Is Geothermal Installation Cost-Effective?

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Make sure geothermal installation is right for you and your home by determining what the annual return would be on this renewable energy investment.
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In “Green Is Good,” author Brian F. Keane uses real-life stories to demonstrate how you too can benefit from adopting renewable energy in your home.

Renewable energy used to be prohibitively expensive, but times have changed, and energy guru Brian F. Keane demonstrates just how affordable it can be now. In Green Is Good (Lyons Press, 2013) Keane takes you through the cost-benefit trade-offs of new technologies — like geothermal energy and introduces you to revolutionary products on the horizon. In this excerpt from chapter 3, “Going Green at Home,” learn about one energy pioneer’s experience with geothermal installation, and how the annual return could likely make sense for you too.

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Home Geothermal Energy

Shack had been paying about $4,000 a year for heating oil just to keep the relatively few rooms he used in winter at a barely tolerable sixty degrees. Even that he supplemented with electric baseboard and oil-filled electric radiators. The entire tab probably came closer to $5,000 per winter, and that setup did nothing for him come summertime.

Shack also had plenty of what makes geothermal installation practical: land. But not just any land, land that’s easy to work with a backhoe. A house Shack’s size at his latitude (about the 38th parallel) might require a quarter mile of trenching about four to six feet deep. Into that trench goes plastic pipe, generally made of high density polyethylene because it’s very durable and porous enough to allow heat to pass through its walls. Fluid — either water or some sort of anti-freeze solution — then circulates through the pipe maze by a ground-source heat pump to take advantage of the natural ground temperature at that depth, about sixty degrees. In summer, the circulation carries heat and, indirectly, humidity from the house into the ground. In winter, the reverse takes place: the circulating fluid picks up the ground heat and carries it into the house, where a typical forced-air heating system distributes it.

Ground temperature obviously varies depending on whether you live in Death Valley or next to Glacier National Park in Montana, but the principle behind home geothermal is applicable anywhere. It’s just a matter of taking advantage of what’s already in the ground, waiting to be used. If you’re not convinced, think of a cave. In the summer, the interior of a cave is almost always cooler than the air outside. And in the winter, caves are almost always warmer than outside. Like geothermal houses, caves are warmed and cooled by the ground that surrounds them.

Whether you’re heating or cooling with home geothermal, the system is basically free once installed, apart from the electricity to run the pump. In fact, studies show that about 70 percent of the energy expended in geothermal is renewable. As a bonus, you can also add to the system a “desuperheater,” which uses the summer heat it draws out of the house to warm household water for free and, in winter, provides about half the energy for the same purpose.

But geothermal installation isn’t cheap. The size of the space to be heated and the desired BTU output determine the amount of trenching required; the bigger the space, the more trenching you need. The heat pump, the key mechanical piece of the system, generally runs in excess of $10,000. In Shack’s instance, the bill, soup-to-nuts, rang up to about $30,000. Virginia unfortunately offers no tax credits for this sort of improvement, and federal incentives had expired by the time he had the work done, so his payback time — the cost of the system divided by the annual fuel-oil cost, pre-geothermal — is roughly seven-and-a-half years, a little better than the national average on such systems. But Shack now gets summer cooling, which he never had before, for free.

Worth it? Shack has air conditioning in the summer where he had none, and he has a warm house in the winter. You tell me, who wouldn’t value that? As for monetary value, generally speaking, the break-even point comes (as it did for Shack) about halfway through year seven. By then, you’ve recouped your investment in the system. After that, the benefits side of the equation goes into orbit. By year fifteen, you’ve doubled your investment — roughly equivalent to a 6.7 percent annual return — and by year thirty, if you get there, you’ve quadrupled your investment, a 13-plus percent annual return. That savings is “profit” on which you pay no tax.

Digging Deep and Going Collective

Not all geothermal stories are quite as dramatic as Brampton, but collectively they tell a remarkably consistent tale.

Jonathan and Linda Hamilton, for example, live in a Connecticut home without a name, but they have similar reasons to be excited. Faced with replacing their old oil furnace and air conditioning at an estimated cost of $20,000 for both units, the Hamiltons opted instead for a geothermal heat-pump system at a total cost of about $23,000; $9,000 for the trenching, $14,000 for the heat pump. But their new system also came with $3,000 in rebates, which made the effective cost difference zero. The savings, on the other hand, have been little short of amazing. Pre-geothermal, the Hamiltons were using about 700 gallons of heating oil annually, spending almost $3,000 when oil hits $4 a gallon. Not only has that cost vanished, but their electric usage “has gone down 30 percent,” Linda Hamilton told a reporter. “We’ve seen a 20 percent decrease in our electric bill, and we have eighty gallons of hot water with our new system where we only had forty gallons last year.” The Hamiltons are saving on the order of $4,000 a year, just about what cousin Shack is saving, with a similar payback calendar.

In Clarke County, Virginia, about seventy-five miles north of Brampton, near the top of the Shenandoah Valley, Janet Eltinge lacked both the land and the geology to do horizontal trenching for geothermal. The cottage that she was renovating and expanding sits on a limestone shelf, so Eltinge drilled down instead. So-called “vertical-loop” systems operate the same as horizontal-loop ones but require less piping because the farther down you go — and these systems typically go anywhere from 150 to 450 feet deep — the more stable the earth’s temperature. The cost? A bit more than Shack’s since drilling is more expensive than backhoe-trenching. Her savings and payback period stretched out more, too, but with almost as spectacular a long-range return by fifteen or twenty years down the road.

Other geothermal installations lay pipe in a pond or lake. Water stores and releases heat just as land does. Whether you go horizontal, vertical, or aquatic, geothermal is mostly a rural, exurban, or spacious suburban renewable solution.

Reprinted with permission from Green Is Good: Save Money, Make Money, and Help Your Community Profit from Clean Energy by Brian Keane and published by © Lyons Press 2012. Buy this book from our store: Green Is Good.