Last fall, when I was at MRS, the 40 year old oil furnace that had heated our home finally died. The diagnosis: cracked heat exchanger. We’d discussed this possibility a few times, trying out some scenarios. At the time of the incident, our current thinking was either a high-efficiency oil furnace capable of burning biodiesel or a heat pump. The folks at McNutt Service Group, the contractor we decided to work with, quoted us around $4000 for the oil furnace and about $6300 for the heat pump. The heat pump we had selected was a slightly above-average Trane model (16 SEER, 9.0 HSPF), which (along with the new air-handling system) we felt would give us the best deal in terms of efficiency and cost. After much debate, we decided to go with the heat pump for a variety of reasons. the most salient of these was the operating cost. I ran some rough numbers and estimated that over a 20 year lifespan of each unit, I should save around $6000 using the heat pump, based on a 3% per year increase in the cost of heating oil and a 1.5% increase in the cost of a kWh of electricity.

After receiving my first electrical bill that included a full month of the heat pump, I realize I may have underestimated the savings. The amount had only increased by about $35. At first, I thought that this month might have been warmer than usual, and in fact there were some warm days in the month. There were also several nights of temperatures in the teens. The National Weather Service’s climate data page did not indicate that the highs and lows during the month were excessive in either way (average temperatures 3-5 degrees above normal in December and a roughly equal number of days above and below in January.) With that, I was reasonably satisfied that the bill represented a typical January bill. A quick check back through my financial records showed me that from Oct. 2006 to Oct. 2007, I’d spent $766 on heating oil.

Going back to my spreadsheet, I plugged those differences in. Still not trusting the $35 number, I assumed that over the 6 month “winter” period, I’d average $50 more a month, for a total of $300. This number I assume is the cost of heating with electricity. Plugging in the growth rates I mentioned earlier, I set about determining my time to payback over an oil furnace. It’s less than 5 years to save the $2300 difference between the two units. But this really isn’t a good comparison – the new oil furnace would be much more efficient than the ancient Lennox furnace we had. The oil furnace we were quoted on was 90% efficient. Though I don’t have the numbers for certain, I’m estimating that the old furnace was no more than 70% efficient. Using that to adjust the cost of fuel oil, I recomputed the time to payback and got 7 years. Still, not bad at all. Assuming the growth numbers hold, I’ll save around $9000 (in today’s dollars) over the lifetime of the heat pump. And this doesn’t even count the savings in the summer of the 16 SEER heat pump over the old 11 SEER air conditioning unit that came with the house.

Bottom line for us was that the heat pump is looking to be a very good investment. And if folks like Nanosolar make it ultra cost-effective to put photovoltaics on every roof, the heat pump will be an even better decision.

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