Can you afford not to install geothermal power for your home?

geothermal.jpgSome people were surprised by the expense — about $20,000 — to install geothermal heating in their homes. I have a slightly different take. For $20,000, can you afford not to tap into geothermal energy?

Says one commenter:

For 15k – 30k it sure seems like there would be higher-impact things you could do to reduce your footprint. Find a friend who drives 20 miles to work every day in an SUV and buy them a Civic hybrid for 22k!

But unlike a Civic hybrid, the geothermal system is better than free. Despite the painful start-up cost, the investment pays for itself many times over, and fairly quickly too.

Let’s put some numbers around this. Malcolm Gladwell’s father conservatively estimates that he saves $2,000 each year in heating oil costs. Bean counters have a word for investments that throw off a constant amount of cash every year from now until forever: a perpetuity. And it just so happens that the one thing I remember from my finance classes is how to calculate the value of a perpetuity.

Dividing the annual savings by the prevailing interest rate, which I’ll ballpark as 5%, I arrive at the following value for a geothermal energy system:

$2,000 / 5% = $40,000

There you have it. Harness geothermal energy for $20,000 and double your money.

But wait, there’s more! My simple calculation assumes that the geothermal system will save a constant $2,000 per year in fuel costs. But fuel prices, you may have noticed, don’t remain constant. They rise. Historically, they’ve tracked fairly closely to inflation, and recently they’ve far outpaced inflation, a trend which is likely to continue.

So the yearly payout from geothermal energy is likely to grow over time. This is called — surprise — a growing perpetuity, and its value is also easy to calculate. Let’s conservatively assume that oil prices will track inflation, which I’ll estimate at 3%.

$2,000 / (5% – 3%) = $100,000

Now we’re talking! Install a geothermal energy system and make five times your money. Will putting your money in a Prius yield a similar rate of return? (Hint: you’re better off buying a nice bike.)

A caveat: this is a simplified analysis, and there are other ways to run the numbers. In fact, I’m kind of hoping people tear into them in the comments section. The comments to the original Gladwell post touch on this topic as well, although errors do sneak in.

For those interested in learning more about geothermal energy, the Department of Energy has a lot of info here and here.

Author Bio

adam

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  1. insights 2.0 - August 16, 2006

    I am not familiar with this topic, so it may be a stupid question… But once a geothermal heating system is installed, can we really consider it will last forever, without maintenance? If it needs to be maintained or replaced after a little while, I am not sure that the calculation of perpetuity is still accurate. Just asking…

  2. Adam Stein - August 16, 2006

    Yeah, I really should have calculated this as a growing annuity. Of course, I have no idea how long these systems last. Assuming they last 30 years, the value of the constant annuity is $30,500, and the value of the growing annuity is about $44,000. So still not too shabby, but definitely smaller numbers.

  3. veektor - August 16, 2006

    I would seriously doubt this system would be maintenance free and in fact would suggest you route the pipes away from any lawn areas that might be disrupted in case it needs to be replaced. As I recall, the Icelanders had to dig into the system now and then to deal with leaks, etc. although they benefitted from economies of scale — since nearly everyone had such a system, they knew how to fix them more easily. Certainly, maintenance costs will be a consideration. Water is not free from corrosion, even in a closed system. As BP has found out, even crude oil cannot stop corrosion.

    PS Any Icelanders or anyone else familiar with these systems care to give us some information? Thanks.

  4. Adam Stein - August 17, 2006

    True enough, Veektor, but those costs don’t enter into the analysis unless they differ from what you would have had to pay in regular maintenance anyway. In other words, you have to maintain a furnace too. Only the incremental costs matter. (I guess I remember two things from my finance classes.)
    And since I have no idea what are the relative maintenance costs of geothermal vs. a furnace, I can’t really say much else. A true cost comparison would require a lot of number crunching.
    But the larger point still stands: energy efficiency can pay for itself.

  5. Erik - August 17, 2006

    I feel the original post beginning this thread is confusing two separate technologies and should be clarified.

    True geothermal energy which is used as a prime energy source uses an underground heat source, such as hot water/geysers often heat by volcanic activity. This is what is common in Iceland. The heat may be used to heat a building or converted into electricity for other uses.

    Ground-source heat pumps uses the earth as a semi-infinite heat exchanger/heat sink in order the greatly increase the efficiency of a refrigeration system, but still required outside energy input. This should not be considered ‘renewable energy’ – this would be akin to calling the atmosphere an energy source for a traditional refrigeration system. Unfortunately, in North America this system is also frequently referred to as ‘geothermal’.

    The high cost usually results from the need to drill vertical wells – usually the closed loop system is installed in 100 – 300′ deep vertical wells, unless you have a very large surface area available.

    Another good source of information is the industry trade association site at http://www.geoexchange.com.

  6. veektor - August 17, 2006

    -Thanks for the information. This is a great idea and is worth looking into. It’s great to have this site. We use mother earth’s heat exchanger/sink in the summer and in the winter when we retire to the stabilizing temperatures of our basement and it doesn’t bother us that it is free!

