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  1. BrownianHeatingTech

    BrownianHeatingTech Minister of Fire

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    Had some computer troubles, and I've been very busy with some projects lately, so I've been away for a while.

    But I'll be back soon. Hopefully, I'll have time to do some catching-up on threads this week.

    I'll also be adding some products to my line, and I have some interesting news about existing products. (how's that for a teaser?)

    One of the projects that kept me busy lately was setting up a future fuel oil cost estimating spreadsheet based on the last 20 years of HHO price data. I'll go into more detail soon, but the basic results are that few people realize how much heating costs during the decades we live here, and that the return-on-investment for burning wood is even better than most folks realize.

    Joe

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  2. Eric Johnson

    Eric Johnson Mod Emeritus

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    Looking forward to it, Joe.
  3. BrownianHeatingTech

    BrownianHeatingTech Minister of Fire

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    Thanks. So am I.

    Joe
  4. Nofossil

    Nofossil Moderator Emeritus

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    You've missed a few good food fights. It'll be good to have your perspective here again.
  5. BrownianHeatingTech

    BrownianHeatingTech Minister of Fire

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    See, that's what happens when I'm not here :)

    To give a further "teaser" on some stuff...

    If someone burns 1000 gallons of heating oil per year, how much do you suppose he will pay for heat in the next 20 or 30 years? Assuming very conservative numbers on the increase in price per year...

    Joe
  6. Burn-1

    Burn-1 Feeling the Heat

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  7. webbie

    webbie Seasoned Moderator Staff Member

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    A lot??

    The problem with projections is that the market is often random. Then you have to adjust for inflation, the value of the dollar, the fact that most newer heating systems are more efficient - and that people often upgrade their houses.

    Example: Heating oil is about exactly the same price as in 1980 when adjusted for inflation, but is double the (lowered) cost of just a few years ago.

    Another question is whether folks stay in their houses for 20 years. I did, but I wonder if most people do.

    Then there is the fact that money saved is usually "after tax" money, so you save more than you even think. Add in the compounding interest, and you start seeing some big numbers.

    Now we just have to translate your SS for an online template.
  8. BrownianHeatingTech

    BrownianHeatingTech Minister of Fire

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    An actual number would require a psychic.

    But based on past averages (which is why going by decades makes sense, but predicting next year would be nearly impossible), what total amount will someone spend for 1000 gallons of oil per year, over 20 or 30 years?

    Not inflation-adjusted. Let's be very conservative with these numbers. I'd hate to mislead someone by giving them too-high numbers. I'd much rather lose a sale with numbers I know aren't going to be unfair.

    Based on $2.856/gallon average for 2007, and 8% increase in cost per year...

    2008-2028 comes to $155,528
    2008-2038 comes to $380,458

    And that, my friends, is why saving fuel pays. Except in rare cases, I wouldn't do an install unless I was confident that it would result in at least 30% fuel savings. If we're talking a basic oil boiler replacement, that will probably pay for itself at least five times over during the first 20 years (and it will probably last 30, at which point it will have paid for itself more than a dozen times over).

    If someone is going to biomass fuel (eg, wood, pellets, etc.), the fuel savings are greater.

    The most interesting thing I learned from doing this is that if someone wants to add a biomass option at the same time as they do a new oil boiler (so, two completely new boilers), the price of the install can more than double (biomass boilers are more expensive than oil boilers), but the return on investment will likely be similar or only a year or two longer. For a completely heating system replacement. That's how much the biomass boiler saves you.

    The other interesting thing is that investing in these systems can often pay better "dividends" than most investments. There are plenty of reasons why folks like heating with biomass, but being able to demonstrate that they do pay off economically is huge.

    Joe
  9. Eric Johnson

    Eric Johnson Mod Emeritus

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    Very interesting. Not to mention the increased comfort, environmental benefits and national security contributions involved in avoiding imported oil. Toss the physical fitness component in as a bonus.
  10. webbie

    webbie Seasoned Moderator Staff Member

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    Ok, being the devils advocate here...of course!

    Fuel oil - $1.25 per gallon in 1980
    8% increase as per your stats
    Current price today = $11.50 a gallon!

    In real terms - agreed upon by virtually all experts - the cost of fuel oil today is about exactly the same as in April 1980 (well, actually it is a little lower according to some).
    http://www.washingtonpost.com/wp-dyn/content/article/2007/11/06/AR2007110602148.html

    I don't question the wisdom of upgrading to more efficient products, but where does the 8% per year (in real numbers, adjusted for inflation) come from? We used to quote similar numbers for the increase in electric costs - when I installed solar DHW systems. That was in 1979 and 1980. The cost of electricity today, adjusted for inflation, has actually went way DOWN from then.

    We also used assumptions about how much money the savings would have made invested in something else - at 10% or more interest, of course. Now you can get 4% over time if you are lucky.

    Like you, I believe in using excess caution when "selling" results. So many things come into account - if, like most people, the homeowners borrow money for improvements (at a floating rate!), then this has to also be figured in.
  11. BrownianHeatingTech

    BrownianHeatingTech Minister of Fire

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    Figuring out the financial end means that all those things can be tossed in as bonuses. No need to try to put a "dollar value" on "avoiding imported oil," because the financial side makes sense, all on its own. "Avoiding imported oil" (or whatever other reasons someone has for wanting to heat with biomass) becomes a "free gift" for doing the job.

    Which makes the "sales" side of my business much easier - I don't have to try and talk up the "extra" benefits. I can sell the systems on economics alone, and folks can get all these extras for free.

    Do the percentage change from each year to the next. This helps to deal with past inflation, since there hasn't been huge inflation from year to year.

    Then average the percentages. I think that's the fairest way to figure things. I'm not interested in what the price-per-dollar is today versus 20 years ago. Rather, I'm interested in the average percentage appreciation in cost per year. That averages out to between 8 and 9 percent. There have been some rather huge jumps up and down, so I figure that the average makes more sense than the median.

    There's no perfect way to work the numbers, but that seems to be the most accurate. And it passes the "common sense" test when you look at the per-gallon prices over the years. They don't jump out as crazy numbers or anything.

    Plus, while the 8% numbers are impressive, the economic incentive to go with biomass still makes very good sense (ROI of less than ten years) even at 3% per year.

    And 3% per year puts the 2008 average at less than $3 per gallon. I expect at this time next year, I won't be totaling 2008's numbers and finding that it averaged $2.94 per gallon like the chart would say for a 3% increase.

    Somewhere in the 5.5% range is probably the best number to be as fair as possible, without being unrealistic.

    Joe
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