Wednesday, January 9, 2013

Heating Decision Made Easy (Part 3)

Read Part 1 here...

Read Part 2 here...

Having investigated the wood, pellet, and coal options against the cost of staying with oil, my thoughts turned to gas.

I had ruled it out a couple of years earlier. Although there was natural gas in the neighborhood, my house sits back off the street about 300 feet, and the gas company charges $12 a foot to run gas line to properties. Pretty steep, I thought at the time.

And propane seemed infeasible, also. Since propane is a petroleum derivative, it's price tends to track with oil, and to the high side from a $/Btu standpoint. It's a good alternative for folks who don't have access to natural gas and want to run a fireplace or a barbeque, but it's pretty expensive for a primary heating fuel.

But not having yet found the perfect solution, I decided to re-investigate and crunch the numbers.

Propane was easier to figure. I simply had to figure the cost of the storage tank (which again, would have to be situated in front of the house because of no way to get it in the back) and the equivalent number of gallons I would need to replace the oil. The tank can be rented or bought, but its cost either way is pretty trivial to the cost of the propane. So, I put town $1,000 for the tank, and turned my thoughts to the amount of propane I would consume.

To do that, I needed to figure out what kind of boiler I would purchase. It was my intention to go as high-tech, high-efficiency as I could in order to keep the fuel cost down. What I settled on after a lot of comparison shopping was a gas-fired condensing boiler that was priced about $11,000 installed. (To make the system work right, I needed a lot of plumbing rework, and that plumbing comes dearly here.) The boiler was rated at 93% efficiency, which would give me a net heating value of 84,900 Btu per gallon of propane.

I found that while propane is going for about $2.50 a gallon right now, it has been higher in the past. Whether it will be over the next ten years is uncertain. I gave it the benefit of the doubt and priced it at $2.50. For that boiler then, with propane, my fuel cost would cost me $2.50 * (115,000/84,900) * 10000, which totals $33,860 for the ten years. So my total cost to go propane would be $12,000 (system) + $33,860 (fuel) for a total of $45,860. The highest cost option so far, roughly $7,000 higher than just staying with oil for the ten years.

That brought me to natural gas. I called the gas company and they sent out their salesman. Driving a nice new shiny truck, one of those big suckers. He smelled like money, and it wasn't promising.

He got out of his truck, and slowly turned his head back to gaze back up the lane to my house. "That's gonna be a problem," he cheerfully informed me. I had heard that before.

He pulled out his measuring wheel-on-a-stick. We walked it off together. I had paced it off myself, and my pace was off by only a couple of feet. "Two-twenty-five," he said as we hit the front corner of my garage. "We normally charge twelve dollars a foot to set a meter this far from our main. But I'll tell you what. If you get your own excavation contractor to dig and backfill the trench, we'll set the pipe and meter for free."

What a deal, I thought. He could tell I was a high-usage residence, and he wants to get me on the system. But doesn't want to mess with the excavation. Maybe I can get it done cheaper.

Well, like I said, that's what I thought. Two months later, I had had three different excavators stand me up. One came out and measured but never bid the job. I had friends out in the surrounding counties looking for an excavator. One guy said he had a cousin who wasn't an actual excavator, but he would probably dig me the trench. I said no thanks.

Finally, a fellow from a few towns away gave me a bid of $2400, not only to dig the trench for the gas meter, but to run a trench into the house the way the mechanical contractor, who had bid the boiler, had prescribed. Which was not around the back, but in front of my garage, up along my front steps, and into the house just below my entryway stairwell.

Now I had some numbers to work with. I wouldn't need the propane tank, but extra plumbing from the meter into the boiler room. That made the cost of the gas boiler system $11,000 for the installed boiler, $2,000 for the additional plumbing, and $2,400 for the excavation. The company was selling natural gas at about 99 cents per hundred cubic feet (ccf) at that time, or about 90 cents per therm. I stayed conservative, fully expecting natural gas to rise over the coming years, so I put in the cost of natural gas at $1.00 per therm. The resulting calculation put my ten-year fuel cost at $13,270. Which was almost exactly the same as my solid wood cost, and more than $3,500 less than the wood pellet cost.