  7. Desmodia - August 23, 2006

    Geothermal is not a fix for some older homes. Without good insulation, geothermal (American-style with heat pump) will have to work so hard it will burn through its pumps quickly and won’t keep the house at an even temp.
    Good insulation, esp. of the attic or roof area, is the first step in any energy saving program, and without it geothermal is an expensive failure, as many homeowners attempting a quick fix to energy costs have learned.

  8. GreenEd - August 23, 2006

    If you’re looking for something you can do, ground-source HVAC units are simple alternatives to traditional HVAC units. While they are not popular units nor really aggressive alternatives to traditional energy supplies, like true geothermal energy systems, they are a simple upgrades from your traditional HVAC system.
    Ground-source HVAC units use the same ducting, etc of a traditional HVAC system. Based on your location on the globe, you’ll have various alternatives for ground-source heat exchange and your local HVAC installer should be able to go through these options.
    I’ve had three ground source HVAC units on my home in central Florida for the past 15 years. There are additional maintenance costs but they are more than offset by the reduced energy costs. For example, I have a 4500 sq ft home cooled to 79F and I’ve never had an electric bill over $300; my average electric bill in cooling months is around $230 per month.
    If you have to replace an older standard HVAC unit consider that a good time to evaluate a simple alternative like a ground-source HVAC unit – the price will 10-20% higher for the unit and you may have to replace more components, but well worth the additional cost.
    For me, most problematic and therefore the most maintenance has been the water supply to the units (the ground source on my units is water). Generally this is PVC (think sprinkler system) moving water from the source (for me an in-ground pump) to the units and then back (mine is open loop which means the water is pumped and put back into the ground). The most common failure is water leaks in the PVC.
    I recommend a good plumber to insulate the PVC from vibration and put in appropriate water hammer arrestors and shut-off valves to isolate problem legs and you’ll have no problem dealing with the added maintenance.

  9. PBrazelton - August 23, 2006

    One thing to keep in mind is that geothermal is difficult and expensive to install in city lots; it’s much easier to install in suburban properties where larger lots are prevalent. You can find out more by talking to a geothermal installer – my wife and I were very disappointed with the (justifiable) unwillingness of local installers to tackle our small urban lot in Minnesota.

  10. Meagen in Cleveland - August 23, 2006

    We recently installed Geothermal in our century home (built in 1900) on a city lot. It cost a total of $20,000 because we also replaced all of our central heating ducts. My in-laws installed a similar dig-deep system on a small village lot for $15,000. Geothermal systems are expected to last at least 50 years. Gas furnaces are expected to last 10-15 on a similar size house. Even without the utility bill, we have made our money back in saving the cost of furnace replacement alone! Also, our geothermal system is plugged into the electric water heater to save energy there as well. And if that weren’t good enough, our local electric company (which unfortunately uses coal power, so we might install solar panels on our roof eventually) gives city residents a discounted rate if they have all electric furnace & water heater. And finally, you have the increase in property values that the system is sure to bring. So I think your projected figures are far below the actual lifetime return.

  11. lfv - August 23, 2006

    While it may be instructive to use 5% as the prevailing interest rate, it would be more reasonable to expect an 8-12% annualized return on an investment in equities. This makes the argument much less attractive. Add in that a geothermal system is not liquid, the economic argument for one is weak. This is not to say a geothermal system is not attractive for a family who can afford it, but $20,000 is far too much for most families to invest in something equivalent to current money market yields.

  12. Alex Stange - August 23, 2006

    As the author of the comment quoted in the original posting, I think I should point out that this doesn’t address my comment at all. I’m not arguing about how to turn geothermal energy into a saavy investment strategy, I’m arguing that using the money to buy a hybrid for a gas-guzzling friend is a better way to reduce emissions and greenhouse gases. I though that was the point of everything you guys work on!
    Was the post supposed to imply that after I get my $20000 profit after some undisclosed amount of time that I can then use it to buy that hybrid?

  13. Adam Stein - August 23, 2006

    Thanks to everyone for the input. This is really interesting stuff. A couple of thoughts:
    Some have pointed out that geothermal (sorry — geoexchange) simply isn’t a reasonable choice for a lot of homes, for technical reasons having to do with the site or the home itself. This is absolutely true. If geoexchangedoesn’t make sense, it doesn’t make sense, and clearly a lot of research needs to go into any individual project. For those who do have a good candidate site, though, it does seem like a potentially compelling option. And as some on this thread have noted, there are some alternatives that can get you part way there.
    lvf — what you’re saying is sort of true, but also sort of a different topic entirely. I am right to use the interest rate to value an annuity or perpetuity, not any hypothetical return on equities (12%?! You wish). The point of the analysis is that a good geoexchange project isn’t really as expensive as it seems. In fact, it’s better than costless — it pays a return.
    Which, to your point, is not the same thing as suggesting that such a project is the best investment vehicle out there. It’s not. It’s first and foremost an environmental project that also happens to pay a dividend.
    Alex — it’s likely that putting $20,000 into an effective geoexchange will have a vastly greater environmental benefit than replacing an SUV with a hybrid, although the comparison, of course, depends on the particulars. But given the geothermal is effectively costless, the real point is that you may as well do both.

