Oil to gas conversion

Discussion in 'HVAC Heating & Cooling' started by RJHNY1, Apr 4, 2021.

  1. SShaw

    SShaw Member

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    Impressive analysis, as usual, Dana.

    I just want to point out that because the OP already has gas, and is using it for other purposes, the financial analysis of oil vs gas absolutely should not include the fixed ($85) service fee. This fee is going to be paid regardless of whether the OP keeps oil or converts to gas. The analysis should only include the incremental additional cost of the gas to be used for heating the house. This means the cost/therm used for the analysis should be lower than the figures used, and will be much cheaper in the low season, so the actual savings should be much greater than $350.
     
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  2. SShaw

    SShaw Member

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    To follow up on this, removing the fixed service fee (assuming it's $85/moth), and assuming all other details remain the same, the annual savings for gas versus oil would be $1,096.48.

    This cuts the payback period by 3X. At that point, removing the oil tank and installing the gas retrofit burner on the existing equipment makes a lot more sense, especially if the existing equipment has another 20+ years of life in it.

    Here's the math, which only involves removing the service fee from the prior analysis...

    ($110-$85)/4.1= $6.10/MMBTU for low usage months.

    (($293-$85)/24.6 MMBTU =) $8.46/MMBTU during the ~3 heaviest heating months

    So the annual cost for heating with gas is 24 MMBTU x $6.10 + 73 MMBTU x $8.46 = $763.98

    Annual cost for oil is 97 MMBTU x $19.18 = $1,860.46.

    The savings for converting to gas is thus $1,860.46 - $763.98 = $1,096.48.
     
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  3. RJHNY1

    RJHNY1 New Member

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    New York
    Thank you for taking the time to calculate this. If I save $1100 a year between oil and gas, it would still take almost 10 years for it to pay for itself. That's a long time, no? I've been quoted about 9-10K to convert my EK 2000.
     
  4. SShaw

    SShaw Member

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    From a purely financial perspective, the payback on gas conversion is not a long time, and you would make money on the transaction.

    Spending $9K for something that cuts expenses by $1,100 per year, for 20 years, has a simple payback of (20 x $1,100)-$9,000 = $13,000.

    If you consider the time value of money at a 5% interest rate, then the present value of the future savings is $13,708. So by spending the $9,000 you are actually coming out ahead by $4,708.

    Name something else in your house that'll do that for you?

    So, ignoring the option to convert to heat pumps, your choices are either: 1) spend $3,700 to replace the oil tank, with no savings in operating costs, or 2) spend $9,000 to convert to gas and receive savings worth $13,708 in today's dollars, for a net gain of $4,708.

    The choice should be obvious. Conversion to gas would save you $8,408 compared to just replacing the oil tank.
     
  5. Dana

    Dana In the trades

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    01609
    The fixed service fee is NOT $85- that's the cost of the first 50 therms. Almost all houses with an oil-fired Sys 2K is heating the the domestic hot water with oil, not gas. Without the indirect water heater (or high mass radiation) the Sys-2K doesn't quite hit it's efficiency numbers, despite the pretty-good built-in heat purge controls.

    Unless the domestic hot water is already gas, the other-uses would typically < 10 therms, probably <<5 therms (something that could be verified by looking at last summer's gas bills.) My frame of reference comes from my 4 (sometimes 5) person household even where the hot water is fueled by gas and the summertime use is reliably <20 therms. Even with the "endless shower" teenagers abusing it, the lowest-use months are typically running 10-15 therms in a given summer (WAY under 50 therms, the point in the rate structure after which the marginal cost is low) with very little that consumption attributable to running the gas range & oven. To hit 50 therms/month with cooking alone would require throwing large dinner parties every day.

    Look at the rate structure- it's the first 3 therms that are most expensive, but that's still only $25. There is an argument for the $25 for the first 3 therms being already paid for by other uses, but all (or nearly all) of the remaining $60 marginal cost of that first 50 therms accrues to the water + space heating bill.

