Our Geothermal Adventure (Chapter 3)

Our new geothermal heat pump system is installed and operational (you can read about our initial research, and the decision to go ahead). All that remains at this point is to clean up the mess.

We have replaced our traditional furnaces, air conditioners, and water heater with a new system consisting of two geothermal heat pumps, a backup gas-fired furnace, a hot water storage tank, and a gas-fired on-demand hot water heater. The geothermal heat pumps both heat and cool the house using the soil under our yard as a gigantic heat sink (which is several times as efficient as a traditional furnace or air conditioner), and use waste heat to heat the water in the hot water storage tank. The on-demand hot water heater kicks in if the water in the tank isn't hot enough, and the gas-fired backup furnace is used on really cold days or when the power company turns off the heat pumps to manage the power grid in the winter.

First, a Rude Surprise

Recall that there are three financial incentives for installing this system:

  • A $150/ton rebate from our electric company, Xcel energy, for new geothermal systems
  • A "dual-fuel" electric rate which gives us cheaper electricity for the geothermal system if we have a gas backup and let the power company shut off the geothermal to manage the power grid, and
  • A 30% federal tax credit

Of these, the $150/ton geothermal rebate from Xcel is relatively small (heat pump capacity, like air conditioner capacity, is measured in "tons." Our system is six tons total).  The dual-fuel rate is the one which really makes the system work financially, since that makes the geothermal significantly cheaper to operate than natural gas, even in years when natural gas is cheap.

We calculated that, given the cost of replacing our old furnaces (which had to be done anyway) and taking advantage of all the financial incentives, the geothermal system would pay for itself in about nine years.  That's not bad, considering that the heat pumps have a ten-year warranty and the loop field (the underground heat exchange wells which account for about half the project cost) should last pretty much forever.

Shortly after we committed to the project and paid for 50% of the system up front, we heard from our tax advisors that we might not actually be able to take advantage of the full geothermal tax credit. The problem is that the tax credit is nonrefundable, meaning that if it reduces your tax liability below zero then you don't get the difference back.  At the time we were planning the system, it was still unclear if the credit would be refundable or not; and now that it's not, we don't know if we will have enough tax liability in 2009 to get the full value of the incentive.

We re-ran the numbers without the federal tax credit, and it turns out that without it the system will pay for itself in 18 years instead of nine.  That's not great, but it's not terrible either, especially considering the nonfinancial benefits (helping the environment, etc.).

The System

The system we had installed is one of the more complicated (and therefore more expensive) residential geothermal systems out there.  We had to work around two major limitations in our home: an addition with a completely separate furnace and air conditioner (and no practical way to tie the ductwork together into a single system), and a relatively cramped utility room. Our system consists of:

  1. The geothermal loop field, which is six parallel wells drilled to a depth of 180 feet in the front yard, each with a loop of pipe filled with antifreeze solution.  A buried manifold connects the six loops to a pair of pipes which go underneath the garage into the utility room.
  2. A 2-ton heat pump for the addition, which uses antifreeze pumped through the loop field as a heat source or sink and an air conditioning-style compressor to heat or cool air. Some waste heat is pumped into the hot water storage tank through a pair of water pipes.
  3. A 4-ton heat pump for the main house, which pumps its refrigerant through a heat exchanger in the gas backup furnace to heat or cool the house. It also pumps waste heat into the hot water storage tank.
  4. A gas backup furnace, which also serves as the forced air blower for the main part of the house.
  5. A hot water storage tank, which is warmed up to about 110 degrees when the heat pumps are running (and stays cold when they're not).
  6. An on-demand hot water heater, which runs when the hot water in the storage tank isn't hot enough.
  7. A motley assortment of pipes, pumps, wires, fuseboxes, relays, etc.

Together, all this gear replaces everything which had been in our mechanical room except the water softener.  It looks like the inside of Captain Nemo's submarine.