  14. pradwastes - August 23, 2006

    Rather than spending the money to drill a hole in your yard deep enough to reach the heat for geothermal heat it would be less expensive to use your roof to support some solar energy to generate grid tied energy. With some batteries to back it up you are protected against blackouts as well. In addition to this you can use your roof to support some solar water heating. Again the up front cost is considerable but the system, once installed is almost maintainence free exept for using a hose to clean the dirt off it once in a while.

  15. John - August 27, 2006

    Read again: These are in-ground HEAT EXCHANGERS. The depth is needed to be beyond most seasonal temperature fluctuation- not to reach megma! This is essentially an in-ground radiator that uses the relatively cool soil of summer to cool the system liquid, and the relatively warm soil of winter to warm that liquid. A few batteries to provide current to a typical household in a blackout? That is a fantasy. The battery array needed would be VERY expensive and have high maintenance needs. As someone who has a relative with a solar energy repair business, who has to turn-down work he can’t keep up with, I can assure you these are not maintenance free.
    The completely basic, non-sexy solutions are, to the consternation of evangelists, usually the most effective. House insulation, carpooling, washable water bottles, deciduous trees on the southern side of the house, and a basic honda Civic are almost certainly greener than the media-hyped new technologies.

  16. greenfuture - August 27, 2006

    I’m afraid the geoxchange buzz is overdone here. Let’s start with the $2,000/year oil savings. It sounds to me like Malcolm Gladwell’s dad’s home is either (1) huge, (2) grossly inefficient, or (3) both. A reasonably well-built, well-insulated home should not cost more than $1500 a year in a cold northern climate, nor more than $1000 a year in a moderate (Washington DC, Louisville, St. Louis) climate, even after the recent run-up in oil and gas prices. There was no mention of the electricity costs to operate the heat pumps, which is clearly not zero. Ground-source heat pumps make sense in new, well-built and well-insulated construction, but is dubious in existing homes.

  17. Tina - August 30, 2006

    IF I had to replace everything I have–oil-fired furnace AND central AC unit, I would try to go for this–but the experts calculated I would save just $1000 a year–it still takes electricity to run the thing, you do get a credit on your rate in winter, but not in summer–and yes, there is maintenance to be done–certainly for me, a person of average means, it’s unaffordable at this time. Twenty years to pay for itself is too long, I’m sure the technology and all will be changing quickly in the next few post-Bush years, so I will wait. I hope as demand rises, costs will drop. An alternative, supplementary heating option I am very interested right now in is something called a transpirational solar heater (I think that’s the name)–house-sized units are around $2000–a tad closer to MY budget!!! and they claim it’s easy to install yourself–some units are entirely solar-driven, some have an electric (non-solar powered) fan–NO fossil fuel use at all sounds good to me!!!

  18. Lyndsey - August 30, 2006

    Just a few comments:
    $2000 a month on heating fuel does not sound outrageous to me. The combination of cold long winters here in Alaska and sky rocketing fuel prices, add up to more $$$$ every year. Last winter our neighbor spent $1500 a month to heat a relatively small home (1200 square feet).
    Also, Chena Hot Springs Resort in Fairbanks, AK, just brought online the first geothermal power plant in the nation. check out http://www.yourownpower.com for more info and links on geothermal power. The resort hopes to power its entire opertation by geothermal technology. If it can work here in the Arctic, one of the harshest climates on Earth, I think it can work else where.
    For now, I would agree that geothermal is out of reach for most individual homes due to the price. So keep up the good conservation efforts, and hopefully within a couple of years technology will be more accessible to everyone.

  19. Tina - August 30, 2006

    Yes, I spent about $1700 on fuel oil last year, for a 1,000 sq. ft. house in PA.–and that was with the thermostat set at 60 degrees, and using a little radiant kerosene heater in the evenings to be comfortable–$2000 for the season is not that much–but $1500 per MONTH? IS that accurate??? Good lord!

  20. Lyndsey - August 30, 2006

    Hi,
    Yes i know $1500 a month on fuel oil is hard to believe. A couple of factors were at work last winter:
    The coldest Janurary in Fairbanks in 35 years (-35 for days on end)
    The cost of fuel oil: $2.50/gallon
    Our neighbor burned up roughly 600 gallons/month=
    $1500.00/month
    So maybe they should look into geothermal as an investment!
    When they tore down one part of the house this summer to make an addition, they realized that the entire house was very poorly insulated, and are working to remedy the problem before this winter. I am sure that had something to do with their astronomical fuel costs.

  21. greenfuture - August 30, 2006

    Tina, it sounds like you used about 600-700 gallons of oil last winter, and for a 1,000 sf house (even in PA), it sounds like you could use some insulation, new windows, or maybe work (tuneup) on your furnace & seal ductwork. That’s the first place you should put any available investment monies for your home, before considering geothermal. I’m familiar with transpired solar collectors, but frankly, I wasn’t aware they were practical for residential use, and it sounds like you need to stop heat loss more than preheat outside ventilation air. My two cents.