    So while there's an inherent error in my earlier post related to the very steeply priced first THREE therms, it's about a $300/year error, not a $600-700/year error, and the net savings is still no where near $1K/annum at current oil pricing. While current retail #2 oil pricing is well under the late 2012 through early 2014 levels it's still substantially more expensive than the 2001- 2010 average, even when adjusting for inflation. It's anybody's guess what the pricing for oil (or natural gas) will be over the remaining lifecycle of the boiler, then anticipated downward price pressure from increasingly rapid electrification of transportation in Europe, China, India (and probably the US) seems poised to disrupt both the oil & gas markets writ-large. Peak oil consumption is near (and may already be in the rear-view mirror), and as oil that is marginally more expensive to retrieve gets priced out of the market there will be more price volatility. Since the low price of natural gas in the US is due in part to natural gas byproduct of fracking for (high marginal cost) oil, that oil price volatility is bound to have knock-on effects on the wholesale price of natural gas.

    So my original advice is the same: Don't spend the money on a conversion, but rather spend as little as possible on the boiler right now. But consider spending some real money on fixing the deficiencies of the house to even out room-to-room temperatures, reduce air leakage, and make the place more comfortable. Those comfort measures also increase the efficiency of the house, reducing the heating & cooling loads, so as the home upgrades keep coming, continue to monitor fuel usage and AC duty cycles to measure the heating & cooling loads direct using the existing systems as the measuring instruments. With the better-known (and now lower ) loads, make an all-electric plan for the replacement systems, and execute the plan as the systems eventually fail- sooner if state & federal decarbonization subsidies improve the numbers.

    Solar PV at the utility scale has zero marginal cost, and utility scale wind has nearly zero marginal cost, all of which will be putting downward pressure on electricity pricing over the next decade. NY has already committed to significant offshore wind, and even rooftop solar net-metered is already cost-effective in NY without subsidy (but still an expensive upgrade without subsidy- that will change.) By the end of the 2020s new utility scale solar & wind & battery will be cheaper than keeping the existing fossil & nuclear generation capacity running, independent of fuel pricing for those assets. The price of electricity can't remain this high forever, the distribution cost natural gas puts a substantial floor on retail natural gas, and heating with best in class heat pumps is already fairly competitive with natural gas on Long Island. It won't take much of a carbon tax or subsidy incentive to skew the numbers strongly in favor of all-electric (getting rid of that parasitic $25/month charge for the piddling few therms of gas).

    [​IMG]

    ^^The full lifecycle capacity-factors used in this above analysis are unrealistically high for the fossil fueled generators^^

    The fossil power is more expensive than it looks in this 2020 levelized cost analysis update from Lazard (financial advisors to industry). A new gas generator built today will run far fewer hours/year in 2030 than it does in the early years due to the tsunami of near-zero marginal cost power from wind & solar, which adds to the real capitalization cost per MWh (mega-watt hour, = 1000 kwh) of those generators. The same capital expenditure to build it gets spread over fewer and fewer MWh, so as it's marketable output falls the cost per MWh is increasing over time- it' can't compete with near $0 power from renewables. By 2030 even over-building the solar & wind and simply not using the excess will be cheaper than power from a brand new gas generator today, even if the natural gas fuel were free (which it can't be.)
     
  6. Reach4

    Reach4 Well-Known Member

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    Location:
    IL
    But you might have used almost double that if you did not have that drain heat recovery.;)

    Also, if you can bring a cooktop into the picture, that could add some gas use. I have a friend who has gas piped to the outdoor grill on the deck. Others use the little (16-20 lb) propane bottles.

    After reading your post, I looked at my 07/19/20 - 08/18/20 bill. My use was lower than I expected. I already knew is that in this area gas is cheaper than in the northeast. Pipelines were cheaper to run earlier, and have probably been almost fully depreciated.

    Anyway, I don't have a particular point, except that it is my perception that maintenance is less with gas. I think with oil, routine maintenance is usual. With gas, maybe I should do more, but I just change the air filters.
     

