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How to save money on your natural gas bill

Last updated 2014.02.22



2009.03.26 - Ontario’s Finance Minister, Dwight Duncan, announced that effective July 1, 2010 electricity, natural gas and home heating oil will be subject to the 8% provincial sales tax. Is it finally time to figure out how to reduce your consumption of electricity and heating fuel?

This page is referenced in The End of the Oil Age By Dale Allen Pfeiffer

See the EIA "Short Term Energy Outlook" at: http://www.eia.doe.gov/emeu/steo/pub/contents.html. These guys are historically optimistic.

In 2003 The U.S. Department of Energy's Energy Information Administration (EIA) expected residential natural gas prices to be about 10 to 15 percent higher on average for the upcoming heating season (2003/2004), compared to the previous winter. This presumes no unusually cold periods over the course of the winter. It is also worth noting that in the U.S., at the end of August 2003, natural gas in storage stood about 13 percent below the previous year's levels at the same time, and about 6 percent below the average for the previous five years.

Projections by industry analysts show that (as of mid-2005), we have approximately 8 years worth of proven reserves of natural gas left at the current rate of consumption. The worse news is that the rate of consumption is rising, as approximately 70% of new home construction include natural gas heating, and the electrical generation industry has constructed a significant amount of generating stations based on natural gas, but not all of those are based on the more efficient combined-cycle designs.

Here are the EIA's actual (city-gate) natural gas average prices for the past few years (from their Web site accessed 2008.07.15) (prices in actual U.S.$ per mmf)
2002 $3.95
2003 $5.50
2004 $6.08
2005 $7.67
2006 $7.39
2007 $6.78 (preliminary)

Despite the recent drop, the 2006 price is still 87% higher than just 4 years earlier.

In the winter of 2005/2006, Russia literally turned off the taps for natural gas transmission to the Ukraine, if only for a short time. Supplies to Chechnya were also interrupted.

The remaining major reserves are in the middle East. Sound familiar? However, shipping natural gas is considerably more complicated than shipping crude oil. North America will require major liquid natural gas (LNG) receiving ports and pipelines if it is to use such imports. Unfortunately, the U.S. has refused to have any such terminals on its territory, for fear they would be too enticing as terrorist targets and environmentally hazardous. Plans to establish such terminals on the Canadian east coast would have similar disadvantages, plus the need for new pipeline infrastructure, as the existing natural gas pipeline in Canada starts in the west (Western Sedimentary Basin as the source), and does not reach Canada's easternmost provinces. Eight years probably isn't enough to build an appropriate pipeline, receiving terminal and tanker fleet, even if it were a good idea.

One credible commentator has stated that natural gas will at least quadruple in price in the next decade (by the beginning of 2016). It has more than doubled from the period 1998 to 2005. If you want to negate the forecast impact on your finances, you will need to reduce your natural gas consumption by 75% within the next ten years. If you expect to replace your furnace in that timeframe, you need to give some serious thought to what your new heating fuel is going to be.

Many homeowners and small to medium businesses use natural gas (NG) for space heating, heating domestic hot water, drying laundry, barbecues, and in some cases to power vehicles. This past winter, wholesale prices for NG rose significantly, and we can expect worse in the winter of 2004, as demand continues to rise (more new homes with NG as the heating fuel of choice, and more retrofits from oil to NG in the existing housing population).

But there are some serious competitors for that natural gas, who will be forcing the price up even more in years and heating seasons to come. Consider some of the other buyers for natural gas, many of whom are increasing their consumption.


Major Natural Gas Consumers (North America)

Electrical Generation

As air quality continues to be a concern in most of North America, there is increasing pressure to produce electricity from clean(er) sources. While there are very small amounts of wind and solar (photovoltaic) generation coming on-line, and some hydro dams are actually being removed, the major shift is the expanded use of natural gas powered generation in preference to additional use of oil or coal powered electrical plants. As demand for electricity continues to rise, the demand for natural gas to produce electricity will rise at least as quickly, at least in the short term in North America. The U.S. DOE projects: "The natural gas share of electricity generation is projected to increase from 17 percent in 2001 to 29 percent in 2025, including generation by electric utilities, IPPs, and CHP generators." (citation) That's nearly double the consumption, while supplies are projected to decline. If you are worried about the implications for your electrical bill, we have some suggestions on reducing your electrical bill.

If electricity is being used for heat, it is foolish to use natural gas to produce the electricity. Natural gas can provide heat with efficiency in excess of 90% when burned at point of use in a modern furnace. In a combined-cycle generating station, the efficiency is approximately 60% at best, with some energy lost in transmission and distribution, meaning the overall efficiency for residential heating would be in the area of 50%. If the objective is conservation of the energy embodied in the natural gas through efficiency while producing heat, central generation is not the answer.