  22. BigMieux - September 1, 2006

    I don’t mean to sound like an ass, but remember all of the costs cited by Malcom’s father are in Canadian dollars…not as big of a difference as it used to be, but an American dollar is worth $1.11 Canadian. This may help to explain why things seem so expensive.
    greenfuture, you have an excellent point. Way before anyone should consider dropping any money on a new furnace or other heating technology, they should insulate, insulate, insulate…

  23. Tina - September 2, 2006

    Greenfuture–You might be right about the windows–I have three old-fashioned wooded storm windows, all the rest are nice modern EEE insulated Andersen windows–house is about as well-insulated as it can be without ripping out walls–I have a screen porch I covered in plastic, which was great, sunny days last winter it got up to 70 degrees in there, which helped heat the house and eliminated lots of drafts–that fuel oil consumption is actually inaccurate, though, I realized I added up from Jan. 1, 2005 thru May 2006, so that’s not quite so bad. I still want to get off the fossil fuels though.
    It does seem the house-sized transpiring solar technology is pretty new, but it sure looks promising to me! I saw them at the Alternative Energy Store, online (www.altenergystore.com) Check it out! I would love to hear what better informed people think. Maybe I’m just engaging in wishful thinking about it, but it sounds good AND highly workable and affordable for my house.

  24. KC - February 7, 2007

    I’m a bit late in the game, but am very curious to see if anyone has insights comparing geothermal with solar panels. I am interested in both and glad to see someone else asked about solar, but no one seems to have an answer yet. Which one is more cost and environmentally effective?

  25. Ryan - February 26, 2007

    In regards to the people questioning the cost to run the blower motor… in the new systems the motor is a DC (dirrect current) motor that is run with a drive that makes the cost go from an average of $450/yr down to $50/yr (about the cost to run a single light bulb). I think the geo system is a fantastic buy if you plan on staying in the house long enough (10-15 years here in Iowa) to get your original cost back. Also if you install a geo system and put the money you save each month on heating/cooling bills towards your house it will save you thousands in the end.

  26. Geothermal Power - March 20, 2007

    This is an interresting comment, however the amount you plan to save through geothermal energy installation greatly depends on the surrounding area and global location.

  27. Anonymous - June 6, 2007

    GEOTHERMAL ENERGY RULES

  28. Mark Carlton - October 16, 2007

    I’ve just done an exhaustive analysis of geothermal vs. LP vs. wood with LP backup for heating my house. It’s in the form of an Excel model with variables for such things as interest rates, inflation, furnace efficiencies, fuel costs, bulk electrical rates, etc.
    I have airtight historical data (ten years’ worth of LP and electrical bills), so I know exactly how many gallons and kWh I’ve used and exactly how much it’s cost me. I have also plotted the data to see the trends over time.
    Straight LP is pretty much “business as usual” except for a projected furnace replacement in October 2009. Wood with LP backup requires a wood/coal furnace and a new 27-foot chimney in addition to the assumed LP furnace replacement. I did not include any maintenance costs for geothermal.
    The verdict? Over the next ten years, given my current assumptions, it would cost $40,550 to heat my house with LP, $36,596 with geothermal, … and $24,363 with wood.
    Geothermal would provide some nice intangibles such as being “green,” free central air conditioning, and no flame or CO in the house. However, there are some drawbacks. For one, if power goes out, there is no heat unless you have a HUGE backup generator. That could be a problem in Michigan.
    I must admit the specter of unknown maintenance costs is another problem with geothermal. My HVAC guy was throwing around $8,000 as a typical replacement cost for a geothermal heat pump (I can replace my LP furnace for about $1,000). And it scares me that Water Furnace – supposedly one of the better brands – warrants their equipment for only one year. That’s a far, far cry from some people’s assumptions of a maintenance-free system!
    The jury’s still out at this point, but I don’t see $20k worth of equipment or capability in that little box. I’ll be more interested when they stop overcharging and start backing up their products with at least 10-year warranties.

  29. Chris - November 13, 2007

    It’s not a bad investment for those who are considering new construction or renovations. Consider that I am building a 1200sqft. addition on a 1300sqft. house. My old oil furnace will need to be replaced, duct work installed, and two heat pumps as well to maximize the efficiency of the system. Heat pumps will kick in above 35 deg. and oil would kick in below.
    My calculations (based on a number of different calculators provided by industry, DOE, etc.) show between $1800-2600 in savings annually on heating, cooling, and hot water costs. This assumes $3 gallon oil and .09 kWH electric.
    If I take the ~$150/mo. and put on my principal, calculated over the cost of my 30 year mortgage, the savings is well over $75K and I save 18 months of payments.
    Any system has maintenance associated with it.

