Wood stoves - true cost saving

[firecracker_77]

I can make it real easy. All my equipment has been paid off years ago. Going forward...I save over 1000 gal of propane per year.

There you go. Yours is an easy answer. Probably have to take the 1,000 gallons minus the cost of 2 stroke fuel and maintenance and that's pretty much in the black for sure.

 

[Jags]

Over 10,000 gallons of propane not burnt. Priceless.

 

[Nick Mystic]

Thanks for the effort you put in on your analysis Joful. I haven't done a detailed accounting of my cost savings by burning wood for my heat, but I know it is substantial. I think a huge factor for most people in determining how much they might save is whether or not they have access to "free" wood. Meaning wood they don't have to pay for, just have to work cutting, hauling, splitting and stacking. I know I consider myself fortunate to have over eleven acres of mixed hardwood forest on my property. I can pretty much get buy just harvesting downed trees and deadwood. If I had to buy all my wood I know I'd still save money over propane heat (what our central furnace burns), but it would put a big dent in my savings. For me, I think one of the biggest factors is the satisfaction I get out of being able to supply all my heating through my own effort without spending extra money for fuel. I'm pretty handy, so this is pretty much a lifestyle for me in most of the things I do.

 

[WellSeasoned]

This will be our 3rd year, no oil, lower electric bill, ect. Our woodstove, chimney, ect has paid for itself at the end of last heating season. This year it will pay for the splitter, with $ saved in leftovers.

Can't forget how good it smells, going outside shirtless in the morning to get the paper, with the neighbors looking strangely at you, the exercise along with CSS, and staying warm and being able to cook if the power goes out. "Once you stack, you never go back"

 

[firecracker_77]

This will be our 3rd year, no oil, lower electric bill, ect. Our woodstove, chimney, ect has paid for itself at the end of last heating season. This year it will pay for the splitter, with $ saved in leftovers.

Can't forget how good it smells, going outside shirtless in the morning to get the paper, with the neighbors looking strangely at you, the exercise along with CSS, and staying warm and being able to cook if the power goes out. "Once you stack, you never go back"

I sometimes walk outside in my boxers and my wife calls me hillbilly.

 

[Backwoods Savage]

I've often wondered but not enough to go into a detailed analysis. It is true that we purchased a new stove 6 years ago and also put up a new chimney. Our splitter is 100% for wood heating so that is a cost, but the splitter is well over 20 years old and our maintenance cost so far is a change of oil annually and a filter. There have been no repair costs to date. We have a saw that we've had for many moons but did buy a new one last January but low cost as it is just a small saw. That is something my wife talked me into getting but I'm happy we got it. I did buy a couple pair of log tongs and a few years ago had to buy a new cant hook when ours was stolen. We also broke down and bought a trailer but it is not used 100% for wood hauling; perhaps 50% or maybe less. We cut all our wood here at home so the only cost is gas and oil for atv and saw. While we are on saws, I fail to understand why anyone cutting wood just for home use would need 3 saws. I'd gotten along with one saw for somewhere around 50 years. I also own only one saw chain per saw and see no need to buy multiple chains as that is money tied up that doesn't have to be.

I also have to add that it has been many moons since we bought oil or gas for heating purposes and I don't even remember the price we paid at the time but it was a whole lot lower than today's costs. And like others, we do a fair amount of cooking on our wood stove and we will sometimes even heat a goodly amount of water there also. I could perhaps go on and on about this but it would serve no purpose... I'm done.

 

[firecracker_77]

I've often wondered but not enough to go into a detailed analysis. It is true that we purchased a new stove 6 years ago and also put up a new chimney. Our splitter is 100% for wood heating so that is a cost, but the splitter is well over 20 years old and our maintenance cost so far is a change of oil annually and a filter. There have been no repair costs to date. We have a saw that we've had for many moons but did buy a new one last January but low cost as it is just a small saw. That is something my wife talked me into getting but I'm happy we got it. I did buy a couple pair of log tongs and a few years ago had to buy a new cant hook when ours was stolen. We also broke down and bought a trailer but it is not used 100% for wood hauling; perhaps 50% or maybe less. We cut all our wood here at home so the only cost is gas and oil for atv and saw. While we are on saws, I fail to understand why anyone cutting wood just for home use would need 3 saws. I'd gotten along with one saw for somewhere around 50 years. I also own only one saw chain per saw and see no need to buy multiple chains as that is money tied up that doesn't have to be.

