Why Location Is An Important Factor On Choosing The Right Heating System


I read with interest the Financial Post article on the difference in hydro prices in Ontario.

http://business.financialpost.com/news/energy/who-pays-the-most-and-the-least-for-power-in-ontario-hydro-one-toronto-hydro-among-priciest?__lsa=3125-7a27

Not to split hairs, but the commenters are right. The actual price of the electricity is relatively constant across the province – it’s the delivery charges that make all of the difference.

Let’s try to put this in perspective. To look at just a small (but meaningful) part of the data, Hydro One customers (medium to low density) pay $226 – $258 for 1000 kWh of electricity – or $.22 to $.26 per kWh. If you look at the breakdown (from their website) you’ll see that depending on time of day (TOU) the actual cost of the electricity is between $.087 (off peak) and $.18 (on peak). Just taking an average based on the number of hours you get $.1215 / kWh. When you subtract this from the ‘all in price’ (above) you find that homeowners are paying $.10 – $.14 / kWh.

You will note by looking at the map that not only does the GTA have high rates but popular areas for second homes (Collingwood, Muskoka, Lake Simcoe). I’ll set aside any thoughts I have on why this is – but the implications are meaningful.

We frequently are asked to provide advice on people building second homes in ski / cottage locations. Nearly all of them want to talk about geothermal. We think geothermal technology is fantastic and it does great things for the environment. What I think we struggle with is “at what point does the cost to do the right thing environmentally become too much?” We all have different answers to that question – but let me try to quantify how much the premium is – and let you decide where you feel comfortable.

This discussion will be on a cost per million btu (mmbtu) basis. I am setting aside the capital cost issues and am just looking at the cost for the same amount of heat.

chart1

For disclosure purposes I’m using $.59 per litre of propane, $.24 / kWh (as per article), $.18 per m3 of Natural Gas, and $.926 per litre of home heating oil.

As you can see, at current gas prices NG is ¼ to 1/5 the cost of the others. The interesting part for me is that even at the huge efficiency numbers of geothermal (COP of 3), it is only marginally more cost effective than propane IN THESE PARTS OF THE PROVINCE!. As you need more heat (the weather gets colder) the geo efficiency goes down, driving up the cost per mmbtu.

So, is geothermal a poor choice for a heating system for a second home? For heating purposes only – probably. The reality is however, a lot of second homes are for the shoulder seasons as well as the summer months. This is where Geothermal shines. In the interest of brevity, cooling by ground source heat pump (Geothermal) is about ½ the cost of a 16 SEER Air Conditioner.

The even better news for geo lovers is that in the shoulder seasons where minimal amounts of heat is required, provides ideal conditions for geo efficiency. The ground has some warmth, the house needs moderate amounts of heat, and the heat pump doesn’t have to work very hard to extract the heat and compress it. If you are in areas where electricity delivery charges are not so exorbitant, geo is a very good choice on an operating cost basis. As the price of electricity rises (delivery costs) it becomes less so.

So, in the absence of dramatically reduced operating costs, it gets down to the cost of the installation. Although geo will be cheaper to run, look at the cost of the system. At that point you can decide whether its worth the premium.

My disappointment with the industry is that the fancy calculators that sales people use to show you payback etc is frequently populated with out of date or inaccurate assumptions. Be sure to insist on payback models with CURRENT, ALL IN ENERGY PRICES, along with accurate efficiency numbers for both sides. This is likely to yield the most accurate information for you to make a decision that is appropriate for you.

 

-Peter Wagner

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