# How to accurately judge economics of converting from oil heat to liquid propane?

I have an oil boiler in my house (boiler and burner about 27 years old) and, as part of a renovation project, I may upgrade to something more efficient. I thought I would have to stay with oil because I have no natural gas available on my street.

I was surprised when a recommended heating guy suggested replacing my oil system with one based on liquid propane. When I do the numbers, the price per gallon for oil and LP are about the same in my area (Massachusetts) but LP has fewer BTUs so the price per BTU is cheaper with oil.

The guy said that the gas boiler (Viessmann) can get up to 96% efficiency where the best oil boilers can only get up to about 86%. While those numbers are true based on what I've read, my simple calculations show that that difference is not enough to make up for the higher cost of LP.

He claims that those numbers don't tell the whole story because the entire LP system would be more efficient: modulating, condensing, etc. But I thought modern oil boilers have those features too? He was saying that those simple numbers don't tell the whole story.

I'm willing to believe LP can be better but I haven't seen good arguments. Is this guy simply wrong or is he right but not able to express his information well?

First, check to see if there are any tax breaks on the LP system for your area.

My rule of thumb on energy savings savings is, it must pay off in less than 10 years or half of it's usable life (which ever is shorter). Since you have to replace the unit, see if the difference in cost - expected savings in energy over 10 years justifies going LP. A lot of times, the energy efficient items don't pay off unless they have a tax break or you have to replace an entire system anyways.

Edit: I was curious about the results and looked up the values. Assuming you are using 800 gallons of oil each year at a rate of $4.21 a gallon =$3368 year. You would need 1060 gallons of propane to match the 800 gallons (taking into account different efficiency) at a rate of $3.80 a gallon =$4028 a year.

Cost data came from here: http://www.eia.gov/dnav/pet/pet_pri_wfr_a_EPLLPA_PRS_dpgal_w.htm BTUs of propane: 91,500 per gallon BTUs of heating oil: 135,000 per gallon Conversion from oil to propane used: oil gallons * oil BTUs * oil efficiency = 92,880,000 effective BTUs used each yet. 92,880,000 / propane efficiency / propane BTUs = 1057.38 gallons of propane used.

• I've never heard of tax breaks for LP. Would they be under the heading of general energy efficiency or something more specific to LP or ... ? Sep 3, 2014 at 20:11
• If the LP system qualifies for energy star, you might find local or state tax breaks. There is currently a $150 federal tax credit for >95% efficiency propane boilers. energystar.gov/index.cfm?c=tax_credits.tx_index Sep 3, 2014 at 20:26 • That propane price is a bit high - there was a propane shortage in the Midwest & Northeast in February and March that spiked propane prices this year. Still, your overall conclusion is right, the LP offers little to no savings (plus bonus risk of repeat propane shortages) Sep 4, 2014 at 15:50 • If it's useful info, my average$/gallon of oil in the last 12 months was $3.89. I used about 1400 gallons. An 85% efficient oil boiler works out to 3.3 cents per 1000 BTUs. A 100% efficient electric boiler would get me 3.6 cents per 1000 BTUs (at 12.5 cents/kWh). If an LP boiler were 96% efficient and LP cost$4/gallon, that's 4.5 cents per 1000 BTUs. Still seems like oil wins, no? Sep 4, 2014 at 21:45

Your propane prices (and fuel oil, for that matter) are pretty steep. They're barely competitive with even simple, pure electric resistance heat. Even if the propane furnace manages to come out ahead of your oil system, there are electric systems that will be far cheaper to run. Some options to consider:

• Electric Thermal Storage - Using time of use billing, it heats up a ceramic brick with dirt cheap night time electricity prices, then slowly releases that heat over the day.
• Mini split Heat Pump - Although standard heat pumps generally don't work well enough in very cold weather to be usable outside of the south, some of the mini splits can handle low temperatures well enough to be usable in Massachusetts. On paper, their efficiency is fairly good (though not stunning), but they also get a savings over central heating by not requiring a large blower fan, and offering better zoning capability if you have multiple head units.
• Geothermal Heat Pump - Gets rather good efficiency year round, but can be pricey to install (Regional cost varies significantly, so whether or not it's a good deal for you depends on local costs and lot suitability)
• Fuel and electricity costs vary widely. Particularly electricity costs are highly dependent on location, even within the US. In Long Island, NY I was paying $0.20 per kWH, but the US national average is$0.12. That means some places are probably under $0.10. – Hank Sep 4, 2014 at 17:45 • I checked average MA prices for electricity before posting. I came up with$0.16/kWH, which for electric resistance is about equivalent to $4/gal LP. Sep 4, 2014 at 18:01 • @Zhentar - I've looked into geothermal and nothing beats it if you have the upfront cash. A retrofit to existing construction would cost at least$30k in my area. Mini splits are borderline for MA but they're a non-starter for aesthetics so that's not an option. Sep 4, 2014 at 21:34
• @Zhentar - The electric idea is interesting and for a while, I thought that was the way to go. I'm on a time-of-use program and on a muni (i.e. non-profit) so even though New England's electric is very high, I'm relatively low. My average through peak and non-peak is 12.5 cents/kWh. The problem though is, although electric is 100% efficient, it's so low in BTUs (1 kWh = ~3400 BTUs) that you need to buy a lot of it. That means that if electric changes price even a penny or two, it's not as compelling. Sep 4, 2014 at 21:39
• @DaveBurns Fujitsu makes a ducted mini split that can address your aesthetic concerns. And you're right that they are borderline in MA... but you've already got an oil burner that can serve as backup heat for the coldest days. Sep 5, 2014 at 0:05

The first analysis is how much more efficient does the system (LP or Oil) have to be in order to pay for itself over n years assuming annual average fuel costs [a1, a2 ... an] and a potential internal rate of return IRR if the cost of a new system is invested elsewhere.

When it comes to energy efficiency, there are often low hanging fruit such as reducing air infiltration, improving insulation, upgrading windows, etc. that are far more cost effective than improving boiler efficiency.

As in any business, an air-conditioning business may have an economic incentive to sell one type of system over another. These include room for markup and programs offered by local utility companies.