Published Saturday August 9, 2014: Updated March 8, 2015

Actual Costs and ROI for Geothermal

So what are the actual costs of drilling vertical wells and installing a Geothermal (Ground-Loop) heat pump. How long will it take to pay off? 

Whenever you are making a major energy efficiency improvement/change to a home (or vehicle), knowing how soon it will recoup the investment costs is vitally important. It may be the fanciest gadget ever with really cool whistles and bells, but if the return on investment is longer than its lifespan, financially, it’s not worth the investment. 

Figuring out the ROI:  

Some purchases are made without figuring the ROI, but an energy-saving appliance should never be one of them. You can choose to ignore the ROI and make your decision based on some other environmental/ethical/moral belief, but you should at least go through the ROI exercise just so you can wrap your brain around how much it is really going to cost. 

Make sure you consider all internal and external factors when calculating ROI. Exclude the irrelevant ones. 

Our geothermal system was purchased through Utah Geothermal and they partnered up with Palace Geothermal for the drilling. 

We installed the Tranquility 30 TE038 (with hot-water generator) that uses three vertical ground loops that go down 300 feet. The total negotiated price was $31,935 (I did all the rough plumbing, electrical and provided the tanks for the water heater and hot-water generator). After the 30% federal tax credit, a $2000 state tax credit and re-selling all the old equipment for $1140, (furnace, A/C, gas water-heater and some scrap metal), in the end, it cost me $19,194.50. 

When figuring in the ROI of a ground-loop heat-pump, you need to account for both the gas savings from winter time heating and electric savings during the summer time air conditioning use, (ground-loop heat pumps are crazy efficient at both heating and cooling). Plus the cost of energy does not remain fixed for life. It almost always increases a few percent a year and compounds. Lower energy usage may also put you into a lower tier with the power company so you are being charged less for what electricity you do use.

If you are doing new construction (mine was not), the up-front costs will be much lower too since you aren’t replacing the HVAC equipment and potentially not having to run old school, natural gas lines onto the property and into the home. 
If landscaping is not completed yet, horizontal wells are a significantly cheaper option than vertical ones (mine were vertical). 


Reasons why you should never base ROI off of energy costs alone: 

Going off of raw energy usage alone, the internal ROI for our geothermal heat pump is about 11-14 years. 

Ironically, efficiency improvements appear to hurt an energy cost ROI. Going off of energy usage in 2009, the ROI would have been 11 years. In 2012, because of added efficiency improvements in the home (like air sealing and more insulation), the internal ROI actually went up to 14 years. Energy saving improvements over the years reduced costs which are needed to justify a major purchase. Weird!!! 

Other green technologies will appear to hurt an energy ROI:  Our solar panels provide all the energy needed to run the heat pump, therefore the electrical cost savings for a heat pump are now zero and only natural gas costs are used in the energy ROI calculation. That pushes the energy cost ROI out to over 22 years. What?

But just because a solar panel is making the energy and it is not costing you’re a dime, does not mean that that energy is worthless. It is still worth the same as electricity from the utility company, only now, you are not paying anything for it. The same goes for paying off a mortgage. Just because you no longer have a house payment, doesn't mean your house is worthless. 

Apples are not Oranges:  Comparing a cheap, 80% efficient natural gas furnace to a high-end Geothermal HVAC is like trying to compare a ’73 Pinto to a brand new BMW. There are additional comforts and health benefits that are not included in the raw energy comparison ROI:


Things like:

• Hospital grade MERV 11 or 13 air filtration – Not having to breath bad Utah inversion air (or smoky summer fire season air) inside your home is invaluable to those with chronic chest illnesses. What price can you put on being healthier and getting sick less? What’s the cost of not having to be hospitalized during a bad flu season? This is difficult to quantify but a very real cost.

• Programmable humidity levels – No more itchy, dry-cracking skin in the winter time.

• Increased comfort – Better air circulation.

• More uniform air temperatures through-out the house – No more hot/or cold spots.

These factors brought our True ROI down to 8.5 years.  

Not a bad investment for a very clean, green and super awesome, heating and cooling system. 


There are other factors that some may choose to include in their justification (which I have not included above):


• Greater supply of hot water (if the heat-pump has the HWG - hot-water-generator option as mine does).

• Reduced medical costs – Illness in our house has reduced substantially since we switched over to the heat pump system with its superior air filtration system. 

• No moral dilemma of using natural gas from leaky fracked wells.

• Safety (no CO poisoning or explosion concerns). Hazard insurance premiums may also be lower for this reason.

• Higher oxygen levels in the home due to reduced combustion occurring in gas appliances. 

• Energy independence (when installed in conjunction with PV or wind power on the property).

• Emergency preparedness (In an emergency a 2500 watt inverter/generator could power the heat pump).

• Ability to achieve a carbon neutral/carbon negative status. 


There are also external factors that should not be included in the ROI but still provide a global benefit:

• Cost of not using fossil fuels (Preserving fossil fuels for manufacturing/mineralogical purposes instead of frivolously burning them - estimated at $270 billion/year for the US alone).

• Reduction of Climate change and all of its vast costs ($ tens of trillions per year globally)

• Reduced property insurance premiums brought on by proactively preventing Climate change.

• Reduced health insurance premiums for the same reason.

• Reduced costs for wars fought over oil and other fossil fuels. 

• Reduced death and suffering of people and nations displaced by climate change. 

• Reduced species extinction caused by climate change. Etc, etc, etc.

Other Factors that will Effect Cost: 

Soil Type:

The cost of drilling can vary significantly depending on the soil.  If you live on a mountain where drilling a vertical loop involves going through hundreds of feet of granite, drilling is going to be more labor intensive and cost more money. 

Though still very labor intensive, drilling three, vertical ground loops in my backyard, through 300’ of lake Bonneville sediment, actually went like a dream. There wasn't a single rock all the way down.  I imagine that kept the drilling costs on the low-end of the spectrum. 

Home Efficiency: 

A more efficient home will have reduced cooling and heating demands. This will reduce the number of ground loops needed as well as the size of the heat pump equipment.  You will always be better off insulating and air-sealing the home before you consider installing a Geothermal system.

Low Supply and High Demand: 

Several weeks after I was featured on the KSL news, I got word from Utah Geothermal, that after my story aired, their phones started ringing off the hook and hadn't stopped ringing since. 

While this is good for the local economy and good for the geothermal drilling business, because of high demand, this has both backlogged the schedule for drilling jobs and in some cases has driven up the price of drilling. 

Here's a bit of free advice for those qualified individuals wanting to get into the ground loop drilling business. DO IT!  For the sake of keeping this amazing, green technology within the financial reach of every homeowner and business, supply must catch up with demand. 

Just make sure you know what you are doing lest you botch up the drilling job and give the whole technology a bad name. One of the drillers at Palace Geothermal told me they get a lot of business fixing botched jobs from incompetent drillers. 


Next Article:  Endeavour Elementary, A Model of How to Build an Energy Efficient School