  30. Chris - November 13, 2007

    It’s not a bad investment for those who are considering new construction or renovations. Consider that I am building a 1200sqft. addition on a 1300sqft. house. My old oil furnace will need to be replaced, duct work installed, and two heat pumps as well to maximize the efficiency of the system. Heat pumps will kick in above 35 deg. and oil would kick in below.
    My calculations (based on a number of different calculators provided by industry, DOE, etc.) show between $1800-2600 in savings annually on heating, cooling, and hot water costs. This assumes $3 gallon oil and .09 kWH electric.
    If I take the ~$150/mo. and put on my principal, calculated over the cost of my 30 year mortgage, the savings is well over $75K and I save 18 months of payments.
    Any system has maintenance associated with it.

  31. sten nelson - November 24, 2007

    I don’t know where your getting your $20,000 cost to have a Geothermal System installed. The Company I work for has installed a few of these and the cost is closer to $90,000 with $10,000 to $20,000 just for the well (depending on depth). When you figure that you get Heat, A/C, Hot Water and, Drinking Water if you have a Potable well, they truly are the way to go if one can be afforded. I can’t say that we’re overpriced but $20,000 seems a bit low.

  32. Bob Blume - December 16, 2007

    Geothermal systems are often short circuited by poor thermal envelope construction. The buyer needs to upgrade their insulation package first! If reasonable gas prices are available in your area, 92 & 96% efficient gas furnaces can lower your heat bills (in central Illinois) for a 3000 sq. ft. home with a 1200 sq.ft. basement to the $500 to $600 a year range. We have the utility bills to prove this! HVAC contractors whether installing geo or gas furnaces are taking a bum rap because of poorly constructed NEW homes, often in the million dollar plus range. Check out the “Buildingscience.com” website for independent analysis of actual test homes not sales projections!

  33. Bill - March 1, 2008

    Check out this site.http://www.wfiglobal.com/news/research/GeoThermalFactSheet.asp. I live close to Green Bay and LP costs are around 2.40 per gal this year. Add in the cost of AC and I will save 3-4K per year after electricty costs.

  34. matty - August 15, 2008

    I’ve read over all of the comments on this page about alternative energy. I need all the info I can get. My wife and I are building a house in the near future and we were planing on buying a geothermal heating system. On top of this we are going to use soy based foam insulation though out the entire home. We are also installing a wind turbine to off set energy costs. The wind turbine we are installing should provide 60-100% of our energy needs. What do you folks think of this idea?

  35. Adam Stein - August 15, 2008

    We think it sounds great. I’m sure you’ve already thought of this, but be sure to look into all the relevant tax breaks and incentives. Some are expiring at the end of the year.

  36. Joe - August 15, 2008

    A carefully designed geo system:
    1) factors in whatever insulation you have and accomodates your needs
    2) Is 3-4 times more efficient than a furnace (as it moves heat around vs making it from scratch)
    3)High end units have 10 year warranties while ground loops have 50 year warranties
    4)Saves on heating but also cooling (not possible with the wood burners) and hot water production.
    5) If installed with horizontal loops (need about 1/2 acre for the average system)1 foot below the frost line, cost about 15 to 20 K in mid MI.
    6) Pay for themselves in 4-6 years against fuel oil or propane and as little as 8 against natural gas in mid MI. (again we’re comparing against gas and electric for all heating/cooling and hot water and not factoring in a furnace and ac replacement cost which would be incurred in the life span of geo system)
    7) Are not maintenance free, but have more in common with your refrigerator than your furnace and tend to require less. They should outlast your furnace and cost little more (once the ground loops are in) than replacement of a high end furnace and ac.
    I’m speaking of a water source (closed loop) or direct exchange system. There are other systems but these 20 to 60 year old designs are the most common in my area.
    Obviously pay back is impacted by weather/climate and gas/electric rates.

  37. Paul in Kansas - August 16, 2008

    “Ground-source heat pumps make sense in new, well-built and well-insulated construction, but is dubious in existing homes.”
    Actually, they may make MORE sense in older, less well-insulated structures. A good, well-designed GSHP will save you about 40-60% as compared to fossil fuels. On the cooling side, they save some on cooling electricity, and a lot on domestic hot water (if you add a desuperheater).
    The thing you have to ask yourself is 40-60% of what? With a new, super-insulated structure (we’re talking Insulating Concrete Forms (ICF), Structural Insulated Panels (SIP), fiberglass windows, minimal air infiltration/thermal bridging), you will be using so little energy to condition your home, that there is very little to be gained with a super-efficient GSHP.
    I am getting ready to build one of these super-efficient homes (SIPs over ICFs, fiberglass windows, SIP roof–you get the idea), and I have run the numbers every way I can think of.
    When I take everything into account, including cost of funds, PV, FV, long-term 5% fossil fuel inflation(who knows), long-term 2% electricity inflation(again, who knows); etc., the only way I can justify the GSHP is because I want it, I have plenty of money, it will be pond loop (the cheapest kind), I will buy it for cost (I have a buddy…), and I will install it myself.
    Otherwise, installing a GSHP in my new 3,000 sf, super-insulated home in Missouri, would be a losing proposition.