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  7. Dana

    Dana In the trades

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    Maybe, but making the kids start paying for the gas bill (now that they are legal adults and employed) or adjusting the time-out on the occupancy sensor switch on the bathroom lights might make it go the other direction, even without drainwater heat recovery.

    But the point was, that's even with heating the domestic hot water with gas it's under the 50 therm break point.

    Even with shoulder season space heating for this not super-efficient ~2400' house only 7 months out of 12 meet ore exceed the 50 therm mark (partly due to the use shoulder season use of a wood-stove for space heating of one larger zone.)

    The transmission & distribution grids may be fully depreciated, but with older gas grids the greenhouse gas leakage from said grids become a serious issue in a net-zero emissions scenario, which is what prompted the out & out replacement of the gas mains in my neighborhood (and others), which is driving the distribution costs higher than the gas energy costs on my bill. My March bill was for 114 therms. The delivery charges came to ~$110, the fuel supply only $82, for $192 total more than 57% of which is paying for the grid + meter.

    That's an effective rate of $192/114= $1.68/therm, and I expect to see further rate hikes as more of the distribution grid gets repaired/replaced for methane release abatement. If distribution grid replasement isn't happening on Long Island yet, it almost certainly WILL be within the remaining lifecycle of the System 2000 boiler, given NY state greenhouse gas emissions targets.

    That is definitely true, and would have to be factored in to the financial model to be sure. I'm not sure what the annual service charge is in that neighborhood for tuning up the oil boiler, but it really should be done annually with oil, whereas every 3-5 years (sometimes longer) is usually fine with a gas burner.

    Given the volatility of oil pricing it's hard to really count on fuel cost comparisons more than a season out, and sometimes (as 2007-2008 proved) even projecting the price based on a firm seasonal price contract in hand isn't good enough.
     
  8. SShaw

    SShaw Member

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    Ok. I was going by what you wrote, which was that the total price for the 50 therms was $110, $85 of that being the service and delivery:
    "For a low heating shoulder season month that uses 50 therms that's 50 x $0.50 = $25 for the gas, $85 for the delivery, $110 total for 50 therms, or ($110/50=) $2.20/therm."

    Looking at the rate structure myself, and assuming the first 3 therms are paid for by existing usage (grill, dryer, generator) I come up with an annual savings of ~$539.

    The options are: 1) spend $3,700 to replace a failed oil tank and save nothing, or 2) spend $9,000 to remove the tank and save $539/year in fuel costs.

    The savings has a simple value of $10,780 over 20 years, or a present value of $6,717 at 5% interest. This makes the cost of the conversion:
    ($9,000 - $10,780) = -1,780 in simple payback terms, or
    ($9,000 - $6,717) = $2,283 considering time value of money at 5%

    If the OP were to stay in the house for 20 years, and the price of gas were to stay cheaper than oil, the conversion would be a little better financially than spending $3,700 for tank replacement. I can't predict the future, so it's not an obvious choice with those numbers.
     
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  9. Reach4

    Reach4 Well-Known Member

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    Location:
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    How about the value of the space taken by the tank?
    Is there an effect on resale value? Maybe ask a local real estate person.
     
  10. Dana

    Dana In the trades

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    That looks right to me! Yes, it's nothing like a slam-dunk no brainer type of investment, especially in light of the coming (already beginning, really) disruptions in the energy markets.

    What IS a sure bet is that fixing the air leaks and insulation gaps in the house will make the place more comfortable, (a primary goal for most houses), and will save at least some on heating & cooling costs. Since some of those improvements are subsidized by NYSERDA (details vary year to year, sometimes by location & income) that may be a reasonable place to start. But even without subsidy the first $1500-2500 of blower door & IR camera directed air sealing is almost always cost effective in either NPV or simple payback terms, and can make a significant difference in comfort in most homes built before 2x6 framing & plywood sheathing became the standard. With the IR camera it's also easy to spot any gaps in the wall insulation on cold or hot days when there's a 15F or greater difference between indoor & outdoor temps.

