Is Geothermal Always Worth It?

26 Oct

Earlier this year, I wrote a post on the Pros and Cons of Geothermal Heat Pumps (GHP). As it turns out, there is more to the story. I am in the process of evaluating HVAC systems for an existing home that is getting an addition. The addition is almost the size of the existing home; a new HVAC system is required as you can imagine.

After looking into several HVAC options with a focus on GHP, the consensus is to first focus on “tightening” the envelope of the existing home while considering the most effective methods of building an energy efficient addition. And, do this before worrying about your HVAC considerations. For my wife and I, it comes down to “first things first.” And, first on our agenda is “air infiltration” and insulation.

We are currently building an addition to an existing 1930s home. Understanding the energy use in the existing home and the addition we are building (or the home/addition you plan to build) is, IMHO, by far the most important aspect of HVAC considerations that come later. A “tight” home requires less energy to heat and cool, which in turn requires a significantly smaller HVAC system. And, what that means is a much lower overall energy bill.

It is important to note that lower overall energy use “increases” the “pay back time” required to recover the additional capital costs of a geothermal system.

Paying to “save energy” by investing in better windows, doors, and stopping air infiltration (conditioning your attic and crawl-space, for example), gives you the highest ROI (return on your investment). But, investing in “energy efficiency” leaves you with less money in the overall project budget. So, you need to consider this, is it better to invest in a GHP system or first invest in energy efficiency?

Cutting a big energy bill in half saves you a lot more money than cutting a relative small energy bill in half (basic math). For example, a poorly insulated home may have a $400/month energy bill on average, cut that in half and it saves you $200/month ($2,400/year). But, a “tight” home of the same size (sq. ft.) may only have a $150/month energy bill; cutting that in half only saves $75/month ($900/year).

Over the course of 1-year, the difference is $1,500/year and $15,000 over 10-years. My point here is if you have a well insulated home (SIPs, conditioned attic and crawl-space, great windows and doors, etc.), the initial capital cost of geothermal systems (GHP) requires a lot more time to “pay you back” because your overall energy use is low and so is your savings, in the short-run.

Say you have or plan to build a tight, energy efficient home and your monthly utility bill with a traditional HVAC system is projected to be the $150/month  example above. Say installing a GHP cuts that in half to $75/month. If the GHP system costs you $15,000 more to install than it takes over 10-years to “break-even” (I’m assuming the $15,000 in the bank would be worth more 10-years from now; maybe $20,000).

What I have concluded after a significant amount of research is this; a home that uses significantly less energy because it was built or remodeled to be very energy efficient may not benefit “financially” all that much from a GHP system due to the initial capital cost involved.

Unless you have a huge McMansion or you are using the GHP to also heat a pool, etc., may I suggest you run the numbers for your project? And, definitely consider the best solution of all, invest in cutting your total energy use by “tightening” up the home and stopping all possible avenues of air infiltration.

In short, first take a hard look at the energy efficiency of your home or project before considering any of the possible HVAC systems. There are several new HVAC technologies (mini-splits, high efficiency heat-pumps using air – traditional type systems) that are making GHP a hard sell for energy efficient homes of say 4,000 t0 5,000 sq. ft. or less.

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