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How do Pellet Furnace Prices Compare?

Two People Inspecting Home Furnace

After many years of renting small apartments, my wife and I decided to take the plunge and buy our first house. As any new homeowners would, we have been nervously, excitedly, painting walls and undertaking little projects to make our home perfect for us, but the first big project now looms on the horizon—the heating system.



When we bought the house, we knew that the first big thing we’d need to do was to replace our ancient, 1985 oil furnace with a modern solution for heating in the winter. Fuel providers estimated we’d make it through the winter but told us to seriously start budgeting for a new oil furnace and a new oil tank in the spring. Plus, every time the fan turns on to heat the house it makes a loud clank and scares the dog right off her bed!



Having heard so much about pellet furnaces, I immediately started dreaming about getting one to slot right into the place of our current oil furnace (because of the layout of our home, a pellet stove is not something we’re able to install). A few local companies deliver pellets to our area using a truck that looks an awful lot like an oil truck, the pellets are made in Vermont, the price of pellets is relatively stable compared to other options, they reduce the United States’ reliance on foreign oil, and their environmental impact is lower than that of fossil fuel alternatives. Plus, we’d be getting rid of a weeping oil tank and transitioning our heating to a sustainable alternative.



As I started doing my research, I began to have some serious questions about whether a pellet furnace was right for us. The biggest setback was the cost of the initial installation and equipment. A quote put the cost at roughly $17,000, even after $6,000 dollars of incentives. That meant that it would take us several years to start seeing any financial gain from pellets. Will we still be in this house after all those years? We’re not sure; and this is a big investment that we want to make sure is right for us.

After a few hours of research (and five emails to my poor fuel provider at 9:30 PM), I found this handy fuel cost calculator at It lets you input the cost of various fuel types alongside the efficiency of the products you’re looking at, then gives you an estimate of how much it’ll cost to heat a standard volume of air.*


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So, I went about entering product efficiencies and estimated costs to see what I’d potentially save. I used our VHeat fuel pricing as a basis for my oil and propane costs and some high efficiency furnaces—one oil and one propane—for the efficiency percentage. It is important to note here that VHeat is not available everywhere in Vermont, so you may want to use a different source for your calculations, such as the Vermont 2020 Annual Energy Report. For pellets, I based my estimates on the abovementioned, $17,000 furnace (after incentives). I estimated $300 per ton of delivered pellets with an appliance efficiency of 87.7% (I found this statistic on the manufacturer’s website). The result was that per one standard volume of air, it would cost $20.86 to heat using pellets, $17.98 to heat with oil, and $22.75 to heat with propane (numbers as of early February, 2020).


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Not to be deceived by one source, I did some more calculations to compare what we pay now to what we might pay with a pellet furnace. I found a few resources online that suggested that one ton of pellets roughly equates to 120 gallons of oil ( is one of them). Since our house takes 360 gallons of oil per year, it would mean that we’d likely need about three tons of wood pellets to heat our home throughout the winter. We do not currently use oil to heat our water, and we plan to keep this separate from our space heating, so your numbers may be radically different. Using our current VHeat pricing of $2.42 per gallon of oil, I estimated it would cost us roughly $630 a year to heat our home. If I used the same cost per ton of pellets I used in my previous equation, it would cost $900 a year to heat our home using pellets.


The other thing to contend with is that right now we have oil delivered for heating and propane delivered for our gas fireplace, dryer, and stove. This means that even if we were to replace oil with wood pellets, we’re still paying for propane. When I mentioned this to a friend who is knowledgeable about heating systems, he said that it’s a good rule of thumb to use just one fuel source in your home so you aren’t dependent on two different fluctuating prices and two different deliveries. Cutting your fuel deliveries to one vendor really helps simplify things, especially in rural areas. Unfortunately we can’t get rid of the propane easily, because we’d also have to replace three appliances. The price just keeps adding up!



So, although I am still dreaming about our renewable energy future, it’s unlikely that my wife and I will install a pellet furnace. We desperately want to, but the numbers just don’t add up for us right now. The most efficient propane furnace we can find is still significantly less than $10,000, even after installation, and we already have a propane tank sitting outside. We can still get rid of the oil tank, and although we’ll be burning fossil fuels, we’ll be very efficiently doing so (95% efficiency is nothing to be sneezed at).

The reality is that clean energy solutions, like pellets furnaces, aren’t yet cheap enough for some people, even after the significant incentives. The high upfront cost and the price of delivery is much more expensive than a traditional alternative and is not guaranteed to add to the sale price of your home if you plan on selling one day. Depending on your home and your financial situation, there may be other efficiencies to consider before investing in a pellet furnace, such as weatherization, which can have a major impact on your overall fuel cost and carbon footprint. If you do make energy upgrades to your home and plan on selling, be sure to check out the Appraisal Institute for resources that may help you get more for your investment.

Honestly though, I hope the price comes down over time because heating with local wood pellets just sounds like a dream come true. For some, that dream is already here! For us, it’s a few years down the road. If I was building a house from scratch tomorrow, I’d take a closer look at all my fuel options and possibly install a pellet-based heating system. But for our house and wallets? That’s a much harder case to make.

*For those more interested in this, the calculator actually calculates the cost per million British thermal units (BTUs). A BTU is typically defined as the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit. I’ve abbreviated that in this article to make it more accessible to all.


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Oliver Ames Headshot

About Oliver Ames

Oliver is VSECU's social media strategist and spends most of his day engaging with members through our Facebook, LinkedIn, Twitter, and Instagram profiles. He has a background in science education, non-profit fundraising, business communication, media production, and membership-based organizations. When not at work, Oliver spends much of his time with his wife and son at their home in Montpelier.
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