Wood Pellets vs Heating Oil, Propane and Electricity: How to Compare the Real Cost
Heating bills are one of the biggest household expenses in cold climates. If you’re paying for heating oil, propane or electric baseboard heat, you’ve probably wondered whether switching to wood pellets would save money.
Comparing fuels by the price on the invoice is misleading, because a gallon of oil, a liter of propane and a bag of pellets all contain very different amounts of energy — and your appliance doesn’t turn all of it into heat. The fair way to compare is cost per unit of delivered heat. Here’s how to do it yourself in five minutes.
The energy content of common heating fuels
| Fuel | Energy per unit (approx.) |
|---|---|
| Wood pellets | 8,000 BTU per lb ≈ 16 million BTU per US ton (≈ 4.7–4.9 kWh/kg net heat value) |
| Heating oil | 138,500 BTU per US gallon (≈ 10 kWh per liter) |
| Propane | 91,500 BTU per US gallon (≈ 7 kWh per liter) |
| Natural gas | 100,000 BTU per therm (≈ 10.5 kWh per m³) |
| Electricity | 3,412 BTU per kWh |
Appliance efficiency matters too
No heater is perfect. Typical seasonal efficiencies are:
- Modern pellet stove or boiler: 75–90%
- Oil furnace or boiler: 80–88%
- Propane furnace: 80–95%
- Electric resistance heat (baseboards): ~100%
- Air-source heat pump: 200–350% (it moves heat rather than making it)
The simple formula
Cost per million BTU of heat = Fuel price ÷ (energy per unit × efficiency) × 1,000,000
Or in metric:
Cost per kWh of heat = Fuel price per unit ÷ (kWh per unit × efficiency)
A worked example (illustrative prices)
Prices change constantly and vary by region, so plug in your own local numbers. To show how the calculation works, here’s an example using round, illustrative prices:
| Fuel | Example price | Efficiency | Cost per million BTU of heat |
|---|---|---|---|
| Wood pellets | $300 per ton | 80% | ≈ $23 |
| Heating oil | $4.00 per gallon | 85% | ≈ $34 |
| Propane | $3.00 per gallon | 90% | ≈ $36 |
| Electric resistance | $0.18 per kWh | 100% | ≈ $53 |
| Heat pump | $0.18 per kWh | 250% | ≈ $21 |
In this example, wood pellets cost about a third less than oil or propane and less than half the price of electric resistance heat. Only an efficient heat pump comes close — and heat pumps lose efficiency in deep cold, which is exactly when pellets shine.
Running the numbers for Europe
European households often compare in euro per kWh. Using illustrative figures — pellets at €350 per tonne, a boiler at 88% efficiency, and 4.8 kWh/kg:
- Energy per tonne = 4,800 kWh
- Useful heat = 4,800 × 0.88 = 4,224 kWh
- Cost ≈ €0.083 per kWh of heat
Compare that with your local heating oil price (≈10 kWh per liter), gas tariff or electricity tariff to see where you stand.
Beyond the fuel price: other costs to weigh
Upfront investment. A pellet stove insert typically costs less than a whole-house boiler but heats a smaller area. Many governments and utilities in the USA, Canada and Europe have offered tax credits, rebates or grants for efficient biomass heating at various times — check what’s currently available where you live.
Maintenance. Pellet appliances need regular ash removal and an annual professional cleaning. Budget for it, just as you would for an oil burner service.
Price stability. Pellet prices are generally less volatile than oil and propane, which are tied to global energy markets. Buying a season’s supply in summer locks in your cost.
Electricity use. Pellet stoves use a small amount of power for the auger and fans. It’s a minor cost, but plan for a backup power option if outages are common.
Carbon and air quality. Pellets from sustainably managed forest residues have a much lower fossil carbon footprint than oil or propane, and modern certified pellet stoves are among the cleanest-burning solid fuel appliances.
How to make pellets even cheaper
- Buy by the ton or pallet rather than single bags.
- Buy off-season, typically spring and summer.
- Choose premium, low-ash pellets — more heat per bag means fewer bags.
- Keep your stove clean; a dirty heat exchanger wastes fuel.
- Zone your heat — run the pellet stove in your main living area and lower the thermostat elsewhere.
Frequently asked questions
Are pellet stoves cheaper to run than electric heaters?
In most regions, yes, when comparing against electric resistance heaters such as baseboards, oil-filled radiators and fan heaters. Pellets usually deliver heat at a noticeably lower cost per unit. Modern heat pumps can be competitive in mild weather, but their efficiency drops in severe cold, which is when many households rely most on pellet heat.
How do I find my local cost of heating oil or propane?
Look at your most recent delivery invoice, which lists the price per gallon or liter. Many government energy agencies also publish average heating fuel prices, including the US Energy Information Administration, Natural Resources Canada and national energy statistics offices across Europe. Use those figures in the formula above.
Can I heat my whole house with pellets?
Yes. A pellet boiler or furnace connected to radiators, underfloor heating or ducts can heat an entire home and supply hot water. A single pellet stove works best in open-plan spaces or as a zone heater in the rooms you use most, often cutting the use of a more expensive central system dramatically.
Do pellet prices rise in winter?
Demand peaks in autumn and winter, so prices and lead times can rise during cold snaps. Buying your full season’s supply in spring or summer is the easiest way to lock in a lower price and guarantee availability.
The bottom line
For many households heating with oil, propane or electric resistance, wood pellets offer a lower cost per unit of heat and more stable pricing. Run the formula with your local prices — it only takes a few minutes and the answer may surprise you.
Ready to compare with real numbers? Browse our premium hardwood heating pellets and softwood heating pellets, or request a bulk delivery quote for the USA, Canada or Europe.
