BOSTONSTANGS.COM

PARIS, Maine -- Mark Bancroft's new pellet-burning furnace hasn't been installed, but he's already counting how much money he'll save over his old oil-fired burner.

Instead of paying $5,000 for 1,100 gallons of heating oil in the coming year based on today's record prices, he'll spend $2,000 on about 8 tons of wood pellets. Even at a cost of more than $12,000, he thinks the new furnace will pay for itself within five years.

"How great is it if we make a move toward this type of heating that can boost the economy instead of sending money to foreign lands for oil?" said Bancroft, who plans to have the unit installed this summer.

As heating oil approaches $5 a gallon, consumers in the oil-reliant Northeast are looking at pellets, heat pumps, firewood and even geothermal systems to soften the blow of high oil prices -- which have almost doubled in the past year and gone up nearly fivefold since 2003.

About 8 million households in the U.S. use heating oil as their primary heating source, according to the federal Energy Information Administration.

Nowhere is the pain of skyrocketing oil prices more acute than in the Northeast, which accounts for more than three-quarters of the nation's heating oil sales. And no state relies more on heating oil than Maine, where it's used in 80 percent of homes.

Oil used to be a cheap heating source, with prices around $1 a gallon as recently as five years ago. But as prices rise to unprecedented levels, homeowners are angry and scared.

There are risks, of course, to giving heating oil the boot. Oil prices could drop or wood pellet prices could rise. Questions remain about whether there are enough certified technicians to install and service other types of furnaces.

Here in western Maine, former ski mogul Les Otten is banking on European wood pellet furnaces with his Maine Energy Systems Inc., which he launched with two other investors. Otten once headed American Skiing Co. and was later a part-owner of the Boston Red Sox.

Otten already has 400 orders even though he hasn't taken delivery of his first shipment -- they're not due to arrive by container ship until later this month. To fuel those furnaces, he's arranging for a fleet of trucks to make home deliveries of pellets made at plants in Maine, New Hampshire and Quebec.

Otten, who has a pellet furnace in his home in Greenwood, said it works much like existing forced-water heat systems, except the burner is fueled with wood pellets rather than oil or natural gas. Pellets are made out of compacted sawdust, wood chips or other wood material and look something like rabbit food.

And instead of heating oil deliveries, trucks will deliver pellets, which are pumped into a bin in his basement that can hold 4 tons. They are then carried automatically from the bin to the furnace, where they are burned to heat water that is used to heat the house.

In the next five to seven years, Otten's goal is to convert 10 percent of Maine homeowners -- more than 40,000 homes -- who now heat with oil and expand throughout New England and into New York.

"With 80 percent of Maine homes relying on oil for heat, people are spending billions a year on heating oil," Otten said on a recent day as he showed off his furnace. "That's why you have to use the word 'crisis' when you think about this stuff."

For a smaller investment, pellet stoves -- which are touted as being cleaner and more efficient than traditional wood stoves -- are flying out the door at the Finest Hearth & Home shop in Yarmouth. There, sales are five times higher this year than last year, said assistant manager Mike Jaques.

It can cost $4,000 or more to buy and install a pellet stove, but homeowners can make their money back in two or three years if oil prices stay where they are now, Jaques said. And they're willing to carry bags of pellets from their basement or garage and load the stoves by hand.

"In a nutshell, it's pellet-stove madness," he said.

Heat pump sales are also rising fast, said Duane Hallowell, president of Hallowell International LLC, a Bangor company that makes the Acadia heat pump, which can be used for both heat and air conditioning.

Heat pumps, which are powered by electricity, look like the central air conditioning units commonly seen outside of many homes, especially in the South. They essentially suck the heat from cold air for warmth, and the cold from hot air for cooling. They have long been popular in warm climates, but not used much in cold-weather states because they haven't worked well when temperatures fall below freezing.

Hallowell said he refined the technology so his product works in temperatures as cold as 30 below zero. With oil prices surging, Hallowell's sales have jumped 500 percent the first part of the year -- mostly in the Northeast. He expects to sell tens of thousands of units in 2008.

"It's a time of desperation. People don't know what to do," Hallowell said. "They can't afford these $3,000 to $4,000 heating bills."

Richard Parker, 75, of Burlington, Mass., didn't shed any tears when he got rid of his old oil-burning furnace this spring and replaced it with Hallowell's heat pump. Even at a cost of $13,500, he figures the pump will pay for itself in seven years or so.

With prices so high, Parker's had it with oil. "I don't have any faith in it going down, or if does go down it won't be by a heck of a lot," he said.

As for wood pellets, the new technology in stoves and furnaces harkens to a time when wood was the fuel of choice for most of the U.S.

Pellets have been popular for years in much of Europe, said Otten, who's putting up to $10 million of his own money behind his project. He's convinced they'll catch on here, and he's confident that the price of wood pellets, unlike heating oil, will remain stable even if demand jumps.

"What's more volatile?" he said. "Cutting a tree in the woods or pumping oil out of the ground?"

(Copyright 2008 by The Associated Press. All Rights Reserved.)