To get an idea of how much of a price shock we had in propane, here is a graph of weekly residential propane prices, from 1990 to the present day as of this writing.
This graph is a screenshot from the US Department of Energy's Energy Information Administration website. You can go there to see current information at any given time. Note that data is only tracked during the heating season, which is Oct-March, so summer prices are not shown here.
As you can see propane prices were nice and stable through the 1990s and then went on a gradual, steady climb from about 2004 until 2008, then bounced around a little, and then shot up this year. Even though this graph shows prices peaking just above $4 a gallon, many people in this area were playing upwards of $5 for propane in February, which is crazy because we should not be having shortages... a propane pipeline runs through this area and there is a major terminal in Apex.
OK, but how does this affect me?
My house has a heat pump with a propane furnace as backup. Basically when the temperature gets below 40 degrees, it turns into a propane furnace. This design is supposed to be the best of both words, avoiding the "feels cold" problem of heat pumps but still getting heat pump efficiency when it's not terribly cold out. However I built my house in 1999. Looking at the graph above, that's when propane was bouncing around $1 a gallon and my heat pump was designed in that price environment. With propane going up much higher recently, those design optimizations are no longer so optimal.
Bottom line I recently got a propane bill for $850. That was for enough gas to last for 34 days, from Jan 17 to Feb 21. Talking to others who use propane heat that's not an usual experience and is actually a bit on the low side. Because I own my propane tank instead of renting from a propane company, I'm able to shop around for the best deal in the summer and fall, so the peak price I paid was $3 a gallon. That's still high but at least it's not the $5 that some others around me who didn't have a choice were paying, either because they did not sign a contract in the summer, or can't shop around because their propane tank is owned by their gas company.
So it's obviously now expensive to use propane but how does it really compare to other heat sources I could be using? How much more am I really paying than I would with a heat pump, for example?
Propane cost vs. other heat sources
The Energy Information Administration comes to the rescue with excellent data again. They publish an excellent spreadsheet for comparing the cost of different heating methods. You plug in your local costs and appliance efficiency ratings and it compares the cost of using different heating methods. I did this for our local area and it was eye opening.
The table below comes from my work on this spreadsheet. It shows what the price per gallon for propane would have to be to be competitive with different methods of heating your home. I defined "competitive" as "within 10%". The electricity rate I used is Duke Energy's standard residential rate of 9.6701 cents per kwh, set September 2013 and still in effect as of this writing.
Propane cost vs. other heat sources
The Energy Information Administration comes to the rescue with excellent data again. They publish an excellent spreadsheet for comparing the cost of different heating methods. You plug in your local costs and appliance efficiency ratings and it compares the cost of using different heating methods. I did this for our local area and it was eye opening.
The table below comes from my work on this spreadsheet. It shows what the price per gallon for propane would have to be to be competitive with different methods of heating your home. I defined "competitive" as "within 10%". The electricity rate I used is Duke Energy's standard residential rate of 9.6701 cents per kwh, set September 2013 and still in effect as of this writing.
| Heating Method | Propane is competitive at | Comments |
|---|---|---|
| Electric heat pump | $0.98 | Assumes Heat Pump HSPF of 9.0 and use of electric strip heaters in NC climate (effective HSPF 7.8 when accounting for use of strip heaters) |
| Electric baseboard heater | $2.22 | Assumes 100% efficiency |
| Natural Gas | $0.82 | Uses PSNC rate of $0.85 per therm and assumes furnace AFUE of 82% |
| Wood Stove | $1.13 | Assumes wood purchase price of $200/cord per http://ncfirewood.co/firewood-prices/ and wood stove efficency of 63% |
| Kerosene | $3.10 | Assumes Kerosene is $4.27/gal in an 80% efficient room heater |
Details on the numbers
Some notes on the efficiency ratings. I used the default values provided by the EIA, which they say are the minimum acceptable values, so if you have decent equipment your efficiency ratings are probably higher. For the efficiency of electric heat pumps, there is an adjustment for climate to account for the time that the electric strip heaters have to kick in to help. So in NC, for example, the EIA says a heat pump with an HSPF of 9.0 is treated like 7.8, which is the number I used in the calculations above.
So, what does this tell us?
Looking at the above table in conjunction with the price chart above, it's obvious that propane is hardly ever an economical heat source. It really only consistently beats Kerosene room heaters.
The price for wood heat assumes you have to buy the wood. If you're cutting it off your own property or someone is giving you wood, like letting you have it for free if you haul it off, it's obviously an even better deal, though that's quite high maintenance.
Natural gas is the cheapest mainstream heat source, but in rural areas that's not relevant because there are no gas lines.
The primary mainstream alternative for rural areas in NC is the electric heat pump, which propane has to be under $1 a gallon to be competitive with. That hasn't happened in years and likely never will again in the foreseeable future. So as a strictly financial proposition, it never makes sense to heat with propane instead of a heat pump.
There is however an emotional component. Because electric heat pumps blow air that is warm but below body temperature, a lot of people complain that they feel cold and assert that they'll pay more to heat with propane and be comfortable. That's understandable, but 2-3 times more? That gets harder to swallow, but if you do it with eyes open more power to you.
But on the other hand, even that may not be necessary to be comfortable. Look at the relative cost for electric baseboard heat. This is usually considered the most expensive mainstream way to heat, but it's cheaper than propane when propane exceeds $2.22 a gallon, which it has in fact done for most of the last few heating seasons.
This is relevant because most heat pumps are designed to work at temperatures down to about 40 degrees, and they have electric strip heaters that kick in when it gets too cold for them to keep up. Electric strip heaters work pretty much like baseboard heat and in my opinion would be similar in cost to run. Most heat pump owners complain about high bills when the electric strip heaters come on, but in fact even the electric strip heaters in a heat pump are cheaper than propane has been in the last few heating seasons.
What this means in my opinion is that the smart thing to do if spec'ing a house today, or replacing your HVAC system, would be to just get an electric heat pump. If the air out of it feels cold then put it in emergency mode and run it off the electric strip heaters. It'll be expensive, but still cheaper than propane in today's market!
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