Distinguishing between energy use and energy cost

24Feb2014
BY Burns Mechanical IN Construction, Energy

It’s very easy to assume that when it comes to energy, the less you consume the lower your bills. But it’s really not that simple. Energy use and energy cost can vary independent of each other according to the relative cost of fuel. A highly energy efficient building consuming a relatively expensive fuel might cost more to operate than a moderately efficient building consuming a relatively inexpensive fuel.

Take, for instance, the present difference between natural gas and electricity.

Philadelphia energy services

In terms of raw cost per BTU of energy, electricity is far more expensive. One of our clients currently spends about $0.12/ kWh for electricity and $0.85/CCF for natural gas. Converting those rates to the common unit of MMBTU shows that their electricity costs more than four times as much as natural gas: $35.17/MMBTU for electricity and $8.30/MMBTU for natural gas.

When considering HVAC options for their proposed new facility, this client asked our team to evaluate a geothermal heat pump system, which uses electricity for cooling and heating, to a traditional “four-pipe” system, which would use electricity for cooling and natural gas for heating. Our energy models confirmed that the geothermal system would satisfy their desire to have the most energy efficient building. The all electric building with geothermal heat pump HVAC was predicted to have an Energy Use Intensity (EUI) of 40, meaning the site would consume 40 kBTU/square foot of energy in a year. The predicted EUI of the four-pipe HVAC building was 50.

Despite consuming 20% less energy, however, the relatively high cost of electricity led the geothermal building to cost $18,000 more to operate annually than the four-pipe building. Though puzzled at first, their board of directors eventually settled on installing the less expensive four-pipe system. That’s why, when economic justification is the primary motivator, we rarely advise clients to install geothermal systems if natural gas is readily available. The “spark spread” between electricity and gas is predicted to be large for the foreseeable future.