  38. Rai - October 4, 2008

    Let’s just say that my dad’s planning on installing geothermal,
    but the cost of geothermal has lowered since 2006,am I right?
    So now I don’t think that it cost more than 20,000$.
    It should be lowered by next year or so.
    He still keeps using fuel oil and drives a lot so it cost more.
    But we aren’t sure how deep we should dig,actually…
    By looking at the picture,does the geothermal energy has to be near the lava?I don’t think so but I need an idea,anyone?

  39. Paul in Kansas - October 6, 2008

    The geothermal systems we are talking about are heat pumps. They do not use lava or earth core heat, but rather, the heat from the sun that is absorbed in the surface of the earth.
    To understand how these heat pumps work, think about your refrigerator, which is basically a heat pump–it moves heat from the inside of the box to the outside. This is accomplished by using the heat inside the box to evaporate a gas, then compressing the gas and condensing it on the outside of the box.
    With geothermal heat pumps (in heating mode), heat from the earth is used to evaporate a gas, then the gas is compressed and condensed where you want the heat–for instance in an air handler.
    In cooling mode, a geothermal heat pump works like your refrigerator. The heat inside the house evaporates a gas, and the heat that is released when the gas is compressed and condensed, is dumped into the earth.
    To learn more, you should visit:
    http://www.greenbuildingtalk.com/Forums/tabid/53/afgroup/2/Default.aspx
    Click on the Geothermal Heat Pumps forum, then read the first post in the forum, called:
    “Basic Geothermal Info–Read this first!!!”

  40. brenda lashbrook - November 18, 2008

    My husband and I installed a geothermal when we built our house in 1995 and have had nothing but trouble. All of the pumps have been replace twice. We are now on the third water heater.When the water heater goes out,it flood the bedroom next to it! I hear other people say they’re great, but the electric bills aren’t lower either. I just read a comment about $200.oo bills for 4100 sq.; ours is 2000 and we’re paying that. We;re having a pump replaced today and we’re not sure where to go from here. Geothermal isn’t working!

  41. Jay - November 18, 2008

    I just looked into geoexchange recently and it’s a great idea for new construction and for homes with lots of land (or even a pond), but not for the tiny city lot that I have (the contractor said that the wells alone would be $18K, before adding the heat pump).
    Insulation, a radiant heat barrier (or cool roof), and possibly a traditional (air-exchange) heat pump are better retrofits, especially in climates that don’t get much below freezing.

  42. Mrseagle - December 11, 2008

    I live in Alaska, in the Bush sort of, 300 miles from Anchorage and about the same from Fairbanks, but on the road system. I am looking for someone to install a Geothermal System for us. If anyone knows of a contractor in either Anchorage or Fairbanks please contact us.
    khf@ak.net
    Thanks

  43. Jeanette from Canada - December 12, 2008

    I’m replying to comment #41. I’ve had a geothermal system since June 2007 and I too have had nothing but problems. It gets pretty cold here in the winter but our 1420 sq foot home costs over $200/mo in the winter. We built our house new and have 2×6 contruction with R20 in the walls and R40 in the ceiling. I would NEVER RECOMMEND this to anyone. I’m sitting in my house right now waiting for the repair man to come again. In February 2008 it quit working on the coldest day of the year -35C/-31 fahrenheit. In the winter I don’t dare leave the house unattended for fear of frozen pipes. I hindsight I would have done an ICF block rated at R40 for the walls and had triple pane windows installed. Would have cost the same but not much can go wrong with them. Good luck Brenda!!

  44. dude - December 17, 2008

    so will a furnace

  45. Ezra - December 18, 2008

    I happen to be a huge proponent of geothermal heat pumps in homes. Adam is correct to say that not everyone can afford one, but it is a great investment. Also if you take a look at how volatile prices in the market are, this can give you some stability.
    http://www.eco20-20.com/Geothermal-System.html
    Furthermore, I would love to know how putting a system in will affect your resale on a house. I assume it is a huge positive. This can be looked upon as a total win.

  46. Mike - December 18, 2008

    This seems a bit misleading. I researched goethermal and gave it serious thought. I ended up going air source heat pump for 1/10tht the cost and I am heating a 6000sq ft home for 30 cents a day. How does that add up to 2000 a year in expenses? The part where I hit my head on the wall was I figured 20k for the install and even if we went 2k savings a year it would be a break even in 10 years. Sure I am not accounting for my 30 cents a day so my numbers are a bit skewed. In any case after 10 years the system will be outdated and possibly done for. am I to stick another 20k into it again a repeat the process? I think if I took my 18k I saved on the air source heat pump and invest it wisely ( ya I know not a good term in todays economy) I’d come out miles ahead. By the way, the heat pump is 30 cents a day and the temperature here in Minneapolis has been averging zero degrees F. Just my 2 cents. I love the geo thermal concept but the install cost is a joke.

