A year ago my parents replaced their relatively new natural gas furnace with a geothermal system (or for the purists, a Ground Source Heat Pump, GSHP). They wanted to save energy and the environment, and saw this as a way to cut way back on their carbon footprint. They combined this with "windsource" electric service (which, at least in theory, supplies your electricity from wind farms at a slightly higher cost) in order to reduce their CO2 emissions from heating their home to effectively zero.

A geothermal (GSHP) system uses a heat pump (essentially a refrigerator which can be run in reverse) to extract heat from the ground in the winter, heating the house and cooling the ground. In the summer it runs the other way, extracting heat from the house to cool the house and warm the ground. A series of water-filled coils, the ground loop, act as a heat exchanger and turn the ground under the yard into a giant heat sink. The net result is heating and cooling 3-5 times as efficient as a traditional furnace.

My parents are happy with their system, but I had a hard time seeing how it made financial sense. Even with the higher efficiency, drilling a bunch of deep wells for the ground loop is a very expensive proposition, and natural gas is quite a bit cheaper than electricity.

Nevertheless, we decided that when the time came to replace our own furnace we would at least investigate geothermal.

That time came this winter, when the main furnace in our house (we have two) died on a cold night. It's 25 years old and past its expected lifetime, and when the technician looked at it his first question was whether we actually wanted to spend any money fixing it. We got it working again (at least for now) for a couple hundred dollars, and immediately started researching replacement options.

And so began the first chapter of Our Geothermal Adventure.

The Energy Equation

My first step was to call Dad and get some hard numbers from him about his geothermal system. Fortunately he keeps good records of utility bills, and was able to give me actual electricity and natural gas usage both pre- and post-geothermal. I could match those records against the records I kept of our bills from the same month to see how their heating costs compare to ours (answer: my parents' house uses about the same amount of heat as ours).

A little analysis showed that in my parents' home, the geothermal system heats their house for about a third as much energy as natural gas. This is as expected. However, at the rate we pay for electricity (about $0.11/kWh right now), electricity is two to three times as expensive as natural gas per BTU.

So in a year when gas is cheap (like this year), geothermal would cost about the same, and when gas is expensive we might save a third of our heating bill. That hardly seemed like enough of a difference to justify the huge upfront costs of the GSHP.

We decided to keep exploring anyway, since the environmental positives were appealing, even if the financial equation wasn't coming together.

Excelobama To The Rescue

About that time we learned that a geothermal tax credit was in the 2009 Stimulus Bill, as it was then going through congress. That would mean that the feds would pick up nearly a third of the cost of our installation if we decided to go down that route.

Then, at the first meeting with a geothermal salesperson, we learned that our local power company, Excel Energy, has a special "dual fuel" rate for people who heat with electricity (including geothermal) but have a fossil-fuel powered backup. The deal is that you let Excel turn off your electric heat as needed (an hour at a time, up to 24 hours over the course of the season) and they cut your electric rate in half for the power used for heating. This lets the power company better manage their load during the peak of heating season, and the backup furnace runs only a tiny fraction of the time.

The combination of these two factors--the Obama rebate and the Excel price cut--changed the math radically. Even compared to a year with cheap natural gas, our heating bill would be cut in half. If gas goes back to $1.50/therm (as it did after Katrina), we save 75% or more. And with the feds picking up 30% of the upfront cost, the payback for going geothermal got much faster.

In fact, when you look at the price difference between a geothermal system and a conventional furnace (remember, we have to replace the furnace anyway), we figure the geothermal will pay for itself within 7-10 years. That's actually before the warranty runs out from some manufacturers.

So it looks like we'll be getting a new geothermal system this summer. And this article can only end with....

To Be Continued....