Personal Finance

To burn less money, consider heating with wood

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There's nothing like a roaring fire to stave off winter's chill, or—as some consumers are finding—to cut their heating bills.

Nationwide, about 2.5 million households are expected to use wood as their primary fuel source this winter, according to the Energy Information Administration's Short-Term Energy Outlook. Granted that's just 2 percent of all households, but a 39 percent increase since 2004.

Another 8.8 million, use wood as a secondary heating source—such as an occasionally used fireplace, said Chip Berry, residential energy consumption survey manager for the EIA.

"It's by far the most inexpensive fuel source," said Bill Cook, a forester with the Michigan State University Extension. Cook estimates he spends about $500 over the course of a northern Michigan winter to heat his home. "And that's purchasing the wood," he said. "If you go out and cut and haul your own, it's close to free."

(Read more: Affording a $2,000 winter heating bill)

In comparison, the EIA expects that the average consumer in the Midwest will spend $713 to heat using natural gas from October 2013 to March 2014. Using electricity to heat, the average bill will be $974, and using propane, $1,584. The agency does not track average wood expenditures. (See chart below for more average bills by region and fuel type.)

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It's also gotten easier to use wood as a steady source of fuel, without being home 24/7. Interest in biomass stoves and furnaces, which slowly feed in a store of compressed pellets made of sawdust and wood scraps, has contributed to growth, said Shawn Grushecky, director of the Appalachian Hardwood Center at West Virginia University.

"We saw some major increases [in homes heating with wood] in the late 2000s, as they became more popular," he said. "They automated the use of wood. You didn't need to worry about waking up in the middle of the night and throwing a log on the fire."

But even as numbers grow, switching isn't a trend that experts expect to catch fire. Older fireplaces were more likely put in place for ambiance, and upgrading home heating systems to safely and efficiently use a fireplace, wood stove or pellet furnace as the main heating source isn't simple or cheap. Homeowners may choose to keep their old heating system in place, with fuel-switching capabilities, as a backup, said Grushecky.

Average Winter Heating Bills By Region

Region Fuel 2012-13 2013-14 Change
NortheastNatural Gas$883 $1,036 17.30%
Electricity$1,040 $1,088 4.50%
Propane$1,940 $2,107 8.60%
MidwestNatural Gas$638 $713 11.80%
Electricity$955 $974 2%
Propane$1,333 $1,584 18.80%
SouthNatural Gas$498 $560 12.40%
Electricity$852 $874 2.60%
WestNatural Gas$429 $460 7.20%
Electricity$834 $854 2.40%

Source: Source: Energy Information Administration

A pellet stove can cost more than $1,000, although consumers who install a qualifying device before the end of 2013 can claim a federal tax credit for 10 percent of its cost, worth up to $300. Several states have credits, too—depending on the model. Oregon offers as much as $548.

Consumers who opt to burn firewood have their own challenges. There's a time cost in chopping and drying wood, Cook said, and burning it wet won't heat your home as efficiently. (More of the energy generated goes to drying the wood, not heat.)

Local ordinances related to air quality may limit homeowners' ability to install or use wood-burning stoves and fireplaces, said Cook. (Pellet stoves and certain EPA-certified heaters, which have fewer emissions, are often exempt.) For example, Albuquerque, N.M., issues burn restrictions from October through February to reduce carbon monoxide output, although it allows use even on no-burn days if wood-burning is the home's sole source of heat.

By CNBC's Kelli B. Grant. Follow her on Twitter @kelligrant.