Geothermal heating and cooling pros and cons

I know several people using geothermal heating and cooling. My neighbor really wanted me to switch to it. But what is geothermal heating and cooling? What does it cost? it didn’t make sense to me to replace a highly efficient furnace and AC that were working properly. Now that my furnace needs a costly repair, I’m looking at geothermal heating and cooling pros and cons. Here’s what I found out.

Geothermal heating and cooling is very environmentally friendly, and under the right circumstances, saves you a large sum of money every month. It’s not for everyone, but the people who like it like it a lot.

What is geothermal heating and cooling?

geothermal heating pros and cons
Geothermal heating and cooling uses pipes buried underneath the ground to take advantage of the constant 55 degree temperature.

Once you get a few feet underground, the earth is a constant temperature of around 55 degrees Fahrenheit. That’s why your basement feels about 10 degrees cooler in the summertime than the rest of your house.

Geothermal takes advantage of this. It uses loops of metal tube buried in your yard full of water. A heat pump then uses these tubes of 55-degree water to heat or cool your house. The pump has a constant free source of 55-degree water, which it can then use to heat or cool your house to a more comfortable temperature. It’s not warm enough to heat your house to the 70 degrees you want, but it’s much closer than the outside air.

Geothermal is extremely efficient. Manufacturers claim it can heat or cool your house at a cost of about a dollar a day. When I asked the people I know who have it, they said that’s pretty close. In St. Louis, a heating bill in December or January can easily exceed $200, just for that single month. And in the summertime, bills can get back into that range too. So it’s easy to see the appeal.

What’s the cost of geothermal heating and cooling?

The equipment costs between $10,000 and $20,000. The cost varies because most systems are built to order and there’s a fair bit of custom work that happens with each installation. There are some subsidies available. Your utility company may offer a rebate, and there may be a Federal tax credit available. But there are strings attached to the rebates, and you still have to come up with the money up front even with the tax credit.

So in the best case scenario, geothermal’s cost is comparable to that of a highly efficient conventional furnace and air conditioner. Yes, there are outfits that will install bottom-of-the-line HVAC systems for $4,000, complete. But high-efficiency system will run closer to $8,000 or $9,000.

That said, I would expect the cost of your geothermal setup to be closer to $20,000 than $10,000. If you can get in for 10 grand, it’s a no-brainer. Just do it. It’s the $20,000 sticker shock that should give you pause.

Salespeople will tell you that geothermal pays for itself in 8 years. But there’s some dishonest math going on there. If you keep your house at 82 degrees in the summer and 68 degrees in the winter, versus 72 degrees year-round with a conventional system, then yes, the system pays for itself in 8 years. When you use either system the same way, the payoff period is more like 10-12 years.

Pros and cons of geothermal rebates and tax credits

There are some strings attached to the geothermal rebates from the utility company. In order to qualify, you have to shut off gas service to your home. If you don’t have gas, that’s no problem. In my case, it’s a bit of a problem. I have a gas hot water heater, gas range, and gas dryer. All of them still have about half their service life left. So I’d spend all the rebate money replacing the stuff I ripped out to get the rebate in the first place. If they were due for replacement, it would make more sense to do.

So I’m not factoring in any kind of rebate from the utility company. There are definitely pros for you if your house is all-electric or nearly so. Otherwise it’s more of a con.

The thing about tax credits is they come and go. The credits are in effect for 2020 and 2021 but get smaller each year. What happens in 2022 depends on who has power then. It could be somewhat larger. It could vanish entirely. The credit helps close the gap somewhat between the two types of systems, but it will still take several years to recoup the cost. I’ll take it if I can get it, of course, but the tax credit isn’t a deciding factor for me.

Does geothermal heating and cooling save you money?

Geothermal saves you money as long as you stay in your house long enough. My neighbor estimates it saves him $100 a month on average in power costs. So it means spending $20,000 up front to save $1,200 a year.

That means it takes 16 years to recoup the cost. Why do they say the system pays for itself in 12? They’re probably factoring in the difference in cost between a $20,000 geothermal and a $5,000 conventional system. If you only have to recoup $15,000, you actually do recoup that in about 12 years.