I also have to add that it has been many moons since we bought oil or gas for heating purposes and I don't even remember the price we paid at the time but it was a whole lot lower than today's costs. And like others, we do a fair amount of cooking on our wood stove and we will sometimes even heat a goodly amount of water there also. I could perhaps go on and on about this but it would serve no purpose... I'm done.

Why do women NEED 20 pairs of shoes? They don't...guys buy tools because it's something they want...not need.

 

[Grisu]

You failed to compound inflation... it is not a linear additional cost every year but an exponential one. Also, it's hard to predict exactly where inflation is going, but since the Federal Reserve tripled the money supply in the past five years, it's a fair bet it's going much higher in the not-too-distant future.

Nope. Money sitting in reserve accounts of banks at the Fed has zero impact on inflation. Only money actually spent can influence prices.

I don't see burning wood as superior in cost if you assume that inflation is muted and oil prices will never be impacted by black swan events. Instead, wood is a matter of self-sufficiency, so the return is measured not in dollars, but in peace of mind. You know that you'll be okay even if global war erupts in response to Syria or some other tinderbox in the Middle East or elsewhere or if global trade breaks down or if the currency hyperinflates or if government imposes crazy environmental laws on coal/oil/gas extraction, etc. Also as alluded to above, you pay income and sales taxes on your purchases of oil and other fossil fuels, but your labor to cut wood is non-taxable. And if taxes go up in the future, that's another variable in your risk equation. If you have a good stove, a chainsaw, and a reliable wood lot or other source of wood, then you have visibility into your future costs and risks. You don't have that with oil or electric or gas. This is especially important if you're on a fixed income or fear that you may be downsized at some point. The last thing you need is an inflated heating bill at the perfectly inopportune time. So calculating the savings (or costs) using a baseline set of assumptions doesn't really do much for me. Of course you do have to consider the possibility of no longer being able to cut wood due to injury or illness, and for this reason, wood burning remains a backup heat source for me along with propane, while solar is my primary.

Agree with the rest. Want to add that by using a renewable fuel source for heat instead of a non-renewable one you preserve assets for future generations. Who knows what our next generations will need that oil for.

 

[Grisu]

Great analysis, will peruse it later a bit more in detail.

The oil burner then takes the money they were going to put toward getting started in wood, and invests it. I compared the growth of this modest investment, minus the cost of buying oil and maintaining the oil burner each year, to the costs of starting up and maintaining wood burning. The investment growth rate came from my own 401k statement, in which my rather conservative investments had 10-year averaged annual returns between 5% and 13%, with a net yearly return of approximately 9% averaged over the last 10 years.

That is really a good return especially for the last 10 years. Are those numbers before or after fees? Plus, in an IRA they can grow tax-deferred but would be lower in a standard savings vehicle.

 

[Trilifter7]

This is great Jotul! Good job on the general thinking here, gives a good argument for those that wonder why we do it! Cost savings was my initial reason for getting into burning but the enjoyment that comes from C/S/S and being WARM in the winter has been way more rewarding.
My stove investment is $2500 -250 tax credit. My house already had a free standing stove so I had no additional cost in hookup. I split my splitter with my brother and uncle so that only set me back $300. My dad gave me his chainsaw and tractor so that's a wash. I have not paid for a piece of wood other than equipment cost to haul and process it.
My homes heat source is LP which is around $3-4/gal in my area. I was spending around $2000 a winter with a tstat set at 58F-60F
Now I'm happy and much warmer at around 70F!!

I'd be interested to see my analysis Joful.

 

[Ashful]

This will be our 3rd year, no oil, lower electric bill, ect. Our woodstove, chimney, ect has paid for itself at the end of last heating season. This year it will pay for the splitter, with $ saved in leftovers.

