FutureMetrics: Convert to pellets before upgrading insulation

By Katie Fletcher | April 09, 2015

Last month, FutureMetrics LLC published a white paper on why homeowners should switch from heating oil boilers to wood pellet boilers before upgrading the insulation in their home. The paper argues that even with improved insulation, the continual use of heating oil creates susceptibility to rising fuel prices, drives a bulk of the money spent on it from the regional economy, and sends all production and refining benefits to foreign economies and distant oil refineries.

The paper begins by discussing the fluctuation of heating oil costs. A better insulated home can lower fuel usage, but will not protect a homeowner from the impact of higher heating oil costs, which have varied over the past 20 years, while wood pellet prices have remained relatively stable. According to the paper, if oil costs rise enough all of the savings from insulation are eliminated.

The paper does recognize that if a homeowner upgrades their home’s insulation they experience a drop in the number of gallons needed, and with the current price of oil will save money. The example provided in the report shows that if the insulation project results in a 30 percent drop in heat losses, a home that uses 1,000 gallons of heating oil per year will use 700 gallons per year. Financially, with oil at $2.25 per gallon, the annual heating bill with no insulation would be $2,250 and with insulation $1,575, or a savings of $675 per year.

However, money will not be saved if oil prices increase. For example, if oil prices increase from $2.25, the difference between the annual heating bill before the insulation upgrade and after the upgrade declines. Fewer gallons per year are used, but at a higher cost.

As heating oil prices increase and the homeowner’s heating bill consequently rises, the savings from a better insulated home decrease as the total cost to heat the home trends towards the annual cost before the insulation was put in place. Alternatively, a homeowner using pellets without an insulation upgrade saves more money than a homeowner using heating oil in the better insulated home with heating oil prices above $2.55 per gallon. According to the paper, if heating oil reaches the average price seen in 2014, the homeowner using pellet fuel saves $1,890 more per year than the home using heating oil with an insulation upgrade.

Besides savings, the economic impacts of using each of the fuel options is emphasized in the paper. Positive economic impacts are only realized with an insulation upgrade if oil prices remain low, once heating oil rises above $3.20 per gallon, the paper indicates there is no net benefit to the economy or the homeowner. Also, continuing to import heating oil sends money out of heating oil dependent states, taking jobs with it.

The paper argues that the savings accrued using wood pellet fuel in an automated pellet boiler can make it possible for a homeowner to afford to upgrade their insulation. The white paper concludes by saying that using regionally made wood pellets assures that homeowners will not see their annual heating bill increase with heating oil price escalations, and it will provide positive economic benefits and job creation for heating oil dependent states, like in the northeast.

The paper acknowledges that insulation upgrades are important for energy efficient homes, but that policymakers should recognize that the switch to a lower-cost, locally produced, less-volatile wood pellet fuel should be done before upgrades are made.