2016: The year to consider geothermal


bret curry

I hope you all had a wonderful New Year’s celebration! Speaking of celebrating, let us rejoice the near-normal temperatures as we move into the winter season. And if you haven’t noticed, the dollar amount we have invested to heat our homes so far this winter is down approximately 40 percent versus last year. As a reminder, our two previous winter seasons dealt us below-normal temperatures, above-normal frozen precipitation, drove up our heating costs and lasted well into springtime. Let’s hope the frigid polar vortices remain well to our north this winter season.

This year is an important year if you are thinking about installing a geothermal heating and cooling system into a new home or replacing your existing heating, ventilation and air conditioning (HVAC) unit. This ultra energy-efficient ground source heat pump technology qualifies for a renewable energy tax credit that expires on Dec. 31. Taxpayers may claim a 30-percent tax credit for equipment and installation expenditures. Visit this U.S. Department of Energy website for complete details: http://energy.gov/savings/residential-renewable-energy-tax-credit.

As a reminder, the equipment and installation cost for geothermal is higher than air-source heat pumps, and smartenergytipsgeothermalgraphic1natural gas or propane furnaces. But the annual operating cost for geothermal is significantly lower than conventional systems because its operating efficiency is much higher. Most equipment manufacturers have an online savings calculator for cost comparisons. Their calculators include many important database factors such as zip codes for historic weather data, heating and cooling degree days, climate zones, natural gas prices, kilowatt-hour rates, etc.

Following is an operating cost and equipment comparison example. Please keep in mind these are estimated figures. If you are leaning toward making the switch, I recommend that you have a qualified HVAC expert run a similar comparison plus the actual heating/cooling load requirements and return-on-investment calculations. My figures do not include any financing costs.

I have calculated numbers for three homes with different HVAC systems. Each have the same zip code from a south-central U.S. city. They are each 20 years old and 2,000 square feet in size. Here are the annual average operational cost savings estimates if converted to a geothermal system:

Conversion of a home with natural gas – $1,257 annual savings (water heater savings – $66, cooling savings – $505, heating savings – $685)

Conversion of a home with electric air-source heat pump – $1,144 annual savings (water heating savings – $247, cooling savings – $507, heating savings – $389)

Conversion of a home with propane – $1,813 annual savings (water heating savings – $243, cooling savings – $775, heating savings – $795)

Now, let’s look at the estimated equipment and installation costs for new, energy-efficient natural gas, air-source heat pump and geothermal HVAC systems. I’ll use 3-ton systems for this example:

• 17-SEER AC with 95 percent natural gas condensing unit – $8,500

• 17-SEER AC with HSPF 9 electric air-source heat pump – $8,500

• Geothermal (with domestic hot water feature) – $19,000

Next, subtract the geothermal tax credit, which is $5,700 ($19,000 X .30), from the initial geothermal cost, which leaves a final project cost of $13,300.

Now, let’s compare the traditional units with geothermal. Subtract $8,500 (cost for high-efficiency gas and air-to-air heat pump units) from $13,300 and we have a remainder of $4,800. This $4,800 amount is the key component for determining return on investment.

So, let’s divide $4,800 by our annual savings (when using geothermal) amounts listed above and determine the return on investment when converting existing equipment:

Conversion of home with natural gas: $4,800/$1,257 = 3.8 years

Conversion of home with electric air-to-air heat Pump: $4,800/$1,144 = 4.2 years

Conversion of Home with propane: $4,800/$1,813 = 2.6 years

Again, these figures are estimates and, hopefully, you can see that once the return-on-investment period is over you’ll begin to recognize years of lower utility bills. Plus, geothermal systems with the domestic hot water feature provide copious amounts of hot water as a byproduct.

Please feel free to contact me at smartenergytips@aecc.com with any energy-efficiency related questions. Also, be sure to follow us on Facebook at www.facebook.com/smartenergytips.org as well as listen to our podcasts.

Bret Curry is the residential energy marketing manager for Arkansas Electric Cooperative Corporation (AECC).