Maintenance
Part of Electrification budget: the seven lines and which ones vary
Which budget mistakes turn a good project into a bad one
The forecasting errors that wreck electrification budgets: extrapolating one winter, banking unconfirmed incentives, and comparing fuels on the wrong basis.
The errors in this article are not construction errors. They are arithmetic and forecasting errors made months before anyone picks up a tool, and they are harder to spot because a spreadsheet does not creak or leak. Each one produces a budget that looks reasonable and is wrong by a margin large enough to change the decision.
What to take away
- One winter is a weather sample, not a baseline.
- An unconfirmed incentive is not money and should not sit in the budget.
- Comparing fuels by unit price rather than delivered energy inverts answers.
- Capital and operating budgets need separate contingencies.
Extrapolating a single season
Households routinely take last winter's bills, apply an efficiency ratio, and call the result a forecast. Winters are not interchangeable. EIA's observation that winter residential energy expenditures vary substantially by heating fuel captures one axis of that variation, and weather supplies another on top of it.
EIA's winter outlook reporting, including the year in which household heating expenditures were expected to hold roughly level or fall, shows how much the national expectation shifts between seasons.
The fix costs nothing: use three years of your own data where you have it, normalize by heating degree days, and present the result as a range.
Banking an incentive you have not confirmed
Incentive programs change eligibility, funding levels, documentation requirements and application order, and they differ by state and by utility. Treating a figure read somewhere generic as a budget input is how a project becomes unaffordable after the equipment is ordered. Verify each figure against a named source before it enters the budget.
Three rules keep this safe:
Confirm incentives before budgeting
- Confirm eligibility in writing, with a date
- Check if pre-approval is required
- Budget affordable without the incentive
- Treat approval as a rebate
- Check DSIRE, the national incentives database at dsireusa.org, and your utility's rebate portal. Note the date you checked.
- Confirm eligibility and the approved amount in writing with the program administrator before you order equipment.
- Confirm the application order. Many programs require approval before installation, and equipment installed first is not eligible.
Comparing fuels on the wrong basis
The classic error is comparing the unit price of gas with the unit price of electricity. Those units measure different things, and the equipment converting them has very different efficiency. A correct comparison converts both to delivered useful energy, accounts for equipment efficiency, and then applies the tariff including fixed charges.
Fixed charges catch people out particularly. Removing gas appliances one at a time while keeping the gas connection means paying a standing charge for a service barely used, which can quietly cancel the saving from the switch.
Illustrative numbers show the arithmetic. Gas at $1.50 per therm through an 80 percent efficient furnace delivers 80,000 BTU of usable heat per therm, so 100,000 BTU costs about $1.88.
Electricity at $0.18 per kWh through a heat pump at seasonal COP 2.5 delivers about 8,500 BTU per kWh, so the same 100,000 BTU costs about $2.10. At COP 3.5 the heat pump costs about $1.51. The crossover sits near COP 2.8.
Two contingencies, not one
| Budget | What the contingency covers | Sized against |
|---|---|---|
| Capital | Site surprises, routing, hidden conditions | The variable lines, not the equipment |
| Operating | Rate increases, a colder than usual winter | A plausible higher-price scenario |
Size the capital contingency at 10 to 20 percent of the variable lines, a typical range on retrofit work. Site conditions drive it, not the equipment. On $20,000 of variable scope that is $2,000 to $4,000.
Size the operating contingency at a typical 10 to 15 percent of the annual energy estimate.
Households routinely hold the first and forget the second, then experience an ordinary cold season as a failure of the equipment. Running the operating estimate at a higher rate before you commit is a five-minute exercise that prevents that.
For the errors that happen during the project rather than before it, see our list of mistakes that quietly add cost, the page Home Electrification Mistakes That Lead to Extra Costs. The budget structure itself sits in where the money goes, the page Where the Money Goes in Home Electrification Costs Projects.