  47. Anonymous - December 18, 2008

    Still looking for a contractor in Alaska for installation of Geothermal system.
    Contact me.
    khf@ak.net
    Thanks

  48. ENothman - December 31, 2008

    Install and equipment costs may be $20,000 (in the example), but the savings will not just be related to avoidance of future fuel costs. Folks will have existing equipment such as central AC and a furnace that within the next 20 years will need replacement – i.e. during the lifespan of the new geoexchange heat pump unit. So, there will be the avoidance of that cost too (AC and furnace = $12k?).
    This cost may need to be prorated based on expected longevity of existing equipment, but it is my understanding the geoexchange heatpump has a longer lifespan. If one can time the replacement of old equipment, then the full $12k cost (this example) would be realized. However, if say half the life were still in the older equipment being replaced, then still $6k savings would be realized.
    In addition, the maintenance cost of the indoor geoexchange heat pump is reported to be less than that of what it typically replaces. Again, over the lifespan of the equipment this might add up to $2k total?
    The point is that the lower fuel costs (fuel savings) should only need to offset half or less of the initial $20k investment when a total cost of ownership (TCO) model is applied.
    Separately, electricity can now be generated via solar/wind through purchased certificates no matter where one lives in the US. From an overall energy independence standpoint and a CO2/pollution generation perspective it matters not that the electricity placed on the grid doesn’t specifically go to one’s own home. Therefore, geoexchange provides an avenue to achieve a zero environmental impact regarding pollution, and total national energy independence in terms of one’s own personal heating/cooling footprint when coupled with wind/solar power electricity certificates. Achieving these goals have a value beyond the dollars and cents.

  49. austin beall - February 4, 2009

    is it cost affective

  50. horhey and bertha - February 9, 2009

    how much exactly does geothermal energy cost for a 350,000 dollarhouse

  51. BOB BLUME - February 13, 2009

    How do you save thousands on exotic HVAC or solar systems when a well insulated home with thermo by-pass sealing brings you in a yearly range of $600 heating & cooling on a 3000 sq. ft. home? No matter what mechanical equipment you choose, you have a loser if you don’t tend to the envelope first!

  52. Pete - February 18, 2009

    I live in the Canadian frozen north. I just bought an older farm house built in the early 1900′s. Needless to say it is not very well insulated. This I will be looking after shortly.
    I have 4 friends that have geothermal heating and they all love it.
    In Canada we have eco friendly incentives and grants to do retrofits.
    What I plan to do is re insulate first, then I will have geothermal installed as well I plan to install wind power.
    I’m not a rich person by any means but the way I see it,I won’t have to worry about the oil companies gouging me anymore. (at least for heating my place)
    Another positive is air conditioning in the summer.
    I have 22 acres with a pond about a hundred yards from the house, so I’m sure I won’t have to drill any holes for my loops.

  53. Kelly Albrecht - February 26, 2009

    Chris, how can anyone claim a SAVINGS of up to $2600 annually when it is easily possible to have utility bills well under $2600 TOTAL annually?? I have a new, super insulated home with a 13 SEER a/c and 96% efficiency gas furnace. My TOTAL utility bills for the entire year, gas + electricity + all taxes and fees are $1600 for a 3000 square foot home with an additional 1200 square foot basement (total 4200 sq ft conditioned space). This includes all heating, cooling, lights, appliances, etc. My energy rater estimates that I spend about $530 per year on heating and cooling. A 96% efficiency furnace is about a $1,500 upgrade.

  54. Bob Jones - February 28, 2009

    Anyone know of a contracor in the RI., Mass Region?

  55. dave in kentucky - March 1, 2009

    I have been a licensd hvac contractor since 1971. If my designs and services work, I get asked back. So I’ve relied on what works to get my reference work. My 1st geo was 1978ish, so I’ve been watching, selling, servicing etc, these systems along with all of the other types that it takes to stay in business with the moving target of consumers. Some comments I found on-target, others off a bit, some way off. Let me comment on some from my perspective. Any system can have problems if installed wrong. All hvac needs are definitely not suited to geo. We still have to install a wide array. We picked up solar ( thermal and pv) a long time ago. Sure, get a good structure first, but what do you look for after that, or if you have a historic or other structure that can’t be tightened up? Big houses are probably one of the best places for geo, several reasons: easier to get into budget, easier to hide equipment ( also prevents super long freon lines with possible leaks to the atmosphere), I’ll cut myself off here because I could go on forever. I see the payback as almost always favorable, even in a state with $.07 kwh, several financial analysis comments: every time a new home is built, geo provides a positive cash flow- day one. Oil and LP generally simple payback of 3-4 yrs. Nat gas 6-10 yrs depending on system configuration etc. A word of advice- make sure you get someone who can prove they know geo ( possibly certified)and be sure your nay-sayers aren’t trying to prove their own agenda, selling their brand or type that they rely on, their installers and salemen are familiar with, etc, etc. I go out to a customer inquiry with an open mind and then evaluate how many scenarios they need to investigate to allow a full spectrum of choices that make sense. Happy hunting.

  56. dave in kentucky - March 1, 2009

    Bob Jones, try WaterFurnace International. They do a pretty good job of dealer developement and have a good program and product.

