If you are wondering what the long term net savings by converting to a geothermal heating & cooling system, we will try to answer that question by taking a look at a typical system conversion:
a family of four in a 2200-square-foot home – 2 stories plus a full basement – with above average thermal envelope conditions (i.e. good wall & attic insulation, windows, doors, and low air leakage) currently heating with a 90% efficient propane-fired furnace will be converted to a geothermal heating & cooling system, in this case a horizontal loop connected to a Geostar Magnolia Plus heat pump with a dual-hot-water-tank system which enables the heat pump, in addition to space heating, to handle ~50% of the heating requirements for potable hot water. Current applicable fuel costs are $2.30 per gallon for propane and $0.10 per kilowatt-hour for electricity.
Because we want to forecast costs and savings out into the future, we’ll need to estimate how our fuel costs will change over time. The US Energy Information Administration (EIA) publishes historic energy prices. If we look at the last 20 years or so of price data for residential propane and electricity, we’ll find that the average annual inflation rates are approximately 5.6% and 2.9%, respectively.
In this scenario, we’ll finance the entire installation for 20 years – much less than the average life of the system. After applying the NYSERDA Ground-Sourced Heat Pump Rebate, our monthly payments are $126. Our estimated energy savings for the first year is $1904. Doing some fairly straightforward math, we can calculate our net savings in future years, too. By subtracting twelve months of payments from our inflation-adjusted annual savings, we can forecast the annual and cumulative net savings from our geothermal systems. The plot below summarizes this.
In the first 20 years, our geothermal system has saved us $45,000! And our upfront investment was… zero.
The same scenario but currently heating with oil at $2.70 per gallon instead of propane would result in almost the identical net savings.
What if we opted to finance our investment over a shorter period, say 12 years? Our monthly payments would be $148, so our net savings during the first 12 years would be a little less. However, by 20 years, our geothermal system has saved us over $50,000 as illustrated below.
So what’s the catch? Why haven’t you heard about this before? No catch, but what has changed recently is that financial institutions have recognized that these systems are reliable and a good investment, so they’re now willing to offer attractive terms which make the systems affordable to nearly everyone. But don’t wait for propane and oil prices to go back up before making the move. The NYSERDA rebate is schedule to expire no later than June 2019 and who knows how long financing terms like these will last.
If your situation is unlike any of the scenarios here, contact us so we can forecast your net savings if you were to convert to the geothermal lifestyle.