Fertilizer

NG is a primary raw material for the production of nitrogen fertilizers. This has caused the price of fertilizers to rise in the past year. Some fertilizer plants have suspended production of specific products due to increased NG prices. One possible substitute for residential lawns and gardens is compost.

Large Industry

Big companies use a lot of natural gas for heating air, water, forges, food products, etc.

Transportation Fuel

In recent years, CNG became a niche alternative motor fuel primarily for fleet operators, but it appears to be declining in popularity of late, possibly due to rising prices. However, there is still a significant fleet of commercial vehicles in use that run on CNG, and they are unlikely to reduce their miles driven significantly due to recent price increases.

Hydrogen Production

The new darling of the Bush administration and the automotive industry, the hydrogen economy is touted as an environmentally friendly energy future. However, over 90% of commercial hydrogen production today comes from the steam reforming of natural gas. If significant numbers of hydrogen powered cars and micro-electrical generation based on hydrogen fuel cells come into use in the near future, this will increase the demand for hydrogen derived from natural gas until other sources come on line in quantity, which is likely more than ten years away. In the short term, increased use of hydrogen will increase demand on existing but diminishing natural gas reserves. And with US$1.2 billion committed to this U.S. government flight of fancy, they'll be able to afford increasingly expensive natural gas to make their hydrogen.

Real Problem or Just Hype?

Think you can compete with these players? Think it's all hype? Think this is a manufactured crisis? If it is a manufactured crisis, does it matter in terms of what it's going to do to your household budget? Call your natural gas supplier and see if you can get a long-term, fixed-price contract to protect yourself against future price increases. Or consider what some others have been saying on the subject.

U.S. Energy Secretary Abraham was quoted on July 10, 2003 as saying in a speech "The demand for natural gas is growing faster than producers can get it out of the ground and ship it to consumers. If we have an unusually hot summer, there's a chance that prices could increase dramatically because of tight supplies." (citation)

Time Magazine

Alan Greenspan

Natural Gas Crisis by Dale Allen Pfeiffer

The Coming Global Oil Crisis website

Matthew R. Simmons (energy sector financial analyst) on Natural Gas Depletion

There's plenty more -do your own Internet search to find it.

What Can You Do?

While many of the large consumers have the economic wherewithal to switch to other fuels (biogas, petroleum distillates), most residential consumers do not have this option (due to initial investment cost and lack of access to convenient natural gas substitutes). So, lowly residential natural gas customer, what can you do to protect yourself? Let us suppose that the price of natural gas can be expected to rise by 20% in this coming heating season over the previous year. You need to target a 20% or higher reduction in NG usage to break even on your bill. In short, given that North American governments don't appear to have realistic energy plans, you need to have your own.

Realistically, the only way to save on your natural gas bill is to reduce your usage through energy conservation. Let's approach this by considering where you use natural gas, in order to reduce consumption.

Space Heating

This is usually the largest single use of natural gas for most households over the course of the year.

Switching fuels will likely require the acquisition of a new furnace or stove - typically a significant investment. However, if you need a new furnace in the near future, you may want to consider some other options. Locally available fuels may be a factor (e.g. corn, wood pellets).

In our opinion, the best solution is energy conservation. No matter what fuel you end up using, energy conservation should enable you to use less of it.

  • Make use of "free" heat. (For example, if you use an electric clothes dryer, vent the dryer indoors during the heating season to retain the heat and humidity.) (More)

  • Set the thermostat to a lower temperature, and wear warmer clothing, including slippers, as floors are the coldest part of most houses (warmer air rises).

  • Further reduce the heat in rooms that are not in use. Close off registers and doors to unused rooms. (To avoid mold, make sure there is some air circulation and hopefully direct sunlight on a regular basis.)

  • Improve weather-sealing to reduce air changes. (If your house manages to become too air-tight, investigate the use of an air-to-air heat-exchanger, also know as a heat recovery ventilator - HRV.)

  • Use plastic film over windows to create an additional layer of insulation.

  • Consider the use of a programmable (setback) thermostat, especially if there are regular periods of the day where household occupants are either asleep or absent. (A small investment that will often pay back within the first heating season if you have regular setback opportunities.)

  • Super-insulate your building to reduce heat loss and conserve energy used to replace the lost heat. (This requires an investment that typically pays back in 3-5 years, with no increase in fuel costs. It will pay back faster if fuel costs increase.)

  • Invest in more efficient windows (e.g. low-e, vinyl clad - can be relatively expensive, although installation labour is often the largest component of the price). Smaller windows on walls that don't face the sun, and larger windows that enhance passive solar gain on sun-facing windows to obtain more free heat during the heating season.

