Cost Camparison for Heating and Air Conditioning

Comparison of the cost of heating with gas, oil, and electricity, we also need to talk about the efficiency of the equipment itself.

With gas, plenty of affordable models heat with an efficiency of 90% to 97%, though 80% AFUE models are still available. For comparison purposes here, let’s us an efficiency of 90% with gas. Here is how we calculate the cost of heating our representative house with natural gas:

Annual energy required with natural gas = 60,000,0000 BTU / 0.90 = 66,666,667 BTU

Annual cost with natural gas = 66,666,667 BTU * $1.10/100,000 BTU

Annual cost with natural gas = $733

If you heat with oil, you may have an old burner that operates at 70% efficiency or worse, but newer models boast efficiencies above 85%. Let’s go with 80% for oil.

Annual energy required with oil = 60,000,000 BTU / 0.8 = 75,000,000 BTU

Annual cost with oil = 75,000,000 BTU * $2.50/100,000 BTU

Annual cost with oil = $1,875

Things really get interesting with electricity, thanks to the heat pump. With electrical resistance heating such as wall heaters and baseboard heaters, you can assume an efficiency of 100 percent.

Annual cost with electrical resistance heating = 60,000,000 BTU * $2.93/100,000 BTU

Annual cost with electrical resistance heating = $1,758

With electric heat pumps, efficiency is actually well over 100 percent, thanks to a clever use of thermodynamics. (That’s a blog post in the making, but the short explanation is that heat pumps are so efficient because they move heat from one place to another rather than generating it from energy.) Ductless heat pumps can approach 300 percent efficiency, but to be conservative, let’s run the numbers using an efficiency of 250%.

Annual energy required with ductless heat pump = 60,000,000 BTU / 2.5 = 24,000,000 BTU

Annual cost with ductless heat pump = 24,000,000 BTU * $2.93/100,000 BTU

Annual cost with ductless heat pump = $703

Ranked from less expensive to more, then, here’s where we ended with annual heating costs for our representative moderate-size, mid-efficiency Portland home:

Electricity with ductless heat pump:           $ 703
Natural gas with 90% AFUE furnace:         $ 733
Electric resistance heating:                       $ 1,758
Oil with 80% AFUE burner:                        $ 1,875

Now we have a pretty good comparison of the cost of providing 60,000,000 BTU of heat with two types of electric equipment, a 90% AFUE gas furnace, and an 80% AFUE oil furnace.