Tough Heating Season Forecast in the Northeast for Oil Consumers

With home heating oil prices currently at $4.25 per gallon here on Long Island and a much colder season forecast ahead, this Newsday article predicts a difficult winter for those heating with fuel oil.  Two thirds of Long Islanders still heat their homes with oil and the majority of those would choose to convert to natural gas, if given the opportunity. Unfortunately, Long Island’s natural gas pipeline infrastructure (see Northeast map above) is not being expanded and  National Grid, the private entity responsible for local gas service, is loathe to invest shareholder money to do so.  Michael White, executive director of the Long Island Regional Planning Council, has been an advocate for gas infrastructure expansion to improve Long Island’s economy. White was quoted in the Long Island Business News stating, “it appears we are dependent upon the interests and investments of private fuel suppliers and pipeline companies to actually get approved, construct and operate infrastructure to supply us with natural gas. This paradigm clearly constrains Long Island’s ability to have an adequate and reasonably priced supply of natural gas to support our on-Island generating facilities, as well as conversions from heating oil to natural gas and overall growth.”

Because Long Island’s energy utility infrastructure is controlled by a host of players including private entities (National Grid, ratepayers and private contractors) and public entities (the Public Service Commission, Iroquois Pipeline, NY State and local government), expansion of main and branch service is an excruciating process. This unfortunate stalemate has historically left the majority of Long Islanders with only the costly options of No. 2 fuel oil, electric or propane heating.  We have previously written here about which of these energy options gives you the best bang for your buck.

Taking into account federal tax credits of 30% and LIPA incentives, it is clear that any Long Islander who plans to remain in their home for 5 years or more can get the best rate of return or return on investment by installing a geothermal ground source heat pump to heat their home. Unfortunately, there is a significant initial investment to make in order to convert to geothermal, which has scared away many consumers, even with a financial investment analysis proving out its viability and sound capital return. However, a new program allowing Long Islanders to pay for this conversion through NYSERDA with 2.99% on-bill financing may just be the answer for those too far from the pipeline for gas conversion and hesitant to put savings at potential risk. In order to obtain this financing, a homeowner participates in the Home Performance with ENERGY STAR program, where a BPI accredited contractor approved by NYSERDA will perform a comprehensive home energy assessment to identify opportunities for energy savings. The contractor will write a report that recommends specific energy improvements for your house along with cost figures for making the improvements and estimated energy savings. This program also includes air sealing, energy-efficient furnaces, boilers, water heaters, air conditioners, lighting fixtures and appliances. A homeowner can finance up to $25,000 with this program. An On-Bill Recovery Loan is 2.99% for terms of 5, 10, or 15 years. Once approved for the loan, the consumer’s interest rate is fixed for the life of the loan.

With the advent of variable speed and inverter driven compressors, another efficient option for consumers looking to move away from oil is VRF or “variable refrigerant flow” heat pumps. The market is now flush with systems manufactured by Mitsubishi, Fujitsu, Daikain, Samsung and the like, which have dominated Asian and European markets, but have only recently caught on here. These systems are extremely beneficial to multi-family residential complexes like condominiums and apartment complexes because they are modular, expandable and very efficient at part-load. They achieve their efficiencies because they can operate at partial loads from 10% to 130% in diverse settings, even at low ambient temperatures.

As always, to keep up to date with what’s new in HVAC technology, visit our website at and follow us on Twitter @airideal and at our Facebook page!


Oil to Gas Conversions – The Time is Now!

Natural gas prices have plummeted in the past 5 years and are now lower than they were 20 years ago. The chart shows the progression of natural gas prices over the past 20 years. You can actually see the effect that shale hydraulic fracturing had on the market price of natural gas starting in 2005 after a decade long gradual increase. This chart was put together by the US Energy Information Administration in the first quarter of 2012, so its projection of 2012/2013 price stabilization is already an anachronism. In fact, while home heating oil and gasoline prices continue to escalate, the natural gas glut continues to suppress natural seasonal price spikes. The wellhead price of natural gas is down to less than $4 per thousand cubic feet.  This is only the case in the United States. The current gas glut in the U.S.–driven by an unconventional extraction technique–has driven prices down to average $2 to $3 per million British thermal units this year, far below the $13 to $18 level seen in Asia and Europe.  Unfortunately, liquefied natural gas (LNG) is very difficult to store and transport and can really only be done so at reasonable cost via pipeline. Therefor, it would be difficult for the US to do anything but consume its own production. Hence, the glut and the price deflation and decrease in oil and gas imports.

This is why it is an extremely good time for those who can convert to natural gas from oil to do so now.  Here in the northeast, a consumer can easily burn 550 gallons of No. 2 fuel oil in a heating season, when equated to about 740 CCF of natural gas for the same BTU output at $3.85 per gallon of oil and .93 per CCF, this equates to a $1450 savings in just one heating season. Based upon a 5 year Return On Investment payback, even a $7150 oil to gas conversion would put you ahead of the game.

