Cost to convert from oil to electric heat

Last winter, heating a house with oil cost an average of $1,700, while natural gas averaged less than $900, according to the US Energy Information Administration. The year before, when oil prices peaked, oil heating cost an average of $2,000; natural gas was again around $900. Since 2002, oil heat has averaged 30% to 50% more than gas every year.

So, if it's time to replace your old oil-burning system, you might be wondering if it makes sense to switch. Here's how to crunch the numbers.

What Fuel Types Are Available in Your Area?

About half of the country uses natural gas already, and only about 8% uses oil. Most of the rest use costlier heating — electricity accounts for 34%, propane 6% — typically because that's what is available locally. The vast majority of oil-burners are concentrated in the Northeast, where they account for 31% of residential heating systems. That's largely because of the region's proximity to the ports where oil barges deliver their loads and the fact that oil was a cheaper option back when these houses were built.

Unlike oil, which gets delivered by truck, natural gas gets piped right into your house by a utility company. So making the switch requires having a gas main under your street. Even in oil-dominated neighborhoods of the Northeast, most urban and suburban areas have gas lines. If yours doesn't, you may be able to convince the local utility to install a gas main if enough neighbors band together to make the request.

How Much Will the Equipment Cost?

Gas-fired equipment costs less than oil-fired gear. For a basic furnace (for a forced air heating system) or boiler (for hot-water heat), you'll pay around $1,500 to $3,000 for gas and $2,000 to as much as $8,000 for oil, says Ellis Guiles of TAG Mechanical in Syracuse, New York. If you select a high efficiency system, you'll pay $3,500 to $5,500 for gas, compared with $4,500 to $10,000 for oil. A high-efficiency unit of either kind may be eligible for a tax credit of up to $300, as well as local incentives.

How Much Will the Hookup Cost?

There are two aspects to the connection process for gas: outside the house and inside. The utility company will run an underground pipe from the gas main to your house, where it will install a meter. This requires using a backhoe to dig a trench from the road to the house and typically costs $1,000 to $1,500, according to Jim Ranfone, managing director of the American Gas Association, a trade group. But it's possible that the utility will waive or reduce that charge as an inducement to add you to its customer rolls. Your contractor will handle the second part of the job, piping the gas from the meter to your heating plant, typically at a cost of $500 to $1,000.

What Other Expenses Are Involved?

Switching to gas may require you to line your chimney ($750 to $2,000), because the moisture in gas exhaust can damage the masonry. A liner isn't necessary with a high-efficiency gas system, which, combined with tax incentives, explains why nearly all of Guiles' conversion customers choose high-efficiency equipment. Although it's probably not required, you'll likely choose to remove your oil tank for another $750 or so if it's above ground to $3,000 if it's buried.

The Bottom Line to Convert Oil to Gas

So is it worth spending potentially a few grand in conversion costs to switch to gas? Well, at last year's prices, your fuel-cost savings alone would pay you back in less than five years. But as the stock-market caveat goes, past performance is no guarantee of future results. Most natural gas is mined in North America, so some say its pricing less volatile than oil, which is a global commodity. But the truth is, there's no way to know for sure if gas will continue its substantial price advantage. The decision usually comes down to how complicated the conversion will be for your house—and how good the incentives are that the utilities and state agencies are offering, says Mark Wolfe, executive director of the National Energy Assistance Directors' Association, a trade group of state officials who help homeowners cut their energy costs.

Still, there are reasons other than money to make the switch. Gas has lower carbon emissions than oil, so it's better for the environment. Plus, once you have a gas line, you can get that commercial-style, six-burner stove you've always wanted.

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When you look at oil heating versus electric heating, it’s important to understand how electric power works.

The Basics of Electric Heating

Efficiency is a two-sided issue. Within a household electric system, all incoming electric energy changes to heat energy. At this level, it’s 100 percent efficient.

However, electricity usually originates from power plants with coal, gas or oil generators. Only about 30 percent of the fossil fuels used are actually converted into electricity. Less common sources of electricity are nuclear plants, wind farms and hydropower plants — which use water.

Electric Resistance Heating

An electric heat versus oil heat comparison must examine respective heating methods. Electrical systems incorporate either resistance heating or heat pumps. Resistance heating comes in two forms: forced air furnaces and zonal heaters.

