The conclusions of the earlier analysis, which I still believe are correct, were:
- In recent years, natural gas has been the heating option offering the lowest annual costs, while electric resistance heat has offered the highest annual costs.
- Oil heat and heat pumps both cost more annually than gas and they have traded cost rankings with each other as energy prices have fluctuated.
- Heat pump conversions will usually reduce carbon emissions, even when converting from natural gas heat.
- The upfront cost per ton of carbon emissions saved through a heat pump conversion may substantially exceed current estimates for the “social cost of carbon.”
This post refines the second and third previous conclusions as follows:
- Even for a conversion from an oil burner, consumers should not count on operating savings from a heat pump conversion and should recognize the risk of cost increases.
- We have to worry a lot about the quality of heat pump installations both for efficiency and for the handling of refrigerants which are potent greenhouse gases in themselves.
Note: Heat pump conversions pencil out better in municipal light and community choice communities. See this post.
Home heating cost comparisons
Our discussion here is limited to oil heat and electric heat pumps. Natural gas has been so consistently cheap that we omit discussion of natural gas in this discussion of relative costs. The earlier analysis does consider it. (Propane, the other common heating source statewide is not used much in the urban area that I serve and I omit it here for that reason.)
Both oil and electric power are commodities that fluctuate in price. Anyone considering switching from oil to electric power will realize operating costs or savings that depend on the relative prices of these commodities as well as the efficiency of their units.
Massachusetts electric prices have risen faster than inflation over the last 20 years, even omitting the latest spike in electric prices. From January 2001 to January 2022, average Massachusetts electric prices rose from 11.86 cents per kwh to 25.36 cents per kwh — a jump of 113% — while the Consumer Price Index for northeast urban consumers went up only 60.6% over the same period.
Oil prices have also risen faster than inflation, even faster than electric prices. The next chart on oil prices covers a longer time period than the previous chart, but comparing the same period as in the previous graph — January 2001 to January 2022 — home heating oil prices rose from $1.50/gallon to $3.46/gallon or 130%.
While both oil and electric prices have generally risen and while there are market connections between oil prices and electric rates, inspection of the two curves above shows that the prices move somewhat independently: Their relationship can change over time.
The following table shows the relative advantage or disadvantage of heat pumps over oil heat over the past 9 winters, using energy pricing averages from DOER (downloaded on January 13, 2023). heating-fuels-price-estimate-for-this-winter-As the table indicates the relative prices fluctuate, and the options trade places.
Comparison of Heat Pump Operating Costs to Oil Heat Costs — Recent 9 Winters — for whole home heating systems
|Winter Ending in Year||Electric Average $/kwh||Oil Average $/gal||Heat Pump|
|Heat pump cheaper by $||Heat pump cheaper by %|
Since the cost differences are relatively small on a percentage basis, the cost comparisons depend heavily on assumptions about the efficiency of heat pumps and oil burners. The performance assumptions in the above chart reflect my conclusions in a previous post:
- 250% efficiency for heat pumps (2.5 seasonal COP) is fairly optimistic as an average for results obtained for pumps newly installed in the field. Better results can definitely be obtained in some settings, but much worse results can also be obtained.
- 85% performance is reasonable for a newly installed oil burner. If the comparison were to an older burner one might want to use 75%. 80% could be a reasonable guess for the mix of old and new burners out there.
It is important to acknowledge that no one knows with certainty the average field efficiency of heat pumps. It is an uncertain exercise even to predict the performance of a single pump installation. True efficiency can only be ascertained by metering a particular installed pump. It is therefore appropriate to consider the implications of a range of assumptions.
Percentage cost advantage of heat pumps on average over past 9 winters as a function of assumed efficiency.
|Heat Pump Efficiency||Oil Efficiency|
|300% — achievable in single zone ductless, one or two large rooms with market leading heat pumps||18%||16%||13%|
|250% — common field result based on publications and interviews||2%||0%||-4%|
|200% — not an uncommon result in field installs, some even worse||-22%||-25%||-30%|
Under the most positive comparison for heat pumps — 300% heat pump efficiency and 80% burner efficiency — the cost difference for a typical house over the past 9 winters (considering price variation, but not weather variation) would sum to $3,457. But, since the savings are so variable and uncertain, one should discount them heavily; speculative long term savings have little relevance to the economics. In perspective, the best-case heating operational savings are small compared to whole home heat pump installation costs (typically now running in the $25K to $30K range according to recent anecdotal data). Even with available incentives, conversion to heat pumps is likely to be much more expensive than replacing an oil heat system, so a conversion from oil heat to heat pumps should be undertaken for reasons other than heating cost savings.
The same math applies for partial conversions where upfront costs may be lower, but operating savings (if available) are also proportionately lower and incentives are also generally lower. However, in partial conversions, an additional dimension of uncertainty arises — how much will the pump be used? In a full conversion, one can assume that the heating load will be what it was under the old system and that the pump must meet that load. In a partial conversion, where the existing heating system will continue to carry part of the load, the pump may not be used all the time, so it has less opportunity to generate savings, even if it is efficient enough to do so. Conversely, the pump may be used heavily to keep one particular room extra cozy with the result that it actually increases cost, even thought it is efficient.
For both full and partial conversions, the high sensitivity of savings to efficiency assumptions and the high variability of efficiency results in the field together point to the importance of a thoughtfully designed installation and a well qualified installer.
Carbon Emission Comparisons
When homes convert to heat pumps (fully or partially), they add to the winter load on the electrical system. Today and at least for the next few years, marginal winter load in New England is served by natural gas powered generators. When natural gas is scarce, as it was during the cold snap this past Christmas, oil generators may take over. Oil is dirtier than gas, but also more expensive than gas and so is used relatively rarely.
In the previous post, I made the argument that heat pumps save carbon even if they are powered by electricity supplied by natural gas generators. That math works unless the heat pump seasonal coefficient of performance drops below 1.9. I don’t hear anyone arguing that field performance is that bad on average, but it’s clear that performance often can drop that low, so once again, good design and installation matter.
Lastly, also to the importance of good installation: The “working” refrigerant fluid used in heat pumps is a highly potent greenhouse gas. In our Daikin pumps, the working fluid is a common compound known as R410A, the use of which must be phased down under recent federal law. R410A does not deplete ozone, but if released, contributes to global warming approximately 2000 fold more potently than carbon dioxide. There are several pounds of the fluid in the system. So, if that substance leaked through poorly installed couplings or was disposed of improperly at end of life, it would effectively add several tons of carbon dioxide to the atmosphere, offsetting a couple of years worth of the savings achieved through the use of the heat pump.