The Installation

The project took about two weeks to complete, though 90% of the work was finished in the first week.  Drilling the loop field and replacing our old mechanical systems happened in parallel, with our new hot water heater and gas backup furnace operational after the first full day of work.  This meant that we wouldn't have to be without heat or hot water, though fortunately the weather has been nice enough that the heat hasn't been necessary.

In order to be fully operational, after the equipment was in place and the loop field completed, the loop field had to be connected to the heat pumps and filled (it took about 125 gallons of an antifreeze mixture.  I'm told this fluid should never have to be replaced, unless the system has to be drained for some reason).  Then we had to wait for Xcel Energy to install a second electric meter, since the "dual fuel" rate requires that the geothermal system be separately metered from the rest of the house.

Once all that was done, we ran into a series of minor problems: the wrong part for a control relay, a burned out switch, and finally, after everything was running properly, the technicians accidentally left one of the heat pumps in a test mode, requiring another visit to reset it for normal functioning.

All told, the installation went about as well as can be expected for a project of this magnitude.

Living with Geothermal

The weather has been very pleasant lately, and we haven't used our new system much yet. It was a little cool the first evening the geothermal was on, so we ran it for a few hours to take the chill off.

Some things take getting used to in transitioning from traditional heat and air conditioning to geothermal. The biggest change is that unlike a gas furnace, which normally cycles on and off, a geothermal system is most efficient when it operates continuously in its lowest stage.

That means that it no longer makes sense to turn the heat down at night and when we're not at home during the day.  We had saved a significant amount on our heating bill by turning the heat way down at night, but now that strategy will actually cost us money by forcing the geothermal system to run in a less efficient mode to catch up--or worse, the system might switch to the gas backup furnace, negating the efficiency of geothermal entirely.

Getting the most out of geothermal will mean making only very gradual changes to the temperature in the house.  The name of the game is to try to keep it running in the lowest stage possible, and avoid running the gas backup at all.  We'll have to experiment with it when we get into the next heating season to see what works, but I'm guessing that we can turn down the heat modestly during the work week, as long as we are careful to raise it only gradually on the weekend.  The wood stove will be helpful, since it will give us a way to add more heating capacity without losing the benefit of the geothermal.


Geothermal Adventure

I stumbled on to your blog while trying to research information on using a geothermal heating/cooling system inconjunction with an on demand hot water heater. It appears that you have done what I am trying to investigate. I would appreciate any techincal info on your system such as schematics, pictures, etc. so I can work with my heating/cooling supplier. I'm building a house now. Please respond via email to: gewineman@yahoo.com. Thanks, Gary

Find an expert

My best suggestion is to find someone who has done this before--don't be the one to pay your contractor to figure all this stuff out. For more online research, try geoexchange.org or the online forums at greenbuildingtalk.com.

stimulus plan tax credit

You may want to check with your tax advisor again, or get a new one. A quote from the dsireusa.org site:

If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The excess credit can be carried forward until 2016, but it is unclear whether the unused tax credit can be carried forward after then.

Tax credit

This is new information--thanks. It's quite likely that we'll have enough income over the next 8 years to take full advantage of the credit eventually. That said--it may take many years, since I already have a huge stinking mound of carried forward tax credits thanks to past business losses.

US rebates, I'm not sure about Canada's

Here is a webpage that has the links to the U.S. Goverment tax rebates web pages on it http://geothermalexperts.net/residential_rebates.html .

Geothermal Spreadsheet

we are in exactly the same boat you were in. 2 furnaces, considering replacing. But Canada, not US so the government incentives are different. WOuld you be willing to share your spreadsheet on costs so that others can make the informed decision you made?


What are the odds the unti fails in a major way 3 months after the warranty?

Ten years and three months

Considering that it's a ten year warranty....I think we will have gotten our money's worth by that time. 

If it would fail the

If it would fail the replacement cost would be much less since the wells are already in place.