Switch to geothermal energy improves heating and cooling, and saves money

January 31, 2011

Just before Thanksgiving 2009, my family began heating and cooling our 4,400-square-foot suburban home with geothermal energy. As I wrote in a story that appeared in Health & Science last March, we got rid of our 24-year-old oil-burning furnace and traditional air conditioning, and replaced them with a system based on drawing moderate temperatures from beneath the Earth's surface.

We expected better performance, big-time savings on our energy bill and a rapid return on investment, thanks to a host of tax and financial incentives.

Now we've lived with geothermal for a year - a year of historic weather extremes. We've paid our utility bills and applied for tax credits. So . . . did reality match or collide with our expectations? Was this project worth it?

Largely, yes - but with some interesting caveats.

First, let's recap.

Almost two years ago, we began looking at options for replacing our aged HVAC equipment. For a new conventional system, we got bids ranging from $9,500 to $11,000.

We also checked into cleaner, renewable alternatives, including solar, wind and geothermal. We settled on geothermal. Its basic principle isn't complicated: The temperature of the Earth a few feet below our Montgomery County yard (and for hundreds of feet below that) is fairly constant: in the mid-to-upper 50s year-round. The idea is to transfer that temperature into the house, then make the relatively small leap from there to a comfortable indoor level.

The bill for our geothermal system came to $23,950, which included hiring a drilling company and an HVAC firm.

But we knew that our actual cost would be much less: Under the American Recovery and Reinvestment Act of 2009, geothermal projects completed by 2016 are eligible for a 30 percent federal income tax credit. In addition, we would qualify for a $5,000 Montgomery County property tax credit and a $2,000 state grant. Those incentives brought the net cost of geothermal to less than $10,000, rivaling the lowest bid we got for a traditional HVAC system.

And because we'd eliminate oil bills, we expected to save thousands of dollars every winter.

It seemed on paper that we could get a return on investment in less than four years.

Construction started in October 2009. The drilling company buried hundreds of feet of polyethylene piping in our yard and routed it indoors. Inside the pipes, a mixture of water and antifreeze circulates, absorbing the moderate underground temperature and bringing it into a newly installed geothermal heat pump in the basement.

Our heat pump essentially works like a super-efficient version of those common in many homes, extracting heat from one environment and moving it to another. But instead of having to work with 20-degree air in January or 90-degree air in July, our heat pump gets to draw on the 55 degrees in the water-antifreeze mixture. The pump then uses electricity to bring air the rest of the way to a comfortable temperature, and blows it through the house using our existing ducts.

How the house felt

I'd give our new system's performance an A. Both heating and cooling have proved to be more comfortable and consistent with geothermal. With our old heating system, we had wild temperature swings, and pockets of colder air were common throughout the house in winter. Not so with our new system, which stayed evenly in the range where we're comfortable (66 or 67 degrees). Air conditioning was similarly improved, keeping the thermostat between 72 and 75 degrees.

Furthermore, our indoor air was less humid in summer and less dry in winter than it had been with a traditional system.

Our HVAC experts had told us this would be true, and they offer interesting explanations, involving such factors as the size of the evaporator coil, the volume of air being moved, the super-high efficiency of our heat pump. They're too complicated to include here. But one point that is easy to understand is why our house is now less dry during the winter heating season: There is no combustion involved, since we're not burning oil anymore.

Savings: The bottom line

My grade for savings: B.

The big savings we counted on was eliminating our oil bill, and that was solid. The previous year we'd spent $2,942 for the oil that heated our home and hot water. After geothermal: not a dime.

However, we paid (as anticipated) higher Pepco bills in the winter, because we needed extra electricity to power the heat pump. Some of that cost was offset with lower electric bills during the summer cooling season. In the end, our 12-month electricity outlay went from $3,358 under our old system to $3,890 with geothermal, an increase of $532. Subtracting that increase from the oil savings left us with net annual savings of $2,410.

But those seemed like pretty rough numbers. To get a professional analysis, I went to Sustainable Design Group of Gaithersburg, the company that had conducted an energy audit on our home as part of our original research. John Spears, the company's president, helped us separate our heating, cooling and hot water costs from the costs of running lamps, computers, appliances and anything else that connects to an outlet - the "plug load."

He also adjusted for temperature differences between the 12 months after geothermal and the 12 months before we did the install. Then we figured in the cost of installing and operating a propane-fueled tankless water heater - not part of the geothermal project per se, but something that my family decided to do at the same time.

In all, this more sophisticated calculation gave us a somewhat better result: $2,678 savings for our first year.

I wanted to figure our return on investment - that is, how long we can expect it to take us to recoup the money we'd spent. So I added in some other costs. For example, we paid $1,400 in landscaping to fix what the drillers tore up and nearly $2,000 in costs related to installing that hot water heater. On the other hand, I subtracted the almost $400 we had been spending on annual service contracts on our HVAC. (Service on geothermal units is minimal: replacing a filter once a year.)

Factoring in these variables (plus the extra plug load we incur because we're hosting a foreign exchange student) and assuming our savings continue at the same rate, our system will have completely paid for itself in 4.4 years - a little worse than I'd originally expected, but pretty good.

Spears advised us not to dwell too much on these first-year costs. The key factor going forward, he said, is the price of oil. The last time my family bought oil, in July 2009, it cost us $2.61 a gallon. The same provider is selling oil this winter for $3.91 a gallon.

"That's what you're going to be saving," Spears says. "The cost of oil is climbing right back up. It's already a huge return on investment."

About those tax credits . . .

My grade here: C. The federal renewable energy tax credit was a breeze. Thirty percent of our geothermal expenditure was $7,185, and we simply claimed it on our 2009 return.

We also received a $2,000 check from Maryland's Geothermal Heat Pump Grant Program. That involved a lot of paperwork and waiting. We got our check six months after applying for it.

The snafu has been Montgomery County. We are eligible for a $5,000 renewable energy tax credit. We applied for it in January 2010 but have not received it.

An Oct. 20 letter from the county said: "Funding for this tax credit program is limited to $400,000 per tax levy year, and all tax credit applications are processed in the order in which they are received." We didn't make the cut.

The county said our application would be forwarded to this year, and I understand we are No. 92 on the list. Last year, 119 credits were issued under the program, the average credit being $3,361.

"The numbers definitely indicate it is a popular program," Esther Bowring, a county public information officer, told me. But she warned that my credit might not be available in 2011, either.

"The county is in really bad shape this year," she said. "Services will be cut. This program aligns very closely with the county's priorities, but we'll have to wait and see the outcome of it."

That could put a disappointing ending onto a really good deal, requiring us to wait a further 1.8 years or so to realize our return on investment.

Still, after living with a better-performing and safer system that requires almost no maintenance, we are pleased that we went with geothermal. We realize that making our money back over six years under a worst-case scenario still is not too bad. After that, all our savings will be gravy - and it's nice to feel we're greener than before.

Gearon is president of GetHealthKnowledge.com, an online health-care resource.

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