When we buy a car, many factors influence our decision including comfort, safety, reliability, environmental impact, and, of course, cost. Many of those factors are also applicable in deciding among home heating & cooling alternatives. If cost was not a factor, geothermal would be the clear choice in most every case as it provides exceptional comfort, does not have the issues associated with burning fossil fuels, and is incredibly efficient.

So what about cost? Just like the car analogy, the holistic or total cost of a heating & cooling solution includes not just purchase price, but cost to operate, maintain, and repair… and let’s not forget about longevity – the average life of the system.

In order to compare one-time (e.g. purchase) costs to ongoing costs, we can annualize those costs by amortizing them over the expected life of the system.

Consider the following example for a typical 10-year-old two-story 2400-ft2 home with a full basement in the Rochester / Finger Lakes area occupied by a family of four. Each forced-air heating & cooling system would be considered mid-efficiency in its class.

These 10-year average energy costs have been applied:

Electric$0.10/kwh
Natural Gas$1.38/therm
Oil$3.20/gal
Propane$2.47/gal

The estimated annual operating costs for each system are:

SystemHeatingCoolingHot Water **Total ($)
Geothermal45883541
Natural Gas w/ ASHP cooling*10492441911484
Oil w/ ASHP cooling19212443742539
Propane w/ ASHP cooling20802444512775
Electric w/ ASHP cooling20772444952816

*Air-sourced heat pump, typical central air conditioning system. 30% Federal tax credit applied to geothermal components.

**Hot water costs are relative to a 2-tank supplemental hot water system where the geothermal heat pump provides 50% of the demand and conventional fuel the balance.

The estimated installation cost, expected life, and resultant annualized cost of each system (assuming the cost of money, i.e. financing interest rate, to be 6%) are summarized by component below.

ComponentInstallation Costs ($) Expected Life (yrs)Annualized Cost ($)
Geothermal equipment12,780***30919
Geothermal horizontal earth loop5,245***75318
Natural gas furnace6,00020516
Oil furnace8,00020688
Propane furnace6,50020599
Electric Furnace3,00020258
Central A/C (ASHP)3,50015354

When you add the annualized installation costs to the annual operating costs, you have a more holistic estimate of total annual costs (TAC) for each system. These are summarized below.

SystemTAC ($)
Geothermal 1778
Natural Gas w/ASHP cooling2354
Oil w/ ASHP cooling3581
Propane w/ ASHP cooling3688
Electric w/ ASHP cooling3428

So, when viewed holistically, geothermal systems are superior for features AND cost!!

***NYS grant ($1500/ton) applied to geothermal components.