One of the most complicated issues for homeowners is determining whether or not to make a change to their 1) heating system efficiency, or 2) heating fuel type. There are a multitude of factors that could go into making this decision, including:

  1. Current system efficiency,
  2. Proposed system efficiency,
  3. Current cost of heating fuel,
  4. Future cost of fuel,
  5. Cost of change to fuel type, system efficiency, or both,
  6. Effect of shell upgrades performed concurrent with change (as is commonly the case in NJ Home Performance with Energy Star projects) or in future,

Fortunately, the US Energy Information Administration has this handy Heating Fuel Comparison Calculator. If you’re considering changing fuel types but are uncertain of the efficiency of the proposed system you can always download the proposed equipment AHRI certificate here.

I suspect that natural gas prices may currently be artificially low. However, the rough analysis I use doesn’t predict variable fuel price increases. Here’s my approach:

  1. Check existing system efficiency and current fuel cost,
  2. Estimate last year’s heating cost. This can be done using the 12 month usage graph on most gas or electric bills (deducting base-load), or totaling oil usage (with a possible deduction for indirect-fired hot water).
  3. Predict savings for efficiency improvements and fuel changes using the spreadsheet above.

Admittedly, there’s a fair bit of guesswork involved. If you’re extraordinarily intelligent, you can improve the accuracy of your estimate by incorporating Heating Degree Days.

Fuel prices vary around the country. Rough prices for the bills in my market are:

  • Gas $1.30/therm. Gas is ridiculously cheap right now.
  • Electricity $.18/kWh. Central NJ has moderately high electricity prices.
  • Oil $3.75/gallon. Ouch.

[A sidebar: Basic shell upgrades such as air-sealing and insulating attics should usually be prioritized over equipment upgrades. In most cases shell upgrades:

  • Are more cost-effective,
  • Improve comfort, sometimes dramatically. On the other hand, converting to a ducted heat pump often diminishes comfort.
  • Improve building durability.]

Here are some general lessons from home performance work we’ve done in central New Jersey:

  • Gas furnaces are cheap to replace and operate.
  • The marginal cost to upgrade furnaces from moderate (78%-84%) to high (90% +) efficiency is very small. Once you factor state, performance and/or utility company rebates, high efficiency systems may be roughly equal to the cost of mid-efficiency. Thus, installing mid-efficiency residential furnaces is generally not very sensible.
  • Heat pumps must have really high efficiencies to compete with high efficiency gas. On the basis of operating costs, it’s difficult to justify installing heat pumps as a primary heat source in areas where gas is available. This is especially true of most residential ground-source heat pumps. Generally the cost to install ground-source heat pumps is high and the real-world coefficient of performance for residential systems is probably not great (see here). On the other hand, for people running gas boilers in houses without any cooling, there may be some justification for installing ductless minisplit heat pumps for cooling, dehumidification, and as a potential hedge against rising gas prices.
  • Really high-efficiency (94%+) gas boilers are expensive, frequently more than double the cost of furnaces of comparable efficiency. In instances where the building has low requirements for heat, it may make sense to install 91% AFUE boilers instead of 95%, and prioritize shell upgrades instead (or nice shoes).
  • A common building geek truism is that shell upgrades have shorter payback periods than equipment upgrades. However, the marginal cost of installing larger equipment is low. Therefore houses that require a lot of heat (e.g. really big houses) or houses that are costly to upgrade (e.g. houses with complex geometry) benefit even more by upgrading to very high efficiency equipment.
  • Assuming comparable efficiencies, oil heat is >2x the cost of gas. Furthermore, gas furnaces and boilers can readily achieve efficiency levels much higher than oil. Although there are some high efficiency oil appliances, the current cost of these systems is pretty high.
  • If you’d like to frivolously offset the savings you should obtain by converting from oil to gas, put your duct-work somewhere dumb, like your attic. I’ve spoken with several people who switched from oil boilers and window units to gas furnace and a/c ducts in their attic, and claim to have saved virtually nothing for their efforts.


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