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What to do when a customer wants to switch from oil to propane

June 6, 2014
More than a few folks to ask for quotes to switch from oil to propane Customers are too-often focused on just the cost per gallon Propane is an unregulated fuel, which puts consumers at the mercy of the company delivering/selling Detailed investigation, smart design choices will help deliver the best energy value to a customer

“Dave, we would like a price to have our oil boiler replaced with a propane furnace in order to reduce our energy costs.”

This past winter’s deep-freeze caused more than a few folks to ask for quotes to switch from oil to propane and while we’re all in the business of drumming up more business in this lackluster economy, we need to tread carefully where consumer expectations are concerned. The home was cooled using several window units, so central A/C was to be included as an option.

On the DHW side, they wanted a price to install an electric water heater. An inspection of the main breaker panel revealed sufficient power was available for adding a 30-amp 220-volt circuit.

Customers are too-often focused on just the cost per gallon and they were paying $4.20 per gallon for fuel oil – up by slightly more than $1.00 per gallon from last year. Their 82% efficiency boiler was also their source for DHW with a 190°F/210°F aquastat setting, and, no thermostatic mixing valve. Aside from the thermal scalding risk, which we did discuss, it was necessary for them to understand the net costs they were paying for each gallon of oil. A gallon of No. 2 fuel oil contains 138,500-Btus. In order to transfer that much energy from flame-to-baseboard, they must burn 1.22-gallons of oil (gross input of 168,902-Btus) for a real-world cost of $5.12 to obtain a net output of 138,500-Btus per hour. Using your iPad or any other device, and a calculator app, you can easily illustrate this on-the-spot by converting the 82% efficiency rating to .82 and divide the Btu of the fuel or the net output required by that number.

Propane, at that moment in time, was selling for $3.35 per gallon. A gallon of propane contains, on average, 91,500-Btus. This is where the customers took a wrong turn. Thinking a 95% efficiency rating and a lower cost-per-gallon would lead them to more comfort and better economy-of-operation. In order to obtain the same 138,500-Btus net output, they would need to burn $5.34 of propane. Over the course of an average heating season (2,250-run-hours for my zone), they would see an increase in operating costs of $495 if, and only if, the cost per gallon remained stable.

Propane is an unregulated fuel, which puts consumers at the mercy of the company delivering/selling the propane and without any oversight/regulation, they can change the cost at will. Then there are the issues: own or rent the tank; how large should the tank(s) be; placement of the tank(s); and propane vaporization rates for the -6°F weather we were experiencing. The bitter cold weather created a sudden shortage of propane and the cost per gallon spiked to $4.20. Obtaining the same net 138,500-Btus cost would be $6.79, completely obliterating the notion that propane would be more economical to burn than oil. Put a fork in it!

What can we do?

“We’re tired of sitting around in coats freezing while shoveling money out the door.”

Further investigation revealed their home was an energy-hog: single-pane windows with aluminum frames; no insulation in the attic or the 2x4 framed walls; and doors that leaked air like a sieve.

Single-speed heating and air conditioning equipment properly sized to meet their existing structure would become horribly inefficient, as upgrades to the envelope would be implemented. Stick a fork in that option too.

Their fuel choices are fuel oil, propane, and electricity at 12-cents per kWh. Electricity had not been considered, but turns out to be the best choice if they utilize inverter heat pump technology. Inverter heat pump sales have primarily been mini-split units and they are available in a wide range of operating efficiencies. Geothermal heat pumps are now available with inverter compressors and unitary central heat pump manufacturers are bringing inverter-driven variable-speed models to market.

The clear advantage of inverter-driven variable-speed technology is that our customers can reduce their energy bills immediately, keep their existing equipment in hibernation if they have any concerns about adopting inverter technology, and start saving money to pay for new windows, doors, and insulation. The beauty of utilizing inverter unit(s) with the widest range of Btus outputs is the variable-speed technology will adapt seamlessly to the home’s changing heat loss/gain as improvements to the envelope are made.

Let’s not forget about the DHW, which is the second largest source of energy consumption in a home. A heat pump water heater is by far their best option and offers a rapid return on the difference in cost between a conventional electric water heater and the heat pump models available. Their power supplier offers a $300 rebate for heat pump water heaters, which was a nice bonus.   

With fuel oil increasing by an average of 11% each year, propane by 9.7%, and electricity 3.5%, the switch to ultra-high-efficiency HVAC & DHW electrical systems was their best option. A little guidance and education can open your customers’ eyes and lead to increased sales.

All Dave Yates material in print and on Contractor's Website is protected by Copyright 2014. Any reuse of this material (print or electronic) must first have the expressed written permission of Dave Yates and Contractor magazine. Please contact via email at: [email protected].  

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