A lot of you guys seem to be missing the basic concept of opportunity cost. Let's say you took the $2000, $4000, $6000, whatever that you put into that "woodstove, chimney, etc.," and invested it wisely, while just continuing to heat your house with whatever you had before, whether it be oil, electric, or propane. Where would you be now? Add $1475 (three years lost investment return) to the $5k you spent to install your stove, before subtracting out your saved money (oil/elec/LP)... can you still say it has "paid for itself?"

That is really a good return especially for the last 10 years. Are those numbers before or after fees? Plus, in an IRA they can grow tax-deferred bit would be lower in an standard savings vehicle.

Thanks! On the fees, I didn't even dig that far. I just pulled up my 401k fund investment rates of return summary, and took the eye-ball average of the 10 Yr. Return. I just went back and actually plugged in my actual distributions, and I'm seeing a net 8.32% return for the last 10 years. Not the previously quoted 9%, but not bad, considering the last 10 years!

Good point on the IRA!

 

[Grisu]

A lot of you guys seem to be missing the basic concept of opportunity cost. Let's say you took the $2000, $4000, $6000, whatever that you put into that "woodstove, chimney, etc.," and invested it wisely, while just continuing to heat your house with whatever you had before, whether it be oil, electric, or propane. Where would you be now? Add $1475 (three years lost investment return) to the $5k you spent to install your stove, before subtracting out your saved money (oil/elec/LP)... can you still say it has "paid for itself?"

Well put. That's the problem of not having any financial education in our schools. Nevertheless, a stove and woodheat has much less risk than a stock market return.

Thanks! On the fees, I didn't even dig that far. I just pulled up my 401k fund investment rates of return summary, and took the eye-ball average of the 10 Yr. Return. I just went back and actually plugged in my actual distributions, and I'm seeing a net 8.32% return for the last 10 years. Not the previously quoted 9%, but not bad, considering the last 10 years!

That's pretty low cost, I know of quite a few with fees in the 2 to 3% range usually putting many below the average return on a low-cost ETF.

 

[Ashful]

I'd be interested to see my analysis Joful.

I assumed $100/year for woodstove maintenance (debit) or $100/year on propane furnace maintenance (credit), so that's basically a wash. I also assumed $100/ year in wood collection costs (fuels, fluids, chains, saw depreciation & maintenance).

So, your upfront investment was $2650 (install + equipment + first year's wood costs), which you could've invested elsewhere at 9%. I didn't know what year you installed your stove, so I left that at 2003, and I also don't know what the trend on LP is (likely not the same $0.25/year linear trend oil has seen over the last ten years), but in any case...



So, based on 9% annual return, your $2650 would have been $14851 after 20 years, but after subtracting out your propane costs (again, using oil as trendline... probably very innaccurate), you'd be $32k in the hole. Meanwhile, your wood heating has cost you $6650, for the same 20 year period. You are justified!

 

[Ashful]

That's pretty low cost, I know of quite a few with fees in the 2 to 3% range usually putting many below the average return on a low-cost ETF.

True! My company is a little odd, in that we have a profit sharing plan instead of company match on 401k. However, because he's not contributing to the 401k, the owner feels some obligation to provide incentive to join these funds, and so he picks up ALL of the plan and individual expenses on our 401k. In return for that, those of us on the investment team try to choose plans which offer high value at the lowest cost. We're strongly aligned with Vanguard, and choose a lot of index funds. I can't say we have no managed funds (some want the target funds), but we have very few. I don't think Vanguard has the best managed funds, anyway... they can't afford to pay the best fund managers, at their rates!

 

[Trilifter7]

I assumed $100/year for woodstove maintenance (debit) or $100/year on propane furnace maintenance (credit), so that's basically a wash. I also assumed $100/ year in wood collection costs (fuels, fluids, chains, saw depreciation & maintenance).

So, your upfront investment was $2650 (install + equipment + first year's wood costs), which you could've invested elsewhere at 9%. I didn't know what year you installed your stove, so I left that at 2003, and I also don't know what the trend on LP is (likely not the same $0.25/year linear trend oil has seen over the last ten years), but in any case...

