Tag Archive for: Energy Costs

Authored by Mitchell Bailey, republished from Indoor Comfort News’ April 2024 issue.

In my last article, we compared the cost to run a heat pump as opposed to a 90+ furnace. In that article, we compared COP to AFUE and the cost to make a million BTU’s when using natural gas and when using electricity. The savings were pronounced, and it really pencils out for customers to switch from a gas furnace to a heat pump based on their utility rates and what it costs per therm of natural gas. What about the air conditioning side- how do we show savings comparing the old system to a new system?

Actually, we can calculate fairly accurately an approximate savings per season and then calculate the savings over the system lifetime, which for an air conditioner is 15 years. We need four things: the size of the old system, the cooling degree days for the location, the estimated SEER of the old system, and the average cost per kilowatt from the utility company. For the new system, we need the same four things. This is the formula we are going to use:

Size in BTU’s/h X Cooling Degree Days Per Season ÷ SEER X Rate/ Kilowatt ÷ 1,000 = Cost per Season

All we have to do is assemble our numbers to calculate the savings using the following to obtain those numbers.

  1. Size is easy; we can get that from the model number of the equipment (for example, a D&N model number 565BJX060 is a 5-ton unit, which is 60,000 BTU’s).
  2. The cooling degree days per year is also easy; we can look it up on the internet by going here and putting in your zip code. There is a section on this calculator to enter your location and then you will see the first set of numbers, which are the 30-year average (1961-1990); for my zip code of 95351, it is 1318 DD.
  3. Approximate SEER of the old equipment is also easy if we know when the equipment was manufactured, and we factor in the age of the equipment based on some assumptions about the system degradation over time. Here is the formula from the Department of Housing and Community Affairs for the State of Texas on the best practices and SEER rating on older equipment. For example, if you are assessing a 16-year-old HVAC system that had an original SEER of 10, you would calculate: SEER = (10)(1-.01)16 = (10)(.99)16 = (10)*(.851458) = 8.5146 is the current SEER of the existing unit. To make it simple, I use this chart (see Figure 1) to plug in the approximate SEER of the old equipment.

4. Your kilowatt rate for the utility is also easily searchable. Here are some of the current rates depending on your utility (these are just a few of the utility companies in California; a quick search for the utility in an area only takes a few seconds):

  • PG&E: $0.462/kWh
  • SCE: $0.367/kWh
  • SDGE: $0.424/ kWh
  • SMUD: $0.146/kWh
  • Modesto Irrigation District: $0.1914/kWh
  • Turlock Irrigation District: $0.1693/kWh
  • Merced Irrigation District: $0.2085/kWh
  • Lodi Electric: $0.2154/kWh

Once we have assembled all the data, we can then calculate the cost to run the old system and then compare that to the calculated cost to run the new system. We subtract the usage with average temperatures. If it is a cooler year, the savings are less, and if the customer does not run the system like a typical homeowner, the savings are less, but the opposite holds true: if the weather is warmer than an average year, and the customer likes their home cooler, then they will save even more.

It is obvious that new equipment will save the customer money. What will give you an edge is knowing the numbers and coming up with an amount that the customer could potentially save. So take the time and get the data for your area and create a form or spreadsheet to show the savings to your customer. If you would like, you can email me for a copy of the savings sheet that I use and then modify it for your company to calculate how much the customer can save.

Authored by Mitchell Bailey, republished from Indoor Comfort News’ March 2024 issue.

Which is more effcient, a 95% AFUE natural gas furnace, or a heat pump with a HSPF of 9.0? A better question to ask is: which will cost less to run over a typical heating season? The answer will depend on what rates the customer is paying for energy. You cannot directly compare gas that is purchased by the therm to electricity that is purchased by the kilowatt. However, there is a simple solution: determine what the cost for each form of energy would be to produce a million BTU’s/H.

