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Articles - Money Management
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Back to Money Management view printable version 
Gas vs. Electric Heat
The Dollar Stretcher
by Gary Foreman
I live in the Midwest and am bracing for the high cost of heating my home this winter. My question is about buying/using a space heater. Is there a way to find out if running an electric space heater would be cheaper than the gas I use to heat the home? Is there a formula for this? How would I figure it out. I've taken all the other precautions such as insulation, furnace tune-up, weather-stripping etc. I figure I can keep the heat turned to about 67 - but a space heater might be good for the family room-kitchen, the area we use the most. Thanks,
Cheryl R.
Cheryl appears to be serious about reducing her heating bills. And, she's right. According to the Federal Trade Commission, nearly half of our utility bills goes to heating/air conditioning. So controlling those expenses is worthwhile.
Cheryl can compare heat generated from gas or electric. To get a fair comparison we'll determine the cost to generate 1 million BTU's of heat with both fuels.
A furnace with a seasonal heating efficiency of 80% will use 12.5 therms to produce the million BTU's. MGE (Madison Gas Electric in Madison WI) was charging consumers $1.50 per therm in October, 2005. We'll use them as our example. At a cost of $1.50 per therm heating with gas would cost $18.75 (12.5 therms X $1.50).
An electric heater would consume 293 kilowatt hours to produce the million BTU's. At a cost of $0.11 per kWh (also from MGE) that's $32.58.
So heating with electric is more expensive than natural gas. And, that's usually the case since a lot of electric is generated by burning natural gas.
But, Cheryl's recognized that gas vs. electric is only half of the equation. Could heating a smaller area (kitchen/family room) with a higher cost fuel (electric) be a good idea?
In our example electric generated heat is 70% more expensive than gas generated heat ($32.58 / $18.75). As long as her kitchen/family room area is less than 30% of the cubic footage of her house she'll save money by using the space heater to heat it and turning down the thermostat on the furnace.
Remember that this is just an example. We've made some assumptions. For instance, furnaces are measured based on their AFUE rating (Annual Fuel Utilization Efficiency). It's also known as "seasonal heating efficiency." We chose a furnace rated at 80% efficiency. Cheryl's could be more or less efficient. That would affect how many therms of gas are consumed.
The selection of space heaters will make a difference, too. There are a number of types available.
According to the Missouri Department of Natural Resources a radiator-type heater could be best for Cheryl. It works well in a room that gets constant use. And, since the surface area isn't extremely hot, there's less danger of someone (think children) getting burned.
There's also a formula that Cheryl can use to figure the cost of running a space heater. She'll need to know the size of the space heater in watts. Divide that by 1,000 to get kilowatts. So a 1500 watt heater is 1.5 kilowatts.
Multiply the answer by the number of hours per day the heater is in use to determine how many kilowatts are used per day. Suppose that it's running from 8am until 10pm. She'd multiply 1.5 kilowatts by 12 hours and be using 18 kilowatts per day.
Her electric bill will show how much she pays per kilowatt. Let's use our $0.11 rate. The 18 kilowatts per day multiplied by $0.11 costs Cheryl $1.98 per day to run the heater.
Make no mistake, the furnace is the most efficient way to heat the entire house. But, according to the National Association of Home Builders the average home is 2,200 square feet. That's a lot of space to heat.
And, if you'll study your home, most homes do not have someone in every room 24 hours a day. Each family has a pattern of use. One or two rooms might be in use for much of the day. Other rooms rarely are used except for sleep. Cheryl might find that she can lower the thermostat on the furnace to 60 degrees and use space heaters to raise the temperature in occupied areas.
Chances are that a lot of us don't want to go through all the calculations. You really don't need to. If you only have one or two rooms occupied, it will almost certainly be cheaper to keep your thermostat lower and put a space heater in the occupied rooms. Just remember to take the appropriate safety precautions when using space heaters.
Gary Foreman is a former financial planner who currently edits The Dollar Stretcher website and newsletters. If you'd like to stretch you day or your dollar, visit today!
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