  • Invest in insulated window coverings (e.g. quilted curtains, reflective drapes, honeycomb blinds), to help keep heat in when the sun is not shining.

Use solar energy. While it is not always available (nights, cloudy days), it's hard to beat the price when it is available. The heat you gain from solar energy will displace your use of conventional fuels, conserving that energy and reducing your bills. If you own or operate a small business, solar energy is a great option. Although there are initial costs involved to switch, incentives, grants and loans can generally cover most of the costs involved.

  • Make use of passive solar energy by opening window coverings on sun-facing windows when the sun is shining. During the winter, in a typical North American residence, this can contribute about 3,000 watts of heat energy while the sun is shining.

  • Having the sun shine onto dark, matte surfaces, and increasing thermal mass enhances the heat energy production and retention.

  • Clean your sun-facing windows in the autumn to allow as much energy as possible to flow in during the heating season.

  • In new construction, make sure larger windows are sun-facing, especially morning and mid-day sun, while smaller or no windows face away from the sun.

  • Consider the potential for an active solar heating system.

Consider the potential for ground-coupled (geo-thermal) heat pump systems for producing at least some of the heat you require. (Such systems can also provide air conditioning.) There are also low-tech geo-thermal systems that do not require a heat pump, but also don't produce the as much heat.

Domestic Hot Water

Reduce your domestic hot water usage to conserve energy.

  • Washing your laundry in cold water works. There are detergents that work well in cold water, even for whites. Try to run with full loads in automatic washers to reduce the number of loads done. If washing smaller loads, remember to set the water level accordingly.

  • Master the cold water wash for your hands. How long do you wait for hot water at the bathroom sink? 30 seconds? 60 seconds? Typically in order to use about 5-10 seconds worth of hot water. However, the hot water tank has been delivering hot water the whole time the water has been running- into the hot water pipes. So your 5 seconds of hot water may actually consume 60 seconds of hot water from the tank. However, the first few seconds of water from the cold water tap is usually at room temperature, having warmed up while sitting in the cold water pipes. Water at room temperature with soap is adequate for washing your hands most of the time.

  • Use reduced flow shower heads, especially the kind with an in-line shut-off. These can cut the water use by 50-70% (including hot water) over conventional shower heads, but the increased water pressure and aerated spray make it feel as though you are still getting about the same flow onto you. The in-line shutoff permits you to stop the water flow completely when not required (e.g. lathering), without affecting the temperature of the water (ratio of hot to cold in the mix) when you restart it. The shower massage type heads are very nice, but may lead to increased time in the shower because they feel so good.

  • Use reduced flow faucet aerators on bathroom and kitchen sinks. They reduce water flow (and hot water used), with no perceived change in temperature or water pressure relative to conventional taps.

Help your existing hot water heater to conserve energy.

  • Turn down the thermostat setting to the lowest setting you find tolerable. Many people are satisfied with hot water at 50 degrees C (120 F), where the tanks are often set to 55 or 60 degrees C (130 to 140 F) at the factory or by service people. Use of an automatic dishwasher may limit how low you should set the hot water control - again 50 degrees C (120 F) is typical.

  • Increase the insulation around your hot water tank. There is a little built into the tank itself, typically about 3 centimeters (about an inch) of fiberglass between the actual tank and the outside metal skin. It isn't enough (manufacturers limit it to this to keep costs down and ease transportation of the tanks). There are after-market insulating jackets available which make a significant difference. Or you can make your own jacket or enclosure. Just make sure you do not block the air intake or exhaust. Remember, your NG hot water tank is using fire to heat the water. The EERE (U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy) says "Unless your water heater's storage tank already has a high R-value of insulation (at least R-24), adding insulation to it can reduce standby heat losses by 25%–45%. This will save you around 4%–9% in water heating costs."

  • Insulate your hot water pipes. If the periods between demands for hot water are relatively short (e.g. between consecutive showers for the household), insulated pipes will reduce the time it takes to deliver hot water to the point of use.

  • In new construction, try to arrange the rooms to minimize the length of hot water runs. Locate bathrooms and kitchens and other hot water use points as close as possible to the hot water tank.

  • You may be able to switch to point-of-use water heaters. Instead of creating a reservoir of hot water, these units are installed close to hot water taps and only heat the water as required, and may keep a small reservoir of hot water to improve initial delivery of hot water. However, the installation of such water heaters may be expensive, involving additional runs of gas-pipe or electrical wiring.

