When is a good time to convert from oil to gas?

by ‐ Tags: property management, measurement and verification

If you use oil to heat your building, you're likely still smarting from the heating costs of this past (and seemingly never-ending) winter.  If this has prompted you to wonder when a good time might be to convert to gas, I have the answer for you--now. But keep reading for some numbers to help you build the case for doing so!

Why Switch?

There are three big reasons that people tend to finally convert to gas--reducing heating costs, the existing equipment is reaching the end of its life, or laws make it a more attractive option.

Savings

In switching from oil to gas, there are two ways you'll save –efficiency gains and cheaper fuel. Efficiency gains are pretty straightforward to determine. The difference between the efficiency of your new system, typically measured in AFUE, and your old system is the percentage savings you can expect. For example, if you are looking at installing a 95% efficient system and the existing one is 80% efficient, you can reasonable anticipate a 15% reduction in fuel usage. BTU for BTU gas is less expensive than oil, so that is the second place you'll save. This past winter, looking at national averages, 1,000,000 BTU of gas would have cost $.94 and 1,000,000 BTU of heating oil would have cost $2.97.

There is a third area of savings that won't affect your bottom line, but is equally important—carbon savings. In terms of on-site emissions, natural gas is much more clean burning and you will be emitting 44 lbs of CO2 less per million BTU than with oil. With an average multi-family building in a heating-dominated climate using 61,000 BTU/sq ft on an annual basis for non-electric heat and hot water, a hypothetical 10,000 sq ft building would be reducing it's CO2 emissions by almost 30,000 lbs by switching to gas from oil.

Equipment End of Life

If your heating equipment is near the end of its useful service life, you could replace your existing equipment with a new, more oil efficient system. One thing to keep in mind is that oil fueled equipment has slightly lower efficiency ratings than natural gas, which is one more reason to give serious consideration to moving away from oil.  When you install more efficient equipment, more of the energy you're paying for is turned into useful heat instead of wasted up the flue.  If gas is already on-site the money spent on piping gas to a new boiler will quickly be recouped.  If it's not yet on-site but is available in your area, many utilties will install a gas line to your building at a discount if you meet their minimum usage requirements.

Laws

Recognizing the environmental impacts of burning heating oil, specifically #6 heating oil (which is different than typical residential heating oil in that it is a much dirtier fuel), New York City implemented a ban on the heavily polluting fuels. Other states, especially in the Northeast, have been enacting stricter limits on the amount of sulfur heating oils can contain, which is driving shifts away from the more polluting types and away from heating oil all together. 

Building a Case for Switching

If you're leaning towards converting, it's a great idea to run some numbers so you can anticipate what your annual savings will be.  It will also give you numbers to compare to post-conversion so you can be sure everything is functioning as it should.

Projecting annual savings

To determine what you can expect to save if you convert, there's some fairly straightforward math you can do to arrive at ballpark numbers (If you want to skip the math, here's a simple calculator.)

Step 1: Gather your oil bills for the last year. Tally up your total oil usage and cost.

Step 2: Convert your total oil use to BTU. Typically fuel oil No. 2 is used for residential heating which has ~138,000 BTU per gallon. Some systems use fuel oil No. 6, which has ~153,000 BTU per gallon. Multiply the number of gallons used in the last year by the appropriate BTU.

Step 3: Determine your new usage, adjusted by your equipment efficiency gains. Multiply the BTU you arrived at in step 2 by the increase in efficiency you expect from your equipment. Subtract the answer from the total BTU to get your new expected annual usage. e.g. Going from an 80% AFUE to a 95% AFUE will give you a 15% decrease in usage. Multiply your BTU from step to by .15 and subtract that amount from your total BTU.

Step 4: Convert BTU to CCF. Divide your answer from step 3 by 102,000.

Step 5: Determine your cost savings. The easiest way to do this is to determine what you would have paid over the last year. Click on the link in the View History column for your state. Determine the average cost per CCF in the heating season by averaging the cost for January, February, March, October, November, and December. Prices are in MCF, so divide the answer you arrive at by 10 to get the price per CCF. Multiple this price by your answer from Step 4.

That is how much you would have spent if you had upgraded your system a year ago. The difference between this number and your actual oil cost from step 1 is what your savings would have been.

Track savings post-conversion

After the new heating equipment has been installed, you'll want to track your usage to ensure that the savings you anticipated are being realized.  Read more about that in our earlier blog post on measurement and verification

Adjusting for weather

Optional: If you want to try to take weather into account in your calculations from above, here's how.  This will let you project your average savings.

Determine how many heating degree days there were over the time period you have data for by going here and typing in your zip code. Don't worry about adjusting the date. On the next screen, select the Custom tab and then put in the date range you have data for. Then look down to see what the sum of heating degree days (HDD) is. Take your answer from Step 3 above and divide it by the heating degree day sum. This is your BTU/HDD. To find what the average HDD for your area is, visit here and locate the city nearest to you. Find the value in the Base 65 column. Multiply the average annual HDD value by the BTU/HDD you calculated. With this new BTU value, pick back up at Step 4 above. The savings number you arrive at in Step 5 is what you can expect to save in a "typical" year.  heating degree days

Example:

A 110,000 sq ft building in New York City has spent $187,000 on 56,200 gallons of oil over the last year.  They are using No. 2 heating oil with 138,000 BTU/gallon, meaning they used 7,755,600,000 BTU last year.  If they were using gas, that would translate to 76,035 CCF.  At the average price per CCF in their area, they would have saved $92,990 over the course of the year, more after taking efficiency gains into account.

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