Geothermal Cost Payback
With a geothermal heat pump, you can tap the clean, renewable heat beneath your feet. Although geothermal heating and cooling systems are not that well known by the public, they have a proven track record that stretches back decades. In fact, there are more than one million geothermal heat pumps in operation around the world.
The technology is also called earth-coupled, ground-source or ground-loop heating and cooling, and the sector is distinct from the more familiar geothermal energy. In the latter process, engineers take advantage of hot water near the earth's surface, or inject water down into hot rocks, in order produce electricity.
But you don't have to live near volcanic activity to take advantage of a geothermal heating and cooling system. All you need is to bury some pipe into the ground around your home, and a heat exchanger -- similar to the one in your window air conditioner -- will magnify the effects of the temperature gradient, producing exceptionally even, quiet heating and cooling.
There is a lot of heated debate over what climates are optimal for earth-coupled climate control systems, but in researching our recent book Geothermal HVAC, we talked to folks with many successful installations all over the world, from chilly Alaska to the scorched Southwest, and from tropical islands to the Middle East. A properly built geothermal system can readily provide 20 years of reliable heating and cooling, with minimal maintenance. You need only a small amount of electricity to run fans and controls, so you slash your carbon footprint.
In our book Geothermal HVAC, my co-author, Jay Egg, crunches the numbers for a typical homeowner, based on his 20+ years in the business. For a home geothermal system, he estimates the total installed cost at $42,000. It sounds like a lot, but the sticker price is only a small piece of the puzzle. One thing to note is that a significant chunk of that is for excavations of the ground loops, which will typically require a few thousand feet of pipe in contact with the soil. Once those bores or trenches are made, they should never have to be redone, even if the system components need replacing after 20+ years.
Homeowners get some help from Uncle Sam, in the form of an income tax credit worth 30% of the total cost of a new geothermal system, including parts and labor. The credit currently expires at the end of 2016, but it has no cap, and does not have to be on a primary residence. If all the credit can't be used in a single year, it can be rolled forward. In our example, the credit is worth $12,600.
With a geothermal system, the ground-loop and heat exchanger provide all the hot water your home needs, so you no longer need to pay to heat it up. That saves an average of $500 a year, according to the DOE. If you are calculating out to 20 years, the estimated life of the system, add an average annual increase of 4% to that, to account for steadily rising utility prices.
When it comes to energy savings, the first year, your system will save you an estimated $1,617, because you don't need to pay for conventional heating and cooling. Add a 4% increase to that every year going forward. Egg also points out that you can save an average of $500 a year in repair and maintenance costs, because geothermal is more reliable than conventional systems.
Jay Egg reasonably points out that if you weren't getting a geothermal system, you would still need heating and cooling; a complete high-efficiency conventional system costs an average of $22,000. Subtract that from the $29,400 (the system cost of $42,000 - $12,600 tax credit), and you get $7,400, the real additional cost of going with geothermal.
If you save $1,617 each year in energy and $1,000 in hot water and maintenance, the payback period would be just short of three years. Over 20 years, Egg estimates the system could save $69,000.
Of course, if you already have a competent HVAC system, your payback period is going to be longer, because you can't subtract out $22,000. But if you have new construction or have to replace an aging system, the math works.