  • Investigate the potential for solar pre-heating of your hot water. There are a variety of systems available from simple in-line "batch" heaters to sophisticated systems employing pumps, panels and dual loops and heat exchangers. For most of us, it is worth discussing alternatives with an experienced installer before proceeding. Most systems will provide more than enough hot water in the summer, but may come up short in the winter. In-line systems may have to be disconnected when temperatures drop below freezing to avoid damage. Some systems integrate hot water pre-heating and space heating functions. Most systems should include an over-temperature control to mix in cold water in the event the solar-heated water becomes too hot. Do your research before making a decision. If you do add a solar water pre-heater, remember to insulate the pipe runs from the pre-heater to the conventional water heater.

Drying Laundry

If you are looking to replace your natural gas clothes dryer for other reasons, electric clothes dryers remain a common option.

To further reduce your energy costs, you can use solar and wind power clothes dryers, also known as clotheslines. For those that are not able to hang laundry outdoors (no facility, local bylaws, extended rainy periods, etc), indoor clothes lines are viable. Retractable lines (typically up to 6 meters or 20 feet in length) are commercially available at reasonable prices. When it comes to energy conservation, it's hard to beat a clothesline.

Pool Heater

First, look into buying a solar blanket for your pool. These will increase heating of the water when the sun is shining, and also provide insulation to retain heat when the sun is not co-operating. The next level is to include a heating collector area outside the pool. This can be as simple as black hose on the roof of the house plumbed into the pump system to a purpose-built set of panels. In either case, the system needs to determine if the water requires additional heating, and if the panels are warmer than the pool water, and only if both are true run the water through the panels to heat it. Most pool sales and service organizations should be able to provide you with more information on heating options.

Barbecue

There are other options, including propane and electric barbecues. If you are using your NG barbecue effectively, it is probably not consuming much fuel, and the economics of switching to another fuel are likely questionable.

One option that may be worth considering is solar cooking. Typically more appropriate for foods that require lower temperatures (200-300 degrees F), this environmentally-friendly means of cooking seems to be catching on in North America in ever-increasing numbers. Not always a direct substitute for the barbecue, it is more like a slow cooker than a stove, to use kitchen appliance analogies. There are exceptions, like the parabolic solar cooker that concentrates solar energy onto a focal area.

On really hot days, consider foregoing the barbecue for cold meals. Your body and the local environment don't need the extra heat on a day that is already very hot. And the air quality will benefit as well.

Transportation Fuel

Many CNG vehicles are dual-fuel vehicles. In this case, you have the option of switching back to gasoline easily. Consider the use of ethanol blended fuels (gasohol) instead of regular gasoline.

If you use CNG vehicles for their environmental benefits, consider switching to another environmentally friendly choice when it is time to replace your vehicle. These could include one of a variety of biofuels (e.g. biodiesel, straight vegetable oil, ethanol, methane).

A relatively new option from some automakers are "hybrid" vehicles that use a small electric drive system to help reduce fuel consumption, especially in stop-and-go urban driving. To date (July 2003), all of these run on gasoline only (ethanol-blends are acceptable).

Electric vehicles (EVs) provide an even more environmentally-friendly option. Regrettably, highway-capable EVs are not available from the major automakers in North America any longer, despite significant advances in their usability in recent years. However, a sub-type, the LSV (Low Speed Vehicle) or NEV (Neighborhood Electric Vehicle) are available from several makers. Governed to speeds of 40 km/h (25 mph) or less, these vehicles are suited to urban driving and short missions such as errand running and commuting, the bulk of driving trips for many of us. Enthusiasts continue to build their own EVs, or convert existing fossil-fuelers to electric power.

In some circumstances, bicycles or other human-powered vehicles (HPVs) may be practical for some trips, especially where bicycle lanes and paths are available. In some cases, due to rush-hour gridlock and traffic jams, bicycles prove faster than cars due to their ability to move past cars trapped in traffic, and to use a mix of regular roads and pathways that do not permit cars.

Mass transit is an option for some of us, and some transit systems are starting to embrace the power of multi-modal travel making them far more effective. Park and ride systems permit people to travel from home in low density areas to a depot where they can connect with the mass transit system, making the transit system more effective. Once into the higher density area, the transit system is often faster than the private car, as it can bypass congested traffic on its own private tracks, roadways or HOV lanes. Some of the park and ride facilities actually cater to EVs, NEVs and HPVs as part of an effective, environmentally-superior transportation solution.

Conclusion

The easiest, fastest and cheapest way to reduce your consumption of natural gas is through energy conservation (lowering the thermostat), followed by things like enhanced insulation and weather-sealing and use of a programmable (set-back) thermostat. The next logical step in conserving your natural gas resource is to substitute other (preferably free or low-cost renewables) such as passive and active solar heating, solar water pre-heating or geo-thermal approaches. However you choose to proceed, reducing your natural gas usage will likely pay off financially before long.


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