Is it time to replace that ancient heating system in your basement? Or maybe you’re thinking about buying a supplemental heater for the most frequently used areas of your house. What type of heating system should you buy? If you are in the market for a home heating appliance, you will need to know how to compare the cost and value of different heating fuels. This bulletin explains how to calculate which fuel will provide the best value.

There are several factors you will want to consider and compare before installing a heating appliance or system, many of which are discussed in University of Maine Cooperative Extension bulletin #7217, Options for Home Heating Fuels and Energy Systems. But one of the very first factors you should consider is the type of heating fuel to use. There are actually four different variables you must work with as you do the calculations to determine which fuel provides the most heat for the fewest dollars.

The four variables of heating fuel value

1. Type of heating fuel
Many choices are available: natural gas, electricity, fuel oil, propane, and wood are fuels commonly used in Maine.

2. Unit cost of heating fuel
That is, the amount of money the fuel costs per unit of measure it is typically sold by. Fuel oil, a liquid, is typically sold by the gallon; stick wood, a solid material, by the cord; and wood pellets by the ton.

3. Per-unit energy content (Btu) of the fuel
Btu (British thermal unit) is a measure of heat energy. One Btu is equal to the amount of heat required to raise the temperature of one pound of water by 1°F. Different fuels produce different amounts of heat energy when burned. For example one gallon of kerosene will produce 135,000 Btu of energy when burned; one gallon of propane will produce 92,500 Btu; and one ton of wood pellets will produce 16,000,000 Btu.

4. Efficiency (AFUE) of the heating unit
Annual Fuel Utilization Efficiency (AFUE), expressed as a percentage, is a measure of how effectively a heating system turns heat released from burning fuel into heat you can use to warm your home. All heating systems will lose some heat to start-up, cool-down, and escape with combustion gases. New and efficient heating systems should have an AFUE of 85 percent or more. Few systems have an AFUE of more than 95 percent.

Comparing heating fuels

Let’s assume that you are deciding between two different heating systems. One uses wood pellets as the heating fuel, and the other uses no. 2 fuel oil. Let’s further assume that the wood pellet stove has an AFUE of 80 percent, while the oil-fueled system has an AFUE of 65 percent. You have called several fuel suppliers in your area and have learned that the average price of a ton of wood pellets is $282, and the average price of a gallon of oil is $2.34. Table 1 below allows you to directly compare the heating value of the two fuels: you see that your cost for wood pellets would be $22 per million Btu (MBtu), and your cost for oil would be $26 per MBtu.

Using the table, you can see an interesting comparison of a 65-percent-efficient oil furnace with an 85-percent-efficient oil furnace. At $2.34 a gallon, oil for the less efficient furnace costs $26 per MBtu, compared to $20 per MBtu for oil for the more efficient furnace. You can also see that burning stick-seasoned hardwood—purchased at $265 a cord—in a 50-percent-efficient wood stove would cost you $22 per MBtu, while if you had a 70-percent-efficient wood stove your cost would be $16 per MBtu.

The attached heating cost equivalence chart will help you compare fuels at a glance. You can also calculate your own fuel cost per Btu by entering your data in our heating cost calculator.¹

Or you can calculate your fuel cost per million Btu using this equation: