The home heating oil industry has a long and proud history, and Fuel Oil News has been there supporting it since 1935. It is an industry that has faced many challenges during that time. In its 77th year, Fuel Oil News is doing more than just holding
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Massachusetts MEMA Fights BAck in thE convErsion BAttlE The Massachusetts Energy Marketers Association has developed a Stakeholder Response report to outline the industry's position to the Massachusetts Department of Energy Resources for their Natural Gas Expansion Study. The goal is to provide clear and accurate data with respect to the implications of public policies leading to incen- tivization and/or cross — subsidization for fuel switching. What is perhaps most interesting, is the information on conver- sion costs. It's easy to look at the base price of the fuels today and the cost of just the heating appliance and not consider the ancillary con- version costs. When these costs are taken into account the conversion picture become far more difficult for a consumer, or state legislator, to support. For example, from the report there is an "economic indifference curve" which represents converting an 80% efficient non-condensing oil boiler to an 83% efficient non-condensing natural gas boiler. This shows that on an economic basis alone a consumer is not likely to benefit from such a conversion. The reason for this is that the following costs (at a minimum) typically come into play: 1. Replacement of the boiler or furnace 2. Chimney replacement or relining 3. Gas main 4. Service line extension and meter set 5. Gas water heater 6. Removal and disposal of the existing fuel storage tank As the report notes, upgrades to more efficient oil heating appliance can make far more sense: In addition, according to the Massachusetts Oil Heat Save Energy Coalition, a 2010 oil heat efficiency pilot program involving 410 homes that oil fired equipment upgrades saved approximately 100,000 gallons of home heating oil per year. This amounted to an average savings per homeowner of 210 gallons per year, or 30% of the oil consumed. At current prices, this amounts to over $800 in savings annually. Homeowners who heat with oil and upgrade their heating system could save on average 116% more on energy costs than would a neighbor who upgrades their natural gas equipment. The differ- ence in potential savings is $997 vs. $461 in annual energy expenses. Another point from the report is that the current relative prices of natural gas and heating oil are not set in stone and are not his- torical in nature. As it states: A 20% or 30% reduction in oil price will have a dramatic negative impact on conversion economics which even in current conditions, oil prices at high levels and natural gas wellhead prices at lows, are not very favorable for change even today. It should be noted, that natural gas prices are expected to rise from their current low because of increased demand for power generation and LNG exports. Given the near - term (5 to 10 years) price forecasts for oil and natural gas there is no consumer based economic reason for fuel switching from oil to natural gas. Where the environment is concerned, the report finds: … as technology advances, bioblend CO 2 reduction can far exceed conven- tional natural gas and shale gas. Given that bioheat matches and can easily be lower than natural gas GHG emissions, there is no climate change reason for fuel switching from oil to natural gas. It further discusses the environmental issues associated with a leaking natural gas pipeline infrastructure. And, to move the message closer to more basic political inter- ests, it concludes on the local economy angle: According to the National Oilheat Research Alliance, there are 747 retail heating oil businesses in Massachusetts. These companies employ 7,750 people and provide energy services to approximately 950,000 households and thousands of commercial operations that use heating oil, diesel fuel and bio-blended distillate for space heating, manufacturing and power generation. A state sponsored fuel switching would eliminate many of these jobs which would not be replaced in kind. STATE BY STATE N e w s 10 MaY 2014 | FueL OIL NeWs | www.fueloilnews.com It should be noted, that natural gas prices are expected to rise from their current low because of increased demand for power generation and LNG exports.