So, for the natural gas option, my expected ten-year heating cost would be $15,400 (system) + $13,270 (fuel) = $28,670. Not the least expensive option, but definitely in the running, and better than I expected. I re-crunched the numbers with the natural gas cost at $1.50 per therm (more than 50% higher than it is currently, and highly unlikely in the next ten years), and the fuel cost jumped to almost $20,000...but the total cost of the conversion would still be $3,600 cheaper than staying with oil.

So I had to consider the intangibles. First and foremost, no additional fuel to split, carry, stack, or pour, and no boiler fire to maintain. No running out of fuel in the middle of an icy weekend holiday, such as happened at least once a year with oil, and would probably occur more often with propane.

But there were other considerations. First, marital bliss. The Wife was definitely on board with the gas concept. Which led to the other, more tangible and measurable, benefits. She was way ahead of me in the decision-making process, and already mentally planning to replace her electric stove, and the old woodstove on the back porch (I haven't mentioned the back porch, to keep things simple) with new, sleek and sexy gas appliances. And it didn't stop there...the upstairs open fireplace could be modernized with a "fireglass" insert, and a backyard grill and tiki torches entered the conversation at some point. For my part, I started thinking about the electric hot water heater, and the electric clothes dryer that runs about eight hours a day at our house. And about our apparent national desire to send all our coal production to China instead of running our own power plants, which is almost certain to cause our electricity prices to climb over the next decade, probably at a far faster rate than the natural gas market will recover.

So, I pulled the plug and signed a contract for the natural gas boiler. And by the first week of November, we had heat, lots of heat, and The Wife, Kids, and I were locked in mortal kombat over control of the thermostats.

So, the decision which was so complex, and took more than a year to figure out for our home, wound up being easier to make once I had all the numbers in front of me. It's hard to weigh intangibles without all the hard cost data in front of you, but once you've taken care of the calculations, the intangibles become easier to value. I built a spreadsheet for the analysis as I performed it, which allowed me to play with the numbers as my assumptions about fuel prices and my choices for boiler options changed. If you care to see the spreadsheet and use it, you can view it by clicking here. Once you're viewing it, if you want to plug in your own numbers, click on File, Download As..., and download it to your own computer. It's pretty rough, but you can improve it and customized as it you see fit.

Story finished? Not exactly. The project didn't go exactly as planned, and a key decision was changed in the process. I need to write at least one, and possibly two, epilogues to the story. If you've followed the story this far, come back tomorrow, you'll find it worth your while.






6 comments:

Aaron said...

You are cracking me up, Ed. I am in the midst of the same decision and virtually all the same variables save for in-laws living here who are dedicated to a horrifically inefficient wood stove and a woodsplitter that flat out does not work. Cheers to you, my friend, I hope my decision will be as easy.

geo said...

Chuck, great article! We live north of Portland OR in the woods above the Columbia River and are considering our heating options. We have an electric heat pump now and have a small gas fireplace run on propane. The propane cost us $600 last year. In January 2012 we used 85KW electric (which includes the heat pump, hot water and our oven and lights) and cost $225 for that month. In August we used 24KW. If we figured our total electricity for 6 months at $225/month and 6 at $64/month our total electric bill would be $1734/year. Have you looked at what a high efficency electric heat pump would cost in total just to compare?

Chuck Ray said...

Thanks for the input, geo. Glad the heat pump is working out for you. I know many who are happy with theirs. You are blessed in the NW by the cheap energy source called the Columbia River and its tributaries, as well as a couple of nuclear plants if I recall correctly. We rely mostly on coal power plants over here, and while our rates our reasonable, they are going up as they are attacked by legislation.

I mentioned in the article that I didn't pursue any options that required ductwork, since I don't have any, nor a way to run any that didn't include running a whole new ceiling. Your point is a good commentary that we are often economically limited by the designs of our homes. Hence, there is no one perfect solution for heating. Yet, anyway.

May I suggest that if your heat pump leaves you a little chilly at times, a good wood or pellet stove wood be a nice, affordable (and therefore warmer) replacement for that propane stove.

Good luck...cdr

bruce lisle said...

Boo hiss!
Wood Pellet Fuel - NO GO BOOM!!!

PennwoodI3 said...

This was great! Thanks!

PennwoodI3 said...

This was great! Thanks much!