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The Value of Natural Gas

Key Points
  • Natural gas has the lowest average cost per million Btu.
  • Natural gas emits 52 to 56 percent less greenhouse emissions than coal.
  • The natural gas industry supports more than 2.8 million jobs.

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Fuel cost is a significant factor in decision making when purchasing such equipment as boilers and/or furnaces. An analysis of each fuel type, where the fuel is converted to equivalent British thermal units (Btu), is an effective tool to determine the value and true cost of the fuel.

Fuel cost comparison

Because of the different ways fuels are priced, it makes them difficult to compare. For example, natural gas is priced per therm unit and electricity is priced per kilowatt hour (kWh). Fuels such as propane and heating oil are priced by the gallon. To better estimate the true cost of each, you need to compare these fuels' Btu content.

The chart below provides the residential purchase costs for various fuel types based on one million Btu (MMBtu) and the following assumptions:

  • One kWh = 3,412 Btu at $0.1256/kWh
  • One hundred cubic feet (ccf) = 103,000 Btu at $1.024/ccf
  • One mcf/MMBtu = 1,000 cubic feet
  • One cubic foot of natural gas has an energy equivalence of 1,029 Btu
  • One gallon of No. 2 heating oil has an energy equivalence of 138,690 Btu at $2.90/gal
  • One gallon of liquid propane has an energy equivalence of 91,333 Btu at $2.00/gal
average fuel costs per MMBtu

Note that natural gas prices are much lower for commercial and industrial markets. The U.S. Energy Information Administration's average estimates for 2015 were $7.93/mcf and $3.89/mcf, respectively. Average 2015 electricity prices were $0.1069/kWh and $0.0693/kWh, respectively.

When you compare annual operating costs of heating equipment and account for equipment efficiency, natural gas is also the best deal:

annual energy costs of heating

The American Gas Association (AGA) firmly believes that as an energy source, natural gas is the best value for your money. The following data from AGA's 2015 Playbook show why:

Natural gas is America's fuel

  • Domestic gas production accounts for about 93 percent of all natural gas consumed in the U.S.
  • The United States produces approximately 14 Bcf per day more natural gas than 12 years ago.
  • Domestic natural gas supplies are expected to meet growth in demand across all sectors in the future.
  • Natural gas prices (Henry Hub) are forecast to range from $4.00 to $6.50 per MMBtu through 2022.

Natural gas is clean and efficient

  • Natural gas emits 52 to 56 percent less greenhouse emissions than coal for the same amount of electricity, helping to reduce smog and acid rain.
  • The direct use of natural gas (from source to end use) is 92 percent efficient compared to electricity's 32 percent.
  • For LEEDv4 certification, use of natural gas can contribute up to 25 points for New Construction and 40 points for Existing Buildings.

Natural gas is safe and reliable

  • Natural gas utilities spend $19 billion per year to enhance the safety of the 2.4 million miles of underground pipeline.
  • The number of pipeline incidents has seen a 40 percent decline over the past decade; excavation damages have decreased by about 50 percent since 2004.
  • During inclement weather such as blizzards and thunderstorms, the natural gas supply usually remains unaffected.

Natural gas helps support the U.S. economy

  • Natural gas utilities provide jobs to people in all 50 states: 622,000 direct jobs; 723,000 indirect jobs; and 1.5 million induced jobs when natural gas employees put their income back into the economy.
  • Natural gas will create more than 300,000 jobs in the chemical industry through 2025 (IHS CERA); AGA forecasts 2.4 million shale gas extraction jobs by 2035.

Natural gas is also the preferred fuel choice for combined heat and power systems used in commercial and industrial facilities. These systems provide energy at costs up to 50 percent less than traditional, separate production of electricity and heat.

With the lowest cost per MMBtu and a high efficiency rating, natural gas is an excellent choice for energy and one of America’s best energy values.

Southwest Gas has Energy Efficiency rebate programs that may help reduce the cost of upgrading to high efficiency natural gas equipment. Contact your Southwest Gas IGE for more information. 

Image source: iStock