How long is a geothermal payback period?
Some things in life are certain — death, taxes and I will never get better at golf. The answer to the payback period question is not one of these things. The needed input contains many variables, including the install costs of your future geothermal system and the HVAC system you are comparing it to, sizing and correct installation, utility rate fluctuations, household activity and lifestyle, system efficiency ratings and your local weather. I'm sure you get the idea. There are a lot of factors.
Don't throw your hands in the air in frustration! Although you can't mark a specific day on your calendar to celebrate your geo system paying for itself, it is possible to come up with a fairly accurate time period if you follow the correct methods and make educated assumptions.
- Have a qualified HVAC contractor provide you with bids to install the types of systems you are interested in. Make sure you trust the contractor. Do your homework on this. Is the bid detailed, inclusive, informative and clear? Are efficiency ratings of the equipment included?
- Make sure the bids spell out all discounts, rebates, and credits that are available. There is a federal tax credit of up to 30 percent of installation costs for geothermal systems right now. When figuring install costs of various systems, make sure these deductions are reflected on the bid to give you the true dollar amount . They can go a long way in shortening your payoff time.
- Now that you have determined the final install costs difference between the systems, you need to figure out your monthly utility usage and cost difference between them. This is where a leap of faith is taken. All of the variables mentioned above are incorporated into the many versions of specialized utility-cost calculators that are in today's market. None of these calculators could be exact to a specific house, but some are better at it than others. My company often uses an accurate one provided by Enertech, the manufacturer of GeoComfort geothermal equipment. We input all necessary values and provide the results to the homeowner. Basically, it computes approximate monthly utility costs for various HVAC systems.
- Finally, you just take the difference in install costs (after all deductions) and divide this amount by the difference in monthly utility costs. The answer is the best educated estimate of the number of months it will take to pay of the higher up-front cost of geothermal. For example, if the cost to install a geo system is $6,000 more than a standard gas/electric split-system, and you save about $120 a month on utility bills, your payback period is a bit over four years.
Obviously, this is not an exact science, but it will get you close enough to make an intelligent decision. Often the payoff time is surprisingly short. Of course, the exercise above doesn't include the added benefits of an extremely comfortable living area and increased home value. It many circumstances, it is very difficult to argue against the wisdom of going geothermal.
This expert insight brought to you by Russ Scott, general manager of Scott-Lee Heating Co. and an Enertech Global LLC geothermal dealer.
Russ Scott Russ Scott has worked for more than 16 years at Scott-Lee Heating Co., and is now the general manager of the business his father co-founded. He received business and creative writing degrees from St. Louis University, is on the S.M.A.C.N.A. - St. Louis Board of Directors, is a Contractor Rep on the Local 36 Apprentice Committee and is involved with the local H.B.A. and A.C.C.A. chapters. Russ enjoys sharing his knowledge of all high-efficient HVAC systems, especially geothermal heat pumps.