View attachment 109923

So, based on 9% annual return, your $2650 would have been $14851 after 20 years, but after subtracting out your propane costs (again, using oil as trendline... probably very innaccurate), you'd be $32k in the hole. Meanwhile, your wood heating has cost you $6650, for the same 20 year period. You are justified!

Thanks Joful!! Very good to know, and interesting!!

 

[Ashful]

Actually, thinking about it.... since I am using 10 years fore and aft of today's date, with today's date as the anchor point for the oil pricing, the trendline (being linear) doesn't even really matter. 1+2+3+4+5+6+7+8+9 = 45, but 5+5+5+5+5+5+5+5+5=45 just the same! So, it doesn't really matter if we're talking oil, electric, LP, as long as their pricing has increased rather linearly, and we anchor on today's pricing in the middle of the date span.

I also just realized that I was accidentally calculating for 21 years, not 20. Oh well... cut it off at 2022!

 

[Soundchasm]

I burn in the basement because I could no longer stand working on stuff at a 60 degree ambient temperature. Of course I enjoy it as well. I burn upstairs to save money (I casually calculated a 5 year payback on the stove). And we enjoy at least one room at an ambient temperature that I could never achieve with electricity. But the other currency is time and effort, but I don't golf and such, so I'm not giving up any of that. I like physical work as much as the next guy.

But the wood is part of a program to consume less electricity, and that includes insulation, CFL bulbs, etc. I went and charted my electric consumption since 2002. We're 100% electric. 2002 was 30,595KWH and 2012 was 17,881KWH.

My chart uses the average monthly temperature paired with the electric bill so I can compare the A/C as well as the heating improvements.

 

[dafattkidd]

We save between $2,500-$3,000 in oil each year depending on winter temps. Wood heat has worked out awesomely for us. The original investment of $3,000 (-30% tax deduction in 2008) paid for itself in the first winter. Then the second winter I had the insert I lost my job. Burning wood literally kept us out of foreclosure. Thankfully now I have a great job and we are using the money saved to do repairs to our house and hopefully raise the value of the house which is grossly under water.
So at this point we are not investing the extra cash in the stock market, but wood heat has allowed us to keep the house in hard times, stay warmer than ever, have security that if we lose power my family is taken care of, and is helping us to climb out of the hole from the messy housing market. For us wood heat is a win!

And lastly I just friggin love it! I'm a pyro in my bones so wood heat is the healthiest outlet.

 

[toddnic]

I ended up spending around $4,500 for the Progress Hybrid, chimney system, and the install (did most of the work myself). I figure that I'll recoup most of the cost in the next two years since we burn about 750 gallons of propane a year ($2.40 per gallon). I am surrounded by thousands of acres of trees so obtaining wood is very easy. I already have an ATV, trailer, saw, etc. so at this point I have not added any equipment costs. The way I look at it I am saving money by burning wood; the house will be warmer than when heating with propane; and I'm getting some well needed exercise in the process!

 

[PapaDave]

A lot of you guys seem to be missing the basic concept of opportunity cost. Let's say you took the $2000, $4000, $6000, whatever that you put into that "woodstove, chimney, etc.," and invested it wisely, while just continuing to heat your house with whatever you had before, whether it be oil, electric, or propane. Where would you be now? Add $1475 (three years lost investment return) to the $5k you spent to install your stove, before subtracting out your saved money (oil/elec/LP)... can you still say it has "paid for itself?"

Yep, got it.
However, when I was still "investing" in our 401k, the rate of return was no where near yours. Actually lost money.
I had a manager who watched his 401k go from over half a mil down to about 250 thou in just a few months. Poor guy. I thought he was going to stroke out.
You obviously hit the sweet spot, where some of us had to get out before it was all gone. It's only money.
Used to see articles on Yahoo about how "investing" in a 401 would net a rate of about 8% and what a great deal it was. Ra, rah, rah. Sis boom bah...humbug.
It's a good "what if" scenario. I like it.
Inversely, where would you be in that sort of scenario? Real life is what happens while you're making other plans.
Also, if no "disposable" income is available, moot point all the way around.

