It is clear now that when a unit of fuel is burned not all of it is available to the end user, and that as the furnace efficiency increases, higher amounts of heat will be available. An important question that needs to be addressed is how much it costs to buy the energy or heat to heat a place.
Fuel is usually sold in gallons or CCF or kWh. Comparing the actual cost of energy to produce a certain amount of heat for the end user would be easy if the comparison is made on an energy basis rather than on a unit basis. That is, \$/BTUs or ($/million BTU) rather than \$/gal or CCF or kWh.
Just a note: Industry uses MMBTU to mean Millions of BTU, this is just convention. MCF means 1000 Cubic Feet of Natural gas.
We can use the following formula to calculate Actual Energy Cost:
Energy Cost Examples
Example
Let’s say we need one million BTUs to keep a place warm at a certain temperature. What would it cost to get those million BTUs from oil or gas or electricity? Let’s assume that:
| Material | Cost per unit | Efficiency | Heating Value |
|---|---|---|---|
| Natural Gas | $3.20/MCF | 90% | 1,000,000 BTUs or 1.0 MM BTU/MCF |
| Oil | $5.53/Gallon | 85% | 140,000 BTUs or 0.14 MM BTUs/Gallon |
| Electricity | $0.1742/kWh | 97% | 3,412 BTUs or .003412 MM BTUs/kWh |
Note: The costs per unit vary widely by season and geopolitical factors
Using the formula below, we can calculate the Actual Energy Cost.
Energy Cost Example (with prices from 1995) (2:44)
Transcript: Energy Cost Example (2:44)
Onscreen Text:
Natural gas costs $9.74/MCF. Heating oil costs $0.99/gal. The natural gas furnace runs at 90% efficiency and the oil furnace runs at 80% efficiency. Which fuel is cheaper?
Presenter:
Ok. This 5.7 is an interesting problem here. We are trying to compare the prices of two fuels – Natural Gas which sells for $9.74/MCF, and we also have oil that sells at $0.99/gallon. We are trying to compare the prices of these two and choose which one is the best fuel or cheapest fuel. So we need to calculate the price per million BTUs so that we can compare these two fuels. And we also know the furnace efficiencies of each of these. Natural gas furnace efficiency is 0.9, and we know the oil furnace efficiency is 0.8; it is given. So we need to calculate the actual cost and compare the cost.
Natural gas actual cost will be cost per unit fuel, which is $9.74/MCF divided by the heating value per unit fuel. Heating value for this one happens to be 1.0 Million BTUs per MCF, and we have to multiply by the efficiency here in the denominator which is 0.9, so the Natural Gas price turns out to be $10.83 or $10.83 per Million BTUs (MMBTUs).
When you do similar calculation for oil here, the actual price is, per unit is $0.99 per gallon here and how many million BTUs do we get per gallon? 0.13 Million BTUs (0.13 MMBTUs). We have done this before. We have to have the same units here. Gallons and gallons and MCF and MCF here in this case (natural gas) and times the efficiency is 0.8. So the price works out to be $9.50 per Million BTUs. Same million BTUs would cost $10.82 for Natural Gas and oil would be $9.50, so oil is cheaper.
Payback Examples: