Geothermal Case Study…Propane to No Pain.

Location: Southeast Pennsylvania Year Built: 2001 Size: 3,500 sqft Previous: Propane Furnace Cooling: Central Air (Heat Pump)

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A lot of friends and neighbors ask why we switched to geothermal; here is the answer to that question by the numbers. All numbers used are verified averages, they are not estimates.

In August of 2009 we installed a 5 ton geothermal heating and cooling system to replace our propane furnace and central air conditioner.

The chart to the left shows the system cost. Don't let the initial cost scare you away - the signficantly lower cost of operation will make up for it.

$3,000 - $4,000 per year to Heat with Propane

Our family burned 1,550 gallons of propane on average per winter over the past 7 years. The cost of propane in 2009 in our area was $2.15/gallon. The current price is $3.33/gallon (as of 4/1/11). We'll use the conservative number of $2.15 for our analysis.

Geothermal replaced our propane furnace and central air conditioner. It also preheats our hot water. We no longer purchase a fuel to heat our home and our geothermal is a much more efficient air conditioner. The geothermal system does cost money in electricity to operate – let's look at those numbers. As you can see in the chart to the left we increased our electricity use by around 4,000 kwh annually.

Our electric rate is 12¢/kwh, therefore we paid an additional $512 in electric throughout the course of the entire year with geothermal. We had higher electric bills in the winter but also lower electric bills in the summer compared to before.

Annual Savings of $2,820 - No Fossil Fuels

Assuming the price of propane is always $2.15/gallon (its already $3.33 as of 4/1/2011) and our cost per kwh remains at 12 cents we will be saving $2,820 annually with geothermal relative to what we would have paid by keeping our old system.

6.5 years isn't the end of the story here – in fact it's really the beginning.  Propane and heating oil prices rise on average about 4-6% per year (our propane rose at 4.5% on average over the previous 7 years) – if we did the same calculation and included an average fuel increase of 4.5% (starting from $2.15) the payback period is 5 years. If we did it assuming propane stayed at its current level of $3.33 with no fluctuation (maybe you sign a long term contract) the payback period moves to near 3.5 years.

If you have an old or failing HVAC system its time to plan ahead

Lets step back a for minute and examine our other options. We had an 8 year old furnace and air conditioner – both which would have needed to be replaced within the next 5 years. The cost to replace both of those systems would have been roughly $10,000. If we factor this in to our equations that means our geothermal system was $8,200 more upfront then the alternative. The pay back here is under three years (if gas is $2.15/Gallon) or under 2 years if gas is its current level of $3.33. The reason I add this in here is for those of you dealing with old equipment which will need replacement in the near future – plan ahead.

Can you really afford another 10 years of purchasing propane or heating oil at these prices?

A Geothermal system has a longer lifespan than other equipment since its indoors away from the weather. The geothermal heat pump has a 15-20 year expected lifetime. The ground loop is guareenteed for 50 years, and should actually last forever if installed correctly.

If we would have put in another high efficiency furnace and air conditioner (for around $10,000) it would have cost our family more than $99,000 over the next 15 years to heat and cool our home (assuming a 4.5% avg. annual increase in fuel prices) or $42,000 (assuming we could buy propane at $2.15 forever).

Let's compare this to geothermal over the next 15 years. It will cost us $7,600 to heat and cool our home over that 15 year period (assuming no electric rate increase) or $8,600 (assuming a 2% annual electric rate increase). Note: Average kwh increase over the past 7 years was 2%

So the choice we made took us from an expensive and uncertain future of a $10,000 system replacement and a $42,000 - $99,000 operating bill to an $18,200 system replacement with a $7,600 - $8,600 operating bill over the next 15 years. That's geothermal by the numbers.

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