This winter, expect the cost of heating to be higher, regardless of the energy source. We correctly warned of high fuel pricing last year, and we're back again, this time with a more severe warning.

A Perfect Energy Price Storm?

Even as natural gas prices were high last winter, fuel oil prices remained reasonable. Those with dual-fuel capability burned oil instead of gas, and had fun showing the boss how much they saved. Due to a confluence of disturbances in international oil markets, oil prices are now higher than natural gas (in equivalent Btu), and continue to climb.

If dual-fuel boiler owners choose this winter to burn gas instead of oil, peak gas demand may be driven higher than last year. With industrial demand for gas returning due to economic recovery in some areas, about the only way that situation will be avoided is if we see a really warm winter.

But why should those that heat with electricity also experience this problem? In some sections of the country, many power plants now run on natural gas. While some of those new plants operate to satisfy summer peak demands, others meet intermediate loads throughout the year. Most regional power markets charge hourly for electricity based on the price offered by the last generator needed to meet that hourly load. If that happens to be a gas-fired plant, then it sets the market clearing price paid to all generators, regardless of their operating costs.

This process is now driving up the price of coal, from which more than half our power is derived. As coal vendors watched generators getting paid higher prices for electricity made from their product, some saw an opportunity to get their "piece of the action" by raising coal prices. If coal-fired generators then raise power prices to maintain their own profit margins, electricity will cost more even when gas-fired plants are not running.

While the impact of such price shifts may be delayed due to regulatory limits in some areas, they are nevertheless seen during the next electric rate case. Since the end of last winter, many utilities have applied for rate hikes to make up for that season's unusually high natural gas cost. Where utilities have fuel adjustment charges, the impact of high spot gas pricing is often seen in the next month's electric bill.

Limiting The Pain

By the time you read this, it may be too late to lock in an acceptable fuel or electricity price for the winter (assuming you have such options). Do you have a contingency plan to mitigate the impact of high heating prices?

  • Can any sections of your facility(s) be closed during winter vacation periods so temperatures could be significantly set back at those times?
  • How recently were your boilers cleaned and burners tuned up?
  • Do you have a night setback system and/or hot water reset system installed that adjusts circulating hot water temperature based on outdoor temperature?
  • Can you minimize (within good practice) outside air intake, especially nights/weekends and during morning warm-ups? When was the last time you checked those dampers to ensure they are really operating and not leaking?
  • Where a standard workday exists, can you take advantage of thermal inertia by shutting off heat an hour before people leave?
  • Has management instructed employees to keep a sweater handy in their offices so routine room setpoints can be reduced 2° to 3°?
  • Are humidifiers in proper working condition? Raising humidity makes a space feel warmer even when it's not.
  • In high-rise structures, have you minimized the stack effect (e.g., rising warm air is pulled into shafts, such as stairwells) daily by ensuring doors to them are closed?
  • When was the last time weatherstripping at leaky windows and doorways was replaced (or even checked)?
  • If cold complaints occur near windows, can you minimize infiltration of cold air by pressurizing the building (e.g., reducing exhaust and increasing supply air flow)?
  • Where windows are operable, who checks for open windows every night? Viewing with binoculars from outside around dusk is a quick way to find such offenders.
  • If the building's skin is dominated by single layer glazing, have you considered adding low emissivity (often called "low-e") film to reduce the glass's effective heat transmission rate? Many options now exist that do not reduce visible light transfer.