We changed over this fall and installed a geothermal system to replace our propane forced air heat to get away from the fossil fuel carousel that propane puts you on. (more like a roller coaster with the price fluctuations)
Here’s the complete picture of what we did for geothermal. Usually people who share this miss sharing the cost, which is the most frightening aspect… at first. We thought it makes more sense to show you exactly how we calculated a ROI (return on investment) for geothermal and why it was the right choice for us. (to hear the full story of what went into this decision check out Coopcast #5)
First off, I can tell you we LOVE the geothermal system. Our hot water cost is offset by the “excess” heat from the geo compressor… we have a grill, stove, fireplace and then the balance of hot water off the propane tank and from Oct to early January our propane fill was only 90 gallons… and that INCLUDES the “shrink” you get in the tank volume with the much colder ground in winter.
The heat from geothermal is super even, the electric bills are FRACTIONAL over the old propane bills, it’s just great. Only “complaint” is the blower itself is louder because these units move more air than conventional furnaces - but that’s trivial, really. Something we got used to pretty quickly.
The hardest part has been the ongoing installation - the company we went with were not very good so they have been out over and over and over and over… small things - but things I should not have “found”. At this point I have learned so much about what NOT to do by the installers that I have half considered starting my own geothermal company to do installations…
The best part was the cost (really) - basically the system cost $25K (4 ton unit + field loops dug and backfilled + everything inside)… but before you freak out (like we initially did - look at the math).
In 2011 (don’t know if it’s still around in 2012) - there’s a 30% fed tax credit, so that’s $8K coming back. We are in NY so there were no state credits or rebates - but other states have them.
When we bought the system NYSERDA (NY’s energy research people) had a GREAT loan program in place it just made sense.
Here’s the math:
We took out a GE Capital 0% for 12 month bridge loan to cover the $8K we know we are getting back in the form of the tax credit - no cost of the money and for 4 months we just have to make on time payments of $201… not a big deal. Taxes get field, credit gets applied, we pay off the GE bridge loan. Done there in another 2-3 months. Gotta love free money! (that means no cost to borrowing).
That left $17K to deal with. That’s where the low, low rate NYSERDA loan came in - 10 year term… payments ended up at $177 / month. We are paying extra principal on each payment (so total payment is $225). There’s a reason for that I’m getting to…
When we put all the numbers together in terms of propane costs - we knew we were paying about $225 / month for propane over the course of the each year - with propane at $2.29/gallon - and the math worked out that the geothermal unit, at that price, gets paid off in under 7 years with payments at that amount. (the recent propane fill was an insane $2.94 / gallon making us way ahead of the ROI curve of 7 years)
Bottom line - we pay $225 a month for 7 years - which is the SAME as locking in the $2.29/gal propane price - which is unrealistic - and after 7 years it’s only the cost of the electricity.
So far - the unit seems to add all of $50 / month to our electric bills.
I share all the numbers so people who are looking into this can see (at least in 2011) it’s a doable endeavor in terms of “normal people finance”.
Here’s the summary of payments:
We had $3000 “in the bank” for our annual propane pre-buy… So here’s how it gets used to kick off this project:
First 4 months of the bridge loan = $201/month (then tax return pays this off with Fed credit)
7 years - each month $225 / month (pays off unit + install in 7 years at a propane rate = 2.29/gallon)
Unit operating costs (about $50-$70/month).
So for 4 months we are paying about $500 / month to cover all the loans and the electric bill on the geothermal… and that comes out of that $3000 we had for our propane pre-buy. Then, after the taxes come back and we pay off the bridge loan, payments drop to $225 a month for the loan and $50-60 a month (worst case) to operate the unit. After 7 years, we are paying only $50-60 a month for heating and cooling because the loan is paid off… and maybe another $200 a year for any extra propane we use for cooking, etc.
The life expectancy of a geothermal unit is in the neighborhood of about 25 years. Also, it used to be very expensive to have maintenance on these units but in our area there are about 4 different HVAC companies that can service them, so honestly, the upkeep cost is about the same as the old furnace.
Think this might be for you… Well, attached to this post is a handy dandy spreadsheet (Excel format) that you can plug YOUR numbers into and see what the math looks like.
Geothermal Finance Worksheet