Then there’s additional savings due to life expectancy. The geothermal unit lasts 25 years, while a conventional system lasts 15. So at the point where the geothermal setup has completely paid for itself, at 16 years, the system still has 9 years of life left in it where you’d be shopping for a new unit if you’d bought conventional.

The problem with geothermal is if you move. It will increase the value of your house, but if you put geothermal in and sell the house next year, don’t expect to get $19,000 more just because you have geothermal. Geothermal makes plenty of sense if you plan to stay 10 years or more, but not so much if you stay less. If you’re moving, forget about geothermal heating and cooling pros and cons. Install the $5,000 unit and play up how new it is and think about geothermal next time.

Is geothermal heating and cooling reliable?

Mechanically speaking, geothermal heating and cooling is pretty simple since it works on the principle of pumping water and transferring heat to or from your yard. It tends to be low-maintenance and has a long life expectancy, about 25 years. That’s 10 years longer than a modern furnace lasts.

You can expect to spend less on preventative maintenance and service calls over the life of the unit, and the unit lasts longer. So its reliability stands to save you $100-$200 per year. We’re talking 1 percent of the purchase cost here, but at least this is a hidden benefit, rather than a hidden gotcha.

Other pros and cons of geothermal heating and cooling

geothermal heating and cooling pros and cons
Geothermal uses a heat pump, like the one Ernest spent the 1980s bugging Vern about.

So far, this all sounds like a lot more good than bad. No wonder geothermal turns its owners into zealots. But surely there’s a downside?

Yes, there are some cons to geothermal. The biggest one is that it’s a heat pump. I’m old enough to remember those 1980s commercials starring Jim Varney as Ernest P. Worrell, asking his neighbor if he likes cold air in the winter time. Heat pumps were all the rage in the 80s, and then those commercials hit. I know the house I live in had one at one point because it had a heat pump thermostat installed when I moved in. That is literally the only reason I ever heard the phrase “heat pump” after about 1989.

Gas heat kicks out toasty air that’s a good 90 degrees. You can warm yourself by it like you’d warm yourself by a fire. With a heat pump, the air is a good 10 degrees cooler. So you’ll have to get used to it. Unlike gas heat, which Ernest touted as “hot, fast, and cheap,” heat pump heat is just cheap.

But according to U.S. Air Force estimates, geothermal heat costs 1/4 as much as gas heat. So comparatively, gas isn’t cheap.

How long does geothermal take to install?

This is another con of geothermal heating and cooling. You can get conventional HVAC installed quickly, sometimes even the next business day. The geothermal installation itself takes two days, but that’s just the time it takes to install it. Your new furnace probably is sitting in a warehouse somewhere across town. Your geothermal heat pump probably gets built when you order it. There’s also some lead time on the digging. A lot of these things happen in parallel, but you’re looking at a week or two for it all to come together.

If you’re in a hurry, geothermal isn’t for you.

Some hidden pros

The cooler air comes with some benefits though. Gas heat is also dry. That’s why everyone wants the house at 75 degrees or even 80 degrees in the winter when they complain 80 degrees is unbearable in the summer. Geothermal heat isn’t dry. So the house doesn’t heat up quite as fast and the air coming out of the register doesn’t feel as toasty, but you don’t have a dry throat all the time either. You may very well be able to keep the house at 70 degrees in the winter and still be comfortable, since the humidity is at a bearable level.

There’s another place where geothermal can eek out a little extra savings for you. Think about that water coming in. The geothermal unit can also use that water to heat water for your hot water heater. So you can add a supplemental tank to your hot water heater to pre-heat water for it, so your hot water heater doesn’t have to work as hard. Once you get geothermal, hot water is one of your last remaining large utility expenses, so being able to knock that down definitely has some benefit.

Paying for it

So when it comes to geothermal heating and cooling pros and cons, the pros seem to outweigh the cons–if you can afford it. Considering the average US household income in 2019 was $89,000, probably more people can afford it than you might think. But it will probably take some sacrifice to do it.

The trouble is, most people can’t just write a check for 20 grand. The average US household in 2019 had $136,000 in debt. It’s more prudent to borrow $20,000 for geothermal than to borrow $20,000 for a car, given that a car will only depreciate in value. The geothermal unit will save you $100 a month, which can immediately go toward helping you make those payments.

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