    For DIYers and gadget people who like chasing this stuff on their own, the $200 low-res version of the FLIR One (using a cell phone or tablet computer as the display) is an extremely useful tool. For those willing to take the time, leak detection with a FLIR One and a $100 16" reversible window fan is just about as easy and thorough as using with the $2000 cameras and $3000 high power calibrated blower doors. When the house is still very leaky it may require selectively closing doors to isolate rooms to get at it with a window fan. Once the big leaks get found & fixed the smaller leaks become easier to find even with the wimpy window fan. Think the weather stripping on the threshold might need to be updated here?

    [​IMG]

    On a very cold day under de-pressurization from stack effect it's easy to find where air is getting sucked in, even without a fan.
     
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  11. SShaw

    SShaw Member

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    I don't know about resale value, but I was happy to get the oil tank removed from inside my house. It took up a whole closet.
     
  12. RJHNY1

    RJHNY1 New Member

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    Location:
    New York
    As much as I would love the space where the oil tank is, it's not worth spending 9-10K just to get rid of the oil tank. Considering the slim margins any savings may bring, I don't think it's worth it. Especially since my boiler is on the younger side and is in perfect working condition. If my boiler was old, inefficient, and on its way out, then a conversion would make more sense. I think Dana makes a ton of sense in trying to make sure my house isn't leaky b/c plugging up any potential leaks will save more in heating costs.

    It doesn't hurt resale value of the house b/c there's already gas in the house. It would be easy for any prospective buyer to convert from oil to gas heating in this house if they chose to go that route.

    My dream was to put in a work bench where the oil tank is sitting right now. But if I replace it with a Roth oil tank, assuming it can fit down the stairs and into the utility room, it will take up less horizontal space and I can make room for a work bench. So that's where I am right now, trying to hear back from companies and see if a Roth tank is feasible.
     
  13. Dana

    Dana In the trades

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    If I can share one of the pictures you showed me in the message board, those "...potential leaks..." and the conductive losses from the uninsulated foundation are potentially quite large:

    [​IMG]

    Notice that none of the seams in the doubled-up framing are caulked, nor is the seam between the mudsill/bottom plate and the foundation, with only partial and wretchedly installed insulation on the framed part of the wall, with no interior side air barriers on the studwall to boot.

    WAG: Even without actively heating the basement, the basement air leak & heat leaks alone are likely to be north of 15% of the total oil bill, and can probably be fixed (or at least mostly fixed) for less than $10K, less than $5K if taken on as a DIY project. Some primers on the topic live here. I've also covered the topic of air sealing & insulating basements (using methods that don't create mold farms) in some detail multiple times on the TerryLove forums too. (There are many more.) Combined with the other air leaks and insulation gaps in the house it's probably cost effective at current energy costs to bring the net heating load down by 25-30%.

    Since part of this basement is finished with fiberglass studwalls up against or near the foundation walls it may be harder to get at some of the air leaks, but based on the construction in the laundry area this is typical leaky pre-1990s construction. Current code minimums for basements in NY are R10 continuous insulation (or a 2x4/R13 studwall) from the slab all the way up to the subfloor for the first floor. (See the values for the Zone 4 row of TABLE N1102.1.2). But for the insulated studwall to meet that performance level there needs to be well sealed air barriers on all sides of the batts. From a moisture control point of view studwalls that extend below grade are risky. In IECC zone 4 (Long Island, NYC, & Westchester County) it's best to have at least an inch of insulated foam board between the studs & cavity insulation and the cold damp foundation. That limits the rate of groundwater moisture entering the studwall portion, and prevents wintertime moisture accumulation which would otherwise accumulate in the fiberglass where the foundation is above grade.

    I won't go into all of the details on basement insulation here unless prompted, since it's way off topic for the HVAC forum. But given the construction of the house the conversion money is far better spent fixing the air leakage and insulation gaps in the house, not limited to just the obvious deficiencies in the basement.

