Geothermal: How much does it cost?

We install "smart" high-efficiency heating and AC systems that help owners achieve lower more predictable energy costs.

We are strong proponents of both high-efficiency fuel and where and when possible geothermal systems.  Geothermal systems represent low-risk, high-return investments and are simply put - smart.

To gain the benefit of lower energy costs and to eliminate oil dependency, up-front costs are required.  People naturally want to know what they are paying for before making their choice.

Here is a list of typically asked questions received from a home owner in a recent email regarding geothermal:

-----Original Message-----
From: XXXX@hotmail.com [mailto:XXXXXX@hotmail.com]
Sent: Tuesday, May 15, 2012 08:01 PM
To: edward.malloy@nerenewable.com
Subject: Do you do geothermal heating for residences?
I am interested in learning about geothermal heating in a MA residence. How much does it cost to drill the wells? What kind of heating system do you need in the house? What is the pay back time when replacing an oil heating system? P.S. I found your business using the Source for Renewable Energy online marketplace located at http://energy.sourceguides.com 

HERE ARE OUR ANSWERS:
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The questions you ask are good ones but to answer them fully and accurately they take some explanation - I suppose that's true with most important items having several variables and considerations.

 

Geothermal is fairly simple from a technology perspective.  It's a water-based heat pump.  It literally extracts heat from water rather than air.  So like a refrigerator - it extracts heat - it does not produce it.  So there are no carbon by-products.  

The fact that water is delivered from the ground (either from a closed loop or open loop system) to the pump at a relatively constant temperature (55degF) allows the geothermal heat pump to operate EXTREMELY efficiently. 

Geothermal systems heat homes somewhat differently than traditional heating systems.  Not only is there no combustion, but the geothermal heat delivered is typically ~120degF.   That's much lower than traditional boilers or furnaces that deliver heat at 180degF.  This higher temperature is why the older systems are much more drying to the indoor air.  For Geothermal heating and cooling, the thermostat is kept fairly constant - less temperature fluctuation = greater efficiency.

 

Regarding geothermal cost.  As efficient as geothermal is compared to gas and oil, it has a higher upfront cost compared to traditional heating and cooling systems.  If you're planning 5 yrs out then Geothermal becomes far more attractive financially.  

For a fair comparison, you need to consider the entire system characteristics.  The geothermal system delivers heating and cooling from one mechanical system (the heat pump).  The system as a whole is made up of 3 primary segments or components - loop, pump/controls, distribution.

 

The final install cost of a geothermal system very much depends on several factors including the insulation quality of the building, the loop type, the mechanical equipment, and the distribution system. 

Regarding insulation quality, if the home or office is well insulated then the geothermal heating and cooling system is smaller (as there is less heat loss and heat gain during winter & summer respectively).  So building characteristics impact geothermal system costs - as they would any high-efficiency heating and cooling system.  

 

The premium for geothermal mechanical (pump/controls) is ~40-50% more compared to new high-efficiency boiler + high efficiency central AC, or approximately $12,000-15,000  (assuming a ~2500-3000sqft home).   While more expensive, geothermal heat pumps are about 4-5x more efficient than the most efficient gas/oil system and 2-3x more efficient than highest efficiency AC system.  

This cost for geothermal mechanicals is typically paid back within a relatively short period given the annual energy savings and the realized tax savings and rebates.  

The other cost associated with geothermal is the loop cost.  That cost is almost always offset by tax credits and state-sponsored rebates.  

 

There are a few different loop types - open and closed.  Each has advantages and disadvantages.  The closed loop is about $2500-3000/12,000 BTUs and the open loop with a single standing column well is about $1500-2000/12,000 BTUs.  

Assume about 700sqft of residential space per 12,000 BTUs.  Sometimes more or less depending on the quality of the insulation. This is a rule of thumb for high-level discussion and never relied on for actual heat load calculations - for this, one must use Manual J.

 

The heating and cooling distribution system can be water-to-water or water-to-air.  With water-to-water, you can use radiant or base-board heat.  For baseboard, you must determine the BTU output capability per foot on an existing system to ensure the older baseboard is sufficient.   

We recommend replacing the old base-board with higher-efficiency slant-fin type base board.  Cooling requires an air handler/blower that circulates conditioned air through a sheet metal or high-velocity duct system.

 

For a water-to-air geothermal pump, which is the simplest system, you can use duct for heating and cooling.  You must do a heating and cooling load (demand) for the home to determine heat loss/gain.  The system size, including the pump and the duct work, are calculated based on the heating and cooling demands. 

 

Back to ROI, again, this greatly depends on several factors but you should assume at least 60-80% heating and cooling energy savings annually.  You can do better than this but it's hard to do worse.  If you are spending $2500-3000/yr then assume at least $2000/yr in energy savings based on today's rates - assuming greater savings with fuel sources increasing - which they always do. 

 

Now, depending on the type of system you choose, you're payback can range between 3-7yrs when you apply tax credits and utility rebates (these rebates and credits are real - don't let anyone tell you differently).   This time frame assumes energy prices remain constant.  

Keep in mind, on payback, obviously, if you choose a high velocity system, the payback is longer since this an expensive distribution system (the cost has nothing to do with Geothermal per se but 30% tax credit does apply to its purchase!!!).  High velocity systems are typically a minimum of 3-4X the cost of traditional duct systems due to materials and labor.   

 

Importantly, you also need to consider fairly that heat pumps have extremely long life-expectancy if maintained correctly (e.g. 35-40yrs) - and we recommend getting life-time warranties on equipment from the manufacturer.  Compared this to 20yrs best case for traditional fuel based systems.

 

Looking at payback is always important.  In doing so the total true value of the system should not be overlooked.  

In addition to energy savings, (as with any system) when a geothermal system is designed and installed correctly, it offers the highest efficiency, it's healthier, lasts longer, brings greater value to the building, is whisper quiet in operation, and has zero carbon contribution (no fuel exhaust), 

Geothermal heating and cooling is simply a smarter choice compared to any other heating/cooling solution.

 

Forgive my passion.  I hope this helps all who consider the choices carefully.