Generator Cost Per kWh: Diesel, Propane, Natural Gas, Gasoline

The US national average cost of electricity from the grid is about $0.15/kWh. How does the cost per kWh from generators compare? Obviously, the generator cost per kWh will be higher, otherwise everybody would be using generators for electricity. But how much higher? $0.20/kWh? $0.40/kWh? Even $1.00/kWh? Let’s find out; you will be quite shocked about the results.

We calculated how much it costs to generate electricity with propane, natural gas, diesel, and gasoline generators. Let’s first start with the basic metrics we need for this calculation, and then calculate the generator cost per kWh one-by-one for each fuel source. We have summarized all the results in the Generator Cost Per kWh Chart at the end.

It’s quite interesting to how cheap or expensive it is to generate electricity with a generator. To calculate that, we need 3 key metrics, namely:

1. Generator Fuel Energy Content. Different generator fuels will have different heat contents. According to the US EIA, they are as follows:

   Generator Fuel:	Energy Content:
   Propane	91,452 BTU Per Gallon Of Propane
   Natural Gas	1,000,039 BTU Per 1000 Cubic Feet (MCT) Of Natural Gas
   Diesel	137,381 BTU Per Gallon Of Diesel
   Gasoline	120,238 BTU Per Gallon Of Gasoline

   As you can see, diesel is the richest liquid generator fuel source with 137,381 BTU per gallon. Notice that natural gas is a bit of an exception here because we measure it in cubic feet (CF), not gallons.

2. Generator Efficiency. Generator fuel efficiency tells us what percentage of the fuel heat content can be converted to electricity. Generators convert about 20% of the fuel content into usable electricity (for comparison, coal plants are about 43% efficiency). Here are a few examples of general fuel efficiencies from the UGOV study:

   Generator + Fuel:	Efficiency At Full Load (100% Output):
   Generac RG022 22kW Propane Generator	22.3% Propane Efficiency
   Kohler 8RESV 8kW Natural Gas Generator	19.0% Natural Gas Efficiency
   Generac SD015 15kW Diesel Generator	27.0% Diesel Efficiency
   Honda EU7000is 5.5kW Gasoline Generator	19.3% Gasoline Efficiency

   Out of these fuels, diesel is also the most efficient with 27.0% efficiency.

3. Cost Of Generator Fuel. This is the most variable factor. Fuel prices are quite volatile in 2023 and will be in 2023 as well. Here are the current US national average fuel prices:

   Fuel:	Average Fuel Cost:
   Propane	$2.70 Per Gallon Of Propane (Source: EIA Propane Prices)
   Natural Gas	$14.10 Per MCF Of Natural Gas (Source: EIA Natural Gas Prices)
   Diesel	$3.70 Per Gallon Of Diesel (Source: EIA Diesel Prices)
   Gasoline	$5.00 Per Gallon Of Gasoline (Source: EIA Gasoline Prices)

Alright, now we have all the basic metrics we need to calculate generator cost per kWh.

Calculating Generator Electricity Prices

To convert BTUs (energy) into kWh (electricity), we also need to know this relationship:

1 kWh = 3412 BTU

We are going to use all these metrics in the following formula that transforms fuel heat content (BTUs) into electricity (kWh). The result will the generator electricity cost (in USD) per kWh:

Generator Cost Per kWh =  (Cost Of Fuel × 3412 BTU/kWh) / (Fuel Energy Content × Generator Efficiency)

Let’s now calculate the cost per kWh for propane generator, diesel generator, gasoline generator, and natural gas one-by-one:

Cost To Run A Propane Generator Per kWh

Let’s look at a quick example of a propane generator.

We know (from the 3 tables above) that propane energy content is 91,452 BTU/gallon, the propane generator efficiency is 22.3% (factor of 0.223) and that propane costs about $2.70 per gallon. Let’s input all of this into the equation:

Propane Generator Cost Per kWh = ($2.70/Gallon / 3412 BTU/kWh) / (91,452 BTU/Gallon × 0.223) = $0.45 Per kWh

Essentially, at current propane prices, the cost to run a propane generator per kWh is $0.45/kWh. Compared to the grid electricity price of about $0.15/kWh, it will cost about 3 times more to generate electricity with a propane generator.

Cost To Run A Diesel Generator Per kWh

Alright, from the 3 tables above, we know that 1 gallon of diesel has 137,381 BTU of energy content per gallon. We also know that diesel generators have a high 27.0% efficiency (factor of 0.27) and that, at current prices, a gallon of diesel costs about $3.70.

Let’s input all of these variables in the equation:

Diesel Generator Cost Per kWh = ($3.70/Gallon / 3412 BTU/kWh) / (137,381 BTU/Gallon × 0.27)  = $0.34 Per kWh

As you can see, the cost to run a diesel generator per kWh is $0.34 per kWh. That is lower than the cost per kWh for propane. In fact, in some states, the electricity cost from the grid and from a diesel generator can be quite comparable.

Cost To Run A Gasoline Generator Per kWh

Let’s do the same cost per kWh calculation for a gasoline generator:

We know that 1 gallon of gasoline contains 120,238 BTU of energy content, the gasoline generator efficiency is 19.3% (factor of 0.193), and that a gallon of gasoline costs about $5.00 at current prices. Here is the calculation:

Gasoline Generator Cost Per kWh = ($5.00/Gallon / 3412 BTU/kWh) / (120,238 BTU/Gallon × 0.193) = $0.73 Per kWh

Compared to propane and diesel, the cost to run a gasoline generator per kWh is quite high; $0.73/kWh, to be exact.

Cost To Run A Natural Gas Generator Per kWh

Natural gas is a little bit different because we don’t measure the quantity of natural gas in gallons; we measure it in 1000s of cubic feet (or MCF).

For natural gas, we know that 1 MCF contains 1,000,039 BTU of heat content. The natural gas generator efficiency is 19.0% (factor of 0.19) and the current average US cost of natural gas per thousand cubic feet (MCF) is $14.10 per MCF of natural gas.

Let’s put these figures in the equation and calculate the natural gas generator cost per kWh:

Natural Gas Generator Cost Per kWh = ($14.10/MCT / 3412 BTU/kWh) / (1,000,039 BTU/MCT × 0.19) = $0.25 Per kWh

This is quite shocking; using a natural gas generator to produce electricity will result in an average cost of just $0.25/kWh. This is comparable with the grid electricity cost.

Here is the summarized chart all for all these types of generators:

Generator Cost Per kWh Chart

From these result summary, we can quite evidently see that the most cost-effective type of generator is a natural gas generator ($0.25/kW), followed by a diesel generator ($0.34/kWh). These two types of generators can in some areas produce electricity cheaper than the price of electricity you get from the grid. This is quite outstanding.

A propane generator is also not all that expensive to run; with a $0.45/kWh electricity price, you will pay about 3 times as much for electricity as from the grid.

The least cost-effective type of generator is the gasoline generator. The electricity produced by a gasoline generator costs about $0.73/kWh at current gasoline prices. The reason for this is not the low energy content of gasoline or very low efficiency; it’s the high $5.00/gallon price of gasoline.

We hope this gives you valuable insight into how much it costs to run a generator per generated kilowatt-hour (kWh) of electricity. You can also quite clearly see which are the most fuel efficient generators.