Electric furnaces have blowers that send cool air over several heating elements. Warmed air travels through supply ducts to the house, and the air loses heat during this journey. Cooled air comes back to the furnace in return ducts. These ducts are sometimes part of a home’s central cooling system. One thermostat typically controls the heat for the entire house, so heating is often uneven.

Zonal heaters are more efficient than forced air furnaces because each room has an independent thermostat. Since zonal heaters don’t use ductwork, heat also doesn’t escape along the way.

Electric baseboard heaters are an example of a zonal heater. Each has a heating element within its housing. Another zonal format is the wall heater, which typically sits within interior walls. A fan moves air through the heater, while a reflector sends heat back into the room.

Though is it not common, some resistance heaters permit thermal storage. These make use of electric companies’ differences in rates between day and night — electricity is more expensive during peak daytime hours.

Electric thermal storage heaters collect electricity at night, when rates are lower, and store it for later use. Heating elements usually rest within heat-storing ceramic components.

Electric Heat Pumps

Air-sourced heat pumps move warm air from one area to another. In cooler weather, a pump brings warmth from the outdoors to inside the home since even cold air contains heat energy.

The process reverses itself for cooling — the pump sends warm air from inside a house to the outside.

People who live in mild climates have more success with traditional heat pumps because efficiency drops significantly in regions where temperatures go very low. However, some modern heat pumps work well even when temperatures are below freezing. While standard heat pumps are either off or on, newer models have variable speeds.

When a house reaches a satisfactory temperature, contemporary motors have the option of continuing to run slowly. This helps to maintain continual warmth in very cold weather.

Though many air-sourced heat pumps use ductwork, mini-split heat pumps don’t need those conduits. Another air-sourced variation, a reverse-cycle chiller, heats and cools water. These systems often work in tandem with radiant floor heating.

Geothermal heat pumps work by moving heat between a ground or water source and a house. Installation costs are higher, but they are more efficient and less expensive to run.

Advantages and Disadvantages of Electric Heat

There are numerous benefits to using electric heat. For example, electric heaters are available for either whole houses or individual rooms. This makes them useful for heating additions or seldom-used rooms.

Electric furnaces are also very safe, as they don’t produce dangerous gases as by-products. There is no combustion in electric heaters, so the chance of a home fire is remote as well.

In the oil versus electric heat debate, however, oil sometimes gets the upper hand. Electric heaters are significantly less efficient than their oil-burning counterparts are, and the air that’s delivered is also cooler than in oil systems.

Pros and Cons of Heating Oil

There are many reasons that people prefer oil heating. The primary advantage is that oil is an exceptionally efficient fuel source. Because oil burns very hot, it heats your home faster for longer with less fuel. Oil's efficient performance can help you save money, especially when you work with a reliable supplier like Smart Touch Energy. 

Oil is also safe for you and the environment, as it is non-explosive and non-toxic with a clean burn that won't pollute the air. 

Oil can be delivered anywhere, including rural areas and remote locations. You must schedule deliveries from a reliable oil company in order to keep a constant supply of oil in your home. You also need a large oil tank on your property to store the oil you receive. These oil tanks require periodic maintenance to prevent blockages, corrosion and contamination, which can develop over time.

Cost of Electric Heat vs. Oil

Which is cheaper — electric or oil heat? In this price contest, electricity and oil are neck and neck. The U.S. Energy Information Administration (EIA) forecasts the average electric heat cost during winter 2020 to be $1,209. For the same period, they estimate heating oil costs at $1,221. Compared to last winter, electric heat costs rose by 7% due to colder than average temperatures, while heating oil costs fell by 10% due to lower crude oil prices. 

Your habits and the condition of your home also play a significant role in how much you pay for heat, whether it's electric or oil. You can save money with simple adjustments like turning down the thermostat when no one is home and wearing weather-appropriate clothing indoors so you don't have to overcompensate for warmth by using more of your heating supply.

Heat can also escape through cracks and crevices in your home, especially around windows and doors. Making sure those entry points are tightly sealed can help you keep more heat inside so that less oil or electricity is required to warm your home.

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