 

[Grisu]

True! My company is a little odd, in that we have a profit sharing plan instead of company match on 401k.

Not my area, but are they not wasting money? I always thought the employer's contribution to 401(k)'s was better in regards to taxes.

However, because he's not contributing to the 401k, the owner feels some obligation to provide incentive to join these funds, and so he picks up ALL of the plan and individual expenses on our 401k. In return for that, those of us on the investment team try to choose plans which offer high value at the lowest cost. We're strongly aligned with Vanguard, and choose a lot of index funds. I can't say we have no managed funds (some want the target funds), but we have very few. I don't think Vanguard has the best managed funds, anyway... they can't afford to pay the best fund managers, at their rates!

I almost guessed that you invested in Vanguard funds. I am a big believer in using low-cost, broad market funds or ETFs. There is a lot of research out there showing that 80 to 90 % of fund managers of actively managed funds are getting a worse return after fees than simple index funds.

Just for the heck of it: How would your well-off burner do if you would only assume a 3 to 4 % return? That is probably closer to what many people achieved through the last years.

 

[Ashful]

PapDave & Grisu... some interesting points! Will look more at this when I'm at a computer tonight.

To papadave, if no disposable income available, you won't be buying a stove... so no analysis necessary. Never heard of long term financing for a wood stove, but I'm sure that option is out there.

 

[Huntindog1]

Man you guys you do money analysis like I analyze stove designs. We spend way too much time doing it.

 

[PapaDave]

To papadave, if no disposable income available

A stove is an investment, and a very sure rate of return is guaranteed, depending how you acquire wood.
So, folks with no disposable income shouldn't pay the gas, oil, elec. man? That's ludicrous.
I would choose to spend those dollars more wisely on a stove and get that guarantee. It continues to pay back, year after year and I get heat. Paying for gas, etc., all I get is heat. Kind of like renting.
A stove, or any other form of heat, is a neccessity, not a want.
If I could take the money I need to keep the house warm and invest it in the market, I might do that,, with your help (you seem to have a good track record).
Alternatives are fun to consider.

 

[Coog]

You failed to compound inflation... it is not a linear additional cost every year but an exponential one. Also, it's hard to predict exactly where inflation is going, but since the Federal Reserve tripled the money supply in the past five years, it's a fair bet it's going much higher in the not-too-distant future. I don't see burning wood as superior in cost if you assume that inflation is muted and oil prices will never be impacted by black swan events. Instead, wood is a matter of self-sufficiency, so the return is measured not in dollars, but in peace of mind. You know that you'll be okay even if global war erupts in response to Syria or some other tinderbox in the Middle East or elsewhere or if global trade breaks down or if the currency hyperinflates or if government imposes crazy environmental laws on coal/oil/gas extraction, etc. Also as alluded to above, you pay income and sales taxes on your purchases of oil and other fossil fuels, but your labor to cut wood is non-taxable. And if taxes go up in the future, that's another variable in your risk equation. If you have a good stove, a chainsaw, and a reliable wood lot or other source of wood, then you have visibility into your future costs and risks. You don't have that with oil or electric or gas. This is especially important if you're on a fixed income or fear that you may be downsized at some point. The last thing you need is an inflated heating bill at the perfectly inopportune time. So calculating the savings (or costs) using a baseline set of assumptions doesn't really do much for me. Of course you do have to consider the possibility of no longer being able to cut wood due to injury or illness, and for this reason, wood burning remains a backup heat source for me along with propane, while solar is my primary.

I know the true intent in this exercise is for the purposes of financial analysis. However, I thing TA makes a good point. A return on investment is important but so is minimizing risk. The current condition of our government spending and the devaluation of our currency motivates me to keep piece of mind. If I lose power or our economy collapses, I have a back up plan.

I know this bypasses the point, but it played in heavily in my decision to by a wood stove.

Oh, and don't forget, a gas furnace or boiler had an initial investment as well. That should really play into this equation as well.