Propane vs Electric Heat Cost

Why the price on the bill does not tell you which is cheaper

Propane and electricity are sold in different units, so the sticker price tells you nothing about which one heats your house for less. Propane comes by the gallon, electricity by the kilowatt hour, and the two hold different amounts of energy.

There is a second trap: efficiency. A propane furnace turns only part of the fuel into heat, and a heat pump turns one unit of electricity into two or three units of heat. Comparing raw prices ignores both differences.

The fix is to convert everything to one unit: dollars per million BTU of heat delivered to your rooms. That is the unit the Energy Information Administration uses to compare fuels, and it is what this calculator reports. Once both fuels are in the same unit, the winner is obvious.

Two homes on the same street can get different answers. A tight, well-insulated house uses less heat, so the per-unit price matters less than the total. A leaky house amplifies whatever you pay per million BTU, which is why insulation and air sealing often beat a fuel switch on cost.

The math behind the heating cost comparison

For propane, divide the price per gallon by the energy in a gallon and again by the furnace efficiency. A gallon holds about 91,500 BTU, or 0.0915 million BTU. At $2.50 a gallon and 90 percent efficiency that is 2.50 divided by 0.0915 divided by 0.90, which is $30.36 per million BTU.

For electric resistance, divide the price per kilowatt hour by the energy in a kilowatt hour. That energy is 3,412 BTU, or 0.003412 million BTU, and resistance heat is 100 percent efficient. At $0.17 per kilowatt hour that is 0.17 divided by 0.003412, which is $49.82 per million BTU.

For a heat pump, divide by the coefficient of performance as well. A seasonal COP of 3 means 0.17 divided by 0.003412 divided by 3, which is $16.61 per million BTU. The Energy Information Administration's units and calculators page lists the same conversion factors for every common fuel.

Multiply the cost per million BTU by your annual heat load to get the yearly bill. If you do not know your heat load, 50 to 70 million BTU is a fair estimate for a 2,000 square foot home in a moderate climate.

Worked example: propane furnace against electric baseboards

Take propane at $2.50 a gallon in a furnace that is 90 percent efficient. Propane holds about 91,500 BTU per gallon, which is 0.0915 million BTU. Divide the price by that and by the efficiency: 2.50 divided by 0.0915 divided by 0.90 is $30.36 per million BTU of heat delivered.

Now electric resistance at $0.17 per kilowatt hour. A kilowatt hour is 3,412 BTU, which is 0.003412 million BTU, and resistance heat turns every watt into heat, so the efficiency is 100 percent. Divide 0.17 by 0.003412 and you get $49.82 per million BTU.

For a winter that needs 60 million BTU of heat, propane costs 60 times $30.36, which is about $1,821. Electric resistance costs 60 times $49.82, which is about $2,989. Propane wins by about $1,168 for the season at those prices.

The break-even is worth knowing. Propane stays cheaper than resistance heat as long as it costs less than about $4.10 a gallon at 17 cent electricity and a 90 percent furnace. Above that, the electric baseboards win on running cost, which surprises people who assume electricity is always the expensive one.

The heat pump changes everything

A heat pump is not resistance heat. It moves heat from outside air into the house instead of making it, so it delivers two to three units of heat for every unit of electricity. At a seasonal COP of 3.0, the cost is 0.17 divided by 0.003412 divided by 3.0, which is $16.61 per million BTU.

That is about half the cost of the propane furnace and a third of the cost of baseboards. For the same 60 million BTU winter, a heat pump runs about $996 against $1,822 for propane. A cold climate heat pump that holds a COP of 2.0 at low temperatures still lands near $24.91 per million BTU, which beats propane at $2.50 a gallon.

Heat pumps cost more up front and can need a backup for the coldest days, but the running cost gap is large enough that many homes switch anyway. Utility rebates and the federal tax credit shrink the up front number. The Department of Energy's heat pump page explains the types and how they perform in cold weather.

What to do with the answer

Run your own numbers before you decide, because the answer flips with local prices. Propane is cheap in some regions and dear in others, and electricity rates range from under 12 cents to over 30 cents a kilowatt hour depending on the state.

Check your last propane fill and your electric bill for the real prices. Enter them in the calculator with your equipment efficiency and your annual heat load. If you heat part of the house with a wood stove or a space heater, lower the heat load to match what the fuel covers.

Then weigh the answer against the fixed costs. A propane tank lease, delivery fees and a service contract all add to the propane side. Heat pumps have a higher purchase price but no fuel deliveries. The calculator covers the running cost, and you bring the rest of the picture.

One last habit: check the price again before winter. Fuel markets move, and a decision that favored propane at $2.00 a gallon can flip the other way at $3.50. Rerunning the numbers takes a minute and can save hundreds over a season.

Think about the next ten years, not just this winter. A furnace lasts 15 to 20 years and a heat pump 12 to 15, so the decision locks in your running cost for a long stretch. Fuel prices move, and a small edge today can widen or vanish over a decade.