Day 4 of Geothermal: What Does a Geothermal System Cost?

 The most popular question I am asked in building a green home is “what does it cost?” Everyone makes the immediate assumption that it will always cost more to go green. Our geothermal system has proven this theory wrong.

A geothermal system for the home will cost more upfront than if you bought a separate forced-air gas-fired or oil-fired furnace and central air conditioning system, but not as much as you might think. Out initial outlay is going to NET around $6k more upfront than comparative systems but will cost us less after our tax rebates and the system offers long term savings for us as well.

One of the greatest advantages of our geothermal system is its ability to lower the monthly out-of-pocket expense for the life cycle of our house. The current trend of lowering a home’s operating costs is one that is only going to continue. As the U.S.  looks to build a smart grid over the next ten years and increase our renewable energy supplies, geothermal systems will be a key element in making a home comfortable and efficient.

In our cost analysis we compared three systems covering approximately 4500 sq/ft:

System A:Five-zone hydro air heating (85% efficient) and cooling system (11 EER) using oil boiler and tankless on demand water tanks and dual Environmental Recovery Ventilators (ERVs) COST: $118,750.00

System B:Five zone Viessman hydro air heating (95% efficiency) and cooling system (13 EER) using propane gas boiler and two 85-gallon domestic hot water tanks and dual ERVs COST: $129,200.00 (NOTE: We do not have natural gas in our neighborhood, we had to look at propane, this was an added cost to this system both upfront and in the long run. That said; oil was never an option for us. We did look at radiant heat as well but the cost increase was significant.)

System C:Five zone Geothermal hydro air heating (3.5 COP (this is equivalent to a 99% efficiency rating)) and cooling system (16.9 EER) using ground source heat pump, dual EVRs and a Superheater COST: $135,501.00

If you are looking into this for your home, to get an accurate comparison of the costs, I also suggest you consider the following:

  • Payback, or how long it takes to recover the difference in costs between the two systems using energy savings. Payback for most geothermal heat pump systems runs three to five years. We have no payback time once we get our tax credit.
  • Energy efficiency of the two systems. To get an accurate picture, make sure efficiency claims are substantiated. Your lifestyle and how well your home is insulated affect how economical a system will be. Our geothermal system has a 3.5 COP and 16.9 EER, this is higher than any competitive system on the market, so we are also getting higher efficiency for less money.
  • Total operating savings from heating, cooling and domestic hot water must be combined to get an accurate picture of total energy savings. (See our table.)
  • Energy costs and availability, both present and future. (We didn’t use this for payback because we didn’t need to, but you can safely assume a 4% rise in oil and gas and 2% for electricity.) 
  • Maintenance costs and system reliability. (We have a 2 year parts and labor warranty. And the system maintenance is equivalent to that of any boiler.) 
  • System lifespan – with a 25 year expected lifespan
  • Other uses, in our case we are tapping into the geothermal well to fill our rainwater harvesting tank when it is low. This completely eliminates the need for our irrigation system to use municipal water.

If you look at the three systems outlined in TABLE 1.0 you can see the heating source, the cost per unit for installation. You can also see the listing for the cost of the plumbing system for each since it impacts domestic hot water. TABLE 2.0 then takes what you spend per year on oil or gas and then compares it to the geothermal system for heating, cooling and DHW. The annual cost to run the geothermal system is averaged at nearly $5k per year less than a propane gas system.

geothermal chart in word for blog

As noted, we also have substantial tax rebates. According to the language, the Geothermal System is defined as a system that produces and stores energy to heat buildings, cool buildings or produces hot water. Our system does all of these things so our deductions include 30% federal (which totals all materials, equipment and labor) and 25% state (capped at an assumed max system cost of $7000, so this is a $1750 state rebate), plus our ENERGY STAR rebate on the total cost of our system. This totals $42,900 (approximately) and can be carried to following years on our federal returns if unused.

So in looking at what we paid, the initial upfront cost was $6301 higher, but with our tax rebates it is easily the least expensive system. We also save $5985 estimated per year on costs for fuel and to run the system. We will never have a bill for oil or natural gas. We will have a system that does not fry and dry my homes air, it will be comfortable. We have a system that eliminates the need to use municipal water for our landscaping but backs up our rainwater harvesting system. And finally, our family will eliminate 19.6 tons of carbon dioxide from entering the atmosphere annually.

If you are looking to build new or replace a system, geothermal is an excellent option. You can easily add solar thermal and PV to the system as well, all option we are including in our long term path once we put money back in our savings account.

posted by KDL | follow me on Twitter: newscaster