  57. Norm - March 2, 2009

    Just a comment in regards to putting your $150 a month savings against your mortage to save money. I don’t think that’s an accurate assessment of savings because if you didn’t spend the additional 10-20k for your geothermal system your mortage would be that much less and so your payments would be less too.
    I like geothermal and I’m seriously considering it for my new house but let’s not delude ourselves about the cost. In regard to payback. Two years ago I would have said it wasn’t worth it because I was making a good return on the market. Now, the thought of a guaranteed after tax return of 3-5% on my investment doesn’t look so bad. And the time I’ll have to spend on that investment is less than I spend stressing about some other investments.

  58. dave in kentucky - March 3, 2009

    All analysis I have seen show to add $10-20k
    to your mortgage ( $10k= 2ton, $20k=3-4 ton systems) saves more per month than what is added to the long number of months of a mortgage loan. Bigger unit, bigger costs and savings, but is always came out positive cash flow, even without the new 30% fed credit on unlimited installation costs that just went into effect.

  59. Panda - July 21, 2009

    I did research on everything from a wood stove to a pellet stove to geothermal to wood gasification.
    Wood/pellet stove can save a lot of money in heat costs for little money but you will still need oil/natural gas/propane etc…
    Pellets seem to increase in cost every year, due to dupply/demand. Pellets are the newest craze and the costs have doubled in the last year.
    I was down to geothermal and a high efficiency wood boiler and went with the wood boiler. it uses about half as much wood as a conventional wood boiler. At about 90% efficiency they will use a lot less wood than a wood stove. The technology was actually developed by the US but was embraced by Europe. They are the leading manufacturers of the units and have ran with the technology and design. They are proven since they have been used extensively in Europe for decades.
    Not to say that geothermal is bad, you will save money, but the costs of the wood boiler with new chimney will be about 2/3 the cost of the geothermal and since it will be hooked up to the current oil boiler, we would have a backup heat source. Most importantly I understand the wood boiler but can’t say the same for geothermal. It should only cost about $800 a year to heat and get hot water a year, a savings of about $1,700 a year at $2.50 a gallon, since we use about 1,000 gallons a year. We should be able to heat the house and hot water for about 6 cords of wood, one burn a day during the coldest days and one a week in the summer for hot water with heat storage. That is with the house set to about 72 degrees. The house is well insulated 2,600 in northern New England. The warranty on the boiler is 10 years, but I have heard these things lasting 20 to 30 years no problem. The plumbing should last the life of the house, so the only thing that could go is the boiler $8,000 or some of the circulator pumps $80 to $200. People we know went with geothermal but had to convert to blown hot air from forced hot water, and had to convert to electric hot water. I grew up with forced hot air (natural gas) and I hated it, forced hot water is the way to go, way more comfortable and little in terms of temperature fluctuation and no cold spots. So having to switch to forced hot air even with the added benefit of having ac in the heat (usually only a couple months here in Maine) seems like too much to give up. We will basically be keeping everything the same except for the source of heat. Also, since we are considering at some point adding to the house, creating another heat zone with hot water is ridiculously easy with forced hot water compared to forced hot air.
    I agree with people who have said that the warranty’s on the geothermal units are not a good sign. If they are supposed to last 50 years why only warranty them for 1 year or even 5 years, why not at least 20 years or more? That scared me since I wouldn’t be able to diagnose problems myself and certainly couldn’t fix them myself. It irked me to think of spending that kind of money on a system and get such a ridiculous warranty. I also will say that I completely understand how the forced water system we currently have (oil)works and will completely understand how the new system (wood gasifier boiler)works. If a circulator pump breaks I can easily diagnose it and fix it cheaply. No service technician required. How many people on here understand how the geothermal works to a point they could fix it themselves??? I wonder how many service technicians understand these as well. I say stick with what you know/understand.
    Quick poll, how much more electricity do people’s geothermal units cost them per year? I have not been able to gather this information anywhere on the web.
    I give anyone who wants to get away from fossil fuels credit, and I think the idea of geo is great, I just think the reliability needs to improve to get the warranty’s length increased. The manufacturers need to trust in their product and right now obviously do not. Maybe within 20 years geo won’t scare me as much.

  60. Brad Schulz - August 28, 2009

    I have an older house that is already set up for geo-thermal heat by using cast iron radiators. The type of geothermal is a closed loop copper heat exchanger which returns water from a 240 ft deep well. The water comes out of there about 155 degrees F. The system is 20 years old and I recently discovered a leak down in the well. To make a long story short; I am now going to have to dig a new one because part of the heat exchanger got stuck down there when trying to pull it up. However, I still think its worth it. Since the house is already set up all I have to do is hook the existing copper onto the new heat exchanger(s). I really like the geothermal heat because its quiet and there is really no need to turn the heat down to 60 or something while gone for the day. So the house doesn’t get cold and have to reheat. It runs on two 1/64th horse power A.C. pumps that have lasted for least ten years. We had a separate heat exchanger put down so the we could use that for the hot water and we were very happy with how hot the water was and how we could take long showers. The heat source is completely free except for tapping it.
    My new well is probably gonna cost around 9000