Two years ago we replaced our oil-steam heating system with geothermal in a 1801 farmhouse. The installation of geothermal was a significant investment and required significant up-front analysis to determine if there would be a financial return on the investment. The financial aspect was not the only consideration for using geothermal heat but needs to be considered.
Predicting Cost Benefit
A lot of data went into a spreadsheet used to calculate then expected return. Key data was the historic amounts of oil purchased, the degree days for the area of the house, and the monthly amount electricity the house previously used. With these trends, one may determine how much heating energy is needed by the oil system then how much the electricity is needed by the geothermal system. After tax rebates, the total cost of installation of a 5-ton system (and a lot of retrofitting) was
| Investment Summary | $43,850 |
The predicted yearly savings resulting in roughly a 9 year ROI. A simple financial model that ignored the cost of money was used but one would expect that to be accurate given the likelihood of energy prices to increasing faster than inflation.
| Oil heating and water heating based on 2010-2011 usage and assuming $3.60/gallon | $6000 |
| Window AC electricity costs | $1200 |
| Calculate electric cost of geothermal heating and cooling | -$2160 |
| Cost per year savings | $5040 |
| Years to recover investment at 0% interest, no increase in oil costs (inv/cost-year) | 8.7 |
Conclusion
Two full years have past since the installation. While last year was a harsh winter, I simply looked at electricity costs. The difficulty with electricity is filtering out non-heating and cooling costs. However, if you look at the trend and take the lowest monthly bill, that will give you the amount of electricity for other things. In our case, September has a low cost of around $130 per month. Subtract the cost from each month and assign each month to either cooling or heating.
| Cost of heating (Oct-Apr) | Cost of Cooling (May-Aug) |
| ~$2000/yr | ~$250/yr |
The predicted a yearly cost of $2160 is very close to the actual cost per year of $2250. This does not include other factors like our house is more comfortable and more evenly heated/cooled and the positive environment impact of reduced energy usagage. The conclusion is we are on track to pay back on geothermal in less than 9 years and enjoying our house more.