With furnaces, it is an easy calculation. A therm is 100,000 BTU’s, therefore it takes 10-therms to make a million BTU’s. However, we have to consider the efficiency of the furnace, because not all the heat actually gets into the home. Depending on the efficiency, a percentage of the heat is exhausted with the flue gasses. There is a direct relationship between the AFUE and percentage of efficiency of a furnace. A furnace with an 80 AFUE rating is 80% efficient, while a furnace with an AFUE of 95 is 95% efficient. The next step is to then take the cost per therm and multiply by 10 and then multiply that by the reciprocal of the efficiency of the furnace (0.93 ÷ 1 = 1.075). Example: I have a 93% AFUE furnace, and natural gas at $2.53 per therm. Thus: $2.53 (therm) X 10 X 1.075 = $27.20 to make a million BTU’s. If the furnace was 80%, then it would be $2.53 (therm) X 10 X 1.25 = $31.63 to make a million BTU’s.

For heat pumps, we do not use HSPF; we use COP to calculate the cost to produce a million BTU’s. COP or Coefficient of Performance is the amount of BTU’s produced by a heat pump, divided by the watts required to produce those BTU’s, multiplied by BTU’s that a watt of electricity can make (3.412 BTU’s per watt). The trick is knowing what COP to use. Fortunately, many manufacturers have published data on their heat pumps based upon certain ARI standard-capacity rating conditions with one standard rating of COP at 47° DB outdoor and another at 17° DB outdoor.

For example, the combination of this 3-ton Trane 4TWR6036N1 heat pump with a Trane TAMXB0C48V41 Air Handler (AHRI #210700291) can be looked up through Trane’s website and would show this 3-ton Trane system has a COP 47 of 3.90 and COP 17 at 2.60 (see Figure One).

The big variable is the amount of BTU’s the unit will produce at these temperatures; at 47°, it will produce 30,800 but only use 2.31 kilowatts, while at 17° it will produce 21,400 BTU’s. The calculation for COP is the BTU’s ÷ (3.412 (BTU’s in a watt) X the COP), thus 30,800 ÷ (3.412 X 3.90) = 2314 watts or 2.31 kilowatts. So, by knowing the COP Figure One, we can divide a million BTU’s to get the total watts needed to make that million BTU’s and then multiply that by the kilowatt rate. For this particular unit, it would look like this: 1,000,000 BTU’s ÷ (3.412 X 3.90) = 75,150 watts ÷ 1,000 (convert to kilowatts) = 75.15 kilowatts.

We then can take the average cost per kilowatt for the utility where the system is installed times the total watts to calculate the cost to make a million BTU’s. For example, the average kilowatt rate for Modesto Irrigation District is $0.24, then it would cost $18.04 to make a million BTU’s at 3.90 COP. If you compare the cost from the furnace above, you can see it costs less to run a heat pump to make a million BTU’s than for even a 93% efficient furnace, which equates to 57% less to for the heat pump to make a million BTU’s. If you did the calculation at the low COP at COP 17, the cost would still be cheaper by 0.14 cents.

Another factor is the fact that the biggest variable for energy is prices for natural gas. Natural gas prices are constantly changing while electricity rates increase each year but stay relatively steady. Last January of 2023, natural gas hit $3 per therm, while electric rates did not change. Many customers had bills that almost doubled due the cold weather and high cost per therm for natural gas. This is another reason to switch to a heat pump and ditch the gas furnace: electric rates are more stable. What is the most expensive fuel to heat your home? Answer: LPG. LPG is expensive compared to natural gas; it is a no-brainer making the switch to a heat pump if your customer has LPG. A good average COP you can use is 3.35; your average heat pump will rarely be less than this for the COP 47.

As energy costs skyrocket and your customers’ budgets become stretched, it benefits you and your customer if you know the real costs and savings. So do a little research on the equipment you are setting, find the COP 47, find the average electric rate for your utility, find the current cost per therm, and show them the savings they can expect by switching to a heat pump. Don’t do it to save the planet, do it to save them money! Saving the planet is just a consequence.

This article was written for folks in the HVAC industry, but of course, customers can learn a lot from this as well when it comes to considering which avenue they ought take for their next heating system. Is your contractor taking these things into consideration? Can they show you the calculations they’ve made behind the energy savings they’ve promised? Bailey’s Air Heroes is always happy to provide a Calculated Savings Sheet; request that your technician fill one out for you at your next appointment.