National Grid is forecasting natural gas heating costs this winter could be reduced by as much as three percent for homeowners during the upcoming winter season. The company is basing its prediction on current forecast market conditions. A typical residential heating customer using around 711 therms during a normal heating season from November to March would pay about $644, which is $21 less than last year for the same amount of usage.

Try the following calculators for your own comparison:   PECO Residential Oil to Gas Heat Conversion Calculator     PSE&G Residential Oil to Gas Spreadsheet Calculator

As always, to keep up to date with what’s new in HVAC technology, visit our website at and follow us on Twitter @airideal and at our Facebook page!

The Election and the Fate of Renewable Energy Tax Credits.

A recent article in the New York Times echoed the death knell of the wind power industry as the result of both the new glut of shale gas and the sunset of wind turbine tax credits on December 31st. Of late, 10,000 wind turbine jobs have evaporated in an industry that relies on those credits and the high cost of fossil fuels to remain competitive. Whether or not the renewal of this credit will ever be considered will surely depend upon the outcome of the election not only of the next President, but also in the House and Senate. Mr. Romney has said that one of the priorities of his administration will be to clear the way for the Keystone XL pipeline, shale hydrofracture exploration and eliminate tax burdens created by renewable energy tax credits.

If this is indeed the case, the future of both the solar and geothermal industries then is in the hands of the electorate. Of course, it would take a majority of the House and Senate to renew such tax credits, but without them, both the Solar and Geothermal industries will go the way of Wind. Right now, with the glut of cheap natural gas created by stockpiles from fracking, geothermal HVAC is a very hard sell against gas. Based upon ROI projections, payback periods in the northeast versus fuel oil can be any where in the 3 to 6 year range with the inclusion of a 30% Federal Tax Credit. Natural gas, however, has plummeted in cost per therm over the past 3 years and now can get extended out past 10 years, making it hard to compete against. Without the the Tax Credits, the growth of the geothermal industry would sputter. These tax credits expire in 2016, so the jury is out on what will happen to them, but certainly Solar and Geothermal cannot compete without incentives. The Romney energy plan focuses mainly on oil, gas, coal and nuclear energy, which together meet 91% of current US primary energy demand. Little has been said about Federal Tax Credits for consumer energy efficiency in Romney’s energy policy prospectus, although he has called upon the expiration of the wind tax credits. The Romney and GOP platform focuses almost entirely on exploiting America’s vast fossil-fuel resources. This 21 page white paper takes some in-depth reading, but does not specifically call for the end to all renewable energy tax credits.

Romney’s paper say only that his policy is to , “Ensure that policies for expanding energy development apply broadly to energy sources, from oil and gas exploration, to coal mining, to the siting of wind, solar, hydroelectric, and other renewable energy facilities”. In criticizing the current administration’s policy on renewables, the paper goes on to say that “President Obama’s poor understanding of the private sector has spilled directly into his energy policy, as he sought to have government play venture capitalist and spend billions of dollars subsidizing his chosen companies and technologies.”

But the most revealing statement that Romney has issued in his policy that may project the end of renewable subsidies is as follows:

“Instead of distorting the playing field, the government should be ensuring that it remains level. The same policies that will open access to land for oil, gas, and coal development can also open access for the construction of wind, solar, and hydropower facilities. Strengthening and streamlining regulations and permitting processes will benefit the development of both traditional and alternative energy sources, and encourage the use of a diverse range of fuels including natural gas in transportation. Instead of defining success as providing enough subsidies for an uncompetitive technology to survive in the market, success should be defined as eliminating any barriers that might prevent the best technologies from succeeding on their own.”

I asked, Geoffrey Styles, a noted energy industry consultant and strategist for his view on what a GOP victory would mean for the renewable tax credits:
“Repeal would be hard, but developers and manufacturers should certainly plan on the basis that 12/31/16 represents true sunset for the renewable investment tax credit.

Here’s one reason why:
Assume 5,000 MW of solar installed per year @$2/W by then. That’s $3B/yr in tax credits–roughly equal to the entire current oil & gas tax incentives–for an energy stream equivalent to about 30,000 bbl/day of oil, but less flexible.”

The New York Times summary of the two candidates views on Clean Energy:

Romney: Opposes government spending on clean energy projects. Uses failure of government-backed solar company Solyndra LLC to illustrate argument against government trying to pick winners in the energy sector.

Opposes renewal of production tax credit, worth about $1 billion a year to wind power producers.

Obama: Included $90 billion in 2009 economic stimulus package for energy projects including solar and wind power, energy efficiency and bolstering the electric grid.

Defends the $16 billion in loan guarantees for 26 clean energy projects as necessary given lack of private financing and competition from China.

Supports renewal of the 20-year-old production tax credit for wind power.

As always, to keep up to date with what’s new in HVAC technology, visit our website at and follow us on Twitter @airideal and at our Facebook page!