    That's true. If you're keeping it for another 10 years heating with EITHER gas or oil is likely to be a net-negative. New York's current greenhouse gas emissions goals are more ambitious than the national average, but hardly very ambitious at all, and that's likely to change. Even at the federal level there are now serious discussions of a carbon tax (which would make both oil and gas more expensive) and net-zero greenhouse gas emissions (all sectors, not just power generators) by 2035. You can't really get there while still burning oil or gas at home.

    Making the house more efficient is step 1. When policy incentives (both carrots & sticks) make it worthwhile, having a lower-load home and developing the plan on how to heat & cool it cheaply without on-site combustion is really more prudent place to spend the money.

    FWIW: When I first moved in to my own 1920s antique ~2400' (+ ~1600' of full basement) 1.5 story bungalow the design heating load was about 50,000 BTU/hr (@ +5F) the cooling load was about 3 tons (@ 83F) , and the comfort levels were pretty low during cold snaps & heat waves, the indoor air was Gobi-desert dry in winter, tropical in summer. The walls and attic were only partially insulated, foundation walls completely uninsulated, and the place leaked air like a tennis racquet. By spot insulating & air sealing behind the kneewall attics, blowing cellulose into the first floor walls, and DIY-ing R15-R20 worth of rigid foam on the foundation walls brought the design heat load to about 35-38K, the design cooling load is under 2 tons, and the indoor humidity can now be controlled by the ventilation rates.

    The original boiler (since replaced by a modulating gas-burner a dozen years back) was sub optimally oversized by a bit more than 2x for the original load, and ridiculously oversized (by 3x) for the new-improved lower load. The 5 tons of central AC (on the list to be replaced) is also on the ridiculous side- we can get by most of the summer running a half-ton window shaker in the upstairs and leaving the doors open to allow the first floor to convection-cool. The all-electric plan for this house is still in flux, largely due to the dearth of hydronic output heat pumps in the North American market, but a 4 or 5 ton LG Multi-Vs full VRF could easily handle the hot water and heating loads. There are several mono-bloc style hydronic heat pumps that could handle it too, but in my climate where -10F outdoor temps aren't super-rare using a mono-bloc would require anti-freeze and higher, less efficient water temps or more radiation to handle the lousier heat transfer characteristics when anti-freeze is in the mix. Going with a more dilute anti freeze only sufficient to prevent pipe bursting (but not prevent freezing) is one possible compromise, but I'm hoping more fully split hydronic heat pumps using more environmentally friendly refrigerants will make it to our shores.

    In RJHNY1's case it would be easier. He's unhappy with the comfort performance of the existing hydronic system, and separate duct systems for (likely way-oversized) air conditioning two zones already exist. An all electric plan there would be a bit easier here than at my house, replacing the existing AC units with right-sized heat pumps (right sized for both heating & cooling at the new-improved "after upgrades" version of the house), and installing a heat pump water heater. Since the AC is fairly new and the boiler has substantial life left, just as in my case there isn't any rush to make that conversion. But if/when the boiler fails or either of the AC systems fail it's worth having the plan already in the file to avoid making yet another $5-10K mistake on equipment selection. If greenhouse gas reductions incentives or oil pricing volatility make it cost effective, it may very well become worth retiring the equipment early, getting rid of BOTH the oil tank and the gas meter.

    But the real no-brainer "right now" investment is air sealing and insulating anywhere that doesn't require gutting a nicely finished room. It might still not "pay off" on an NPV basis or immediate resale value financial basis, but it WILL pay off on a comfort basis, something that a mere fuel conversion (of equivalent or lower financial return) will NEVER do. Moving to gas won't change the deficiencies of the radiation, with the same drafts & colder or hotter rooms. Insulating and air sealing makes it possible to actually control the heat & moisture flows in the house, and lowers the room to room temperature differences.
     
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