Sorry, I couldn’t come up with a snappy title for this one. This is about money and energy, so it’s a bit dry.
After my recent post on water heating, a friend dropped me a note and reminded me that the economics vary considerably depending upon the cost of the fuel. This is absolutely true, though unless you’ve studied a lot of utility bills, you might not realize just how much energy costs can vary.
Generally speaking, we have four energy sources that are widely available:
- Natural gas
- Heating oil
Depending on where you live, the cost of each can vary widely. To complicate matters further, the price varies throughout the year, usually in proportion to the demand. So, for example, heating oil cost is the greatest in the dead of winter when you need it the most.
For the rest of this post, unless I note otherwise, I’ll be comparing fuels based upon their normalized cost. That is, I’ll be comparing the cost based upon the same amount of useful energy contained in the fuel. This can get confusing because most people refer to cost per gallon, but that’s meaningless because a gallon of liquid propane contains far less energy than a gallon of heating oil and you can’t even buy a gallon of natural gas or electricity.
Instead, we’ll be comparing fuels based upon their cost per million BTUs (also called MMBtu). What’s a million BTUs? It’s:
- 7.25 gallons of heating oil
- 10 CCF (or therms) of natural gas
- 10.92 gallons of liquid propane
- 292.91 kilowatt-hours of electricity
You can think of it as about the energy contained in half a tank of gas.
So the million dollar question is, how do fuels compare based on an equivalent amount of energy that they’re capable of producing?
To answer this, we have to look at a range of prices. For example, on the West coast and in the Northeast, fuel costs are quite high. Electricity in most areas is $0.15-$0.20 per kilowatt hour (KWh). That means the cost per MMBtu of electricity ranges from $43.94 to $58.58. But in some areas, or under certain rate plans, electricity is as low as $0.07 per KWh so the cost per MMBtu drops to $20.50.
So you see, this really complicates cost comparisons. That’s a three times range of cost. And it only gets more complicated when you compare multiple fuels! To simplify matters, here’s a table with each fuel, a range of costs, and then the corresponding range of costs per million BTUs.
Now the picture is getting a little clearer. You have natural gas at a low cost of $7 per MMBtu up to Electricity at almost $59 per MMBtu. That’s quite a range for the same amount of energy!
Let’s make this even more interesting! Instead of an abstract term like MMBtu, let’s convert this to “1,000 gallons of hot water”. I have to make a few assumptions here because this new calculation depends upon the starting and ending temperature of the water. For this, I’m basing the calculations on 50 degree water coming in and 130 degree hot water.
Heating 1,000 gallons of water takes 666,400 BTUs of energy. So if you were able to capture 100% of the energy contained in each of the fuels above and transfer it to the water for heating, you’d get the following:
What does the fuel really cost?
Notice that in all this discussion, I’ve kept things simple by just talking about the energy contained in the fuel. That assumes 100% efficiency. Unfortunately, nothing happens with 100% efficiency so we now have to complicate matters further by considering the actual efficiency of each system.
For these calculations, I’m going to use the typical efficiencies achieved in most households. You have to build your own spreadsheet if you want it to be accurate for your own situation.
Water heaters and their corresponding efficiencies
Water heaters are rated by their “energy factor.” This is a rating based upon the combustion efficiency and the heat loss of the storage tank, all measured under “typical conditions” whatever that means. The energy factor is a number from 0.0 to 1.0 representing 0% efficient to 100% efficient. I don’t know why they didn’t just use % efficiency, but they didn’t, so just remember an EF of 1.0 is perfect.
Natural gas, propane or standalone oil water heaters have an EF of about 0.59. Yes, you read that right – your conventional, combustion type water heater is only 59% efficient, if you’re lucky.
An electric storage tank water heater has an EF of about 0.90, or 90% efficient.
There are other technologies and types of water heaters, but in practice, these numbers apply to the vast majority of the homes in the U.S.
This tells us that the actual cost to heat your water is considerably different than what I showed in the tables above because the efficiency changes things, making electric water heaters much more appealing if you have cheap electricity.
Just for completeness, I’ll convert the table above to include these efficiencies. So the following table represents the cost to heat 1,000 gallons of water in a real water heater.
This final table represents the price range that a consumer would expect to pay to heat 1,000 gallons of water based upon typical water heater efficiencies and the range of fuel costs across the United States.
It has been a long journey, but if you followed it, you should now be able to figure out how much it’s really costing you to take a 20 minute shower or wash clothes with that old washer.
In another post, I’m going to describe how you can analyze your own utility bills to see how much fuel you’re actually using for hot water. All these numbers are great, but what’s really important is how much it’s costing you to heat your water based upon your actual consumption.