Monday, 16 August 2010

Geothermal Home Heating Case Study - Going Green Puts Green into Your Pocket

In the autumn of 2009, good friends of mine converted their Montreal home from oil heating to a system that uses heat from the ground. I asked them to share their experience since the new system is so impressive and unique both for its environmental benefit and its financial payback. What follows is their story.

The Need: We were facing the replacement of our existing air source heat pump as it was well past its expected life time. This would have cost us $ 6,000. An air source heat pump in Montreal provides air conditioning throughout the summer and provides some heat down to -10 C. It is not nearly as efficient as geothermal because the ground, below about 5 ft, at this latitude is a constant 8 C.

The geothermal system and its cost:
The installation of the whole system was approximately $ 36,000. This included the new heat pump, circulating fan, thermostat and most importantly the 2 wells drilled to a depth of 250 feet each. This last point is important since it is the most expensive line item. We had to go with a vertical implementation. If you have enough land, it can be put in horizontally. It makes a mess of your yard, but it is much cheaper. Some installations can use a nearby lake or pond for the heat source and that can reduce costs as well.
See photo showing result of drilling - pipes leading out of the hole to the house

We were able to take advantage of a grant from the government for retrofitting to geothermal. This program (the EcoEnergy program) was abruptly cancelled by our beloved Conservative government. (Note from me your blogger: some provincial governments still seem to offer a grant according to NextEnergy) The grant was worth $ 4,600.

When the heat pump is running below its maximum output, the extra heat is used to pre-heat our domestic hot water.
See photo of heat pump installed inside the basement of the house - looks a lot like a furnace)

We had to make a case for an additional $ 26,000 (i.e. approx. 36,000 - 6,000 heat pump replacement - $4,000 grant).

Financial Justification:
This house averaged 3,000 liters of oil every winter to heat the house and provide domestic hot water. This was in addition to the electricity to run the air-source heat pump which provided heating in the spring and fall.

The cost of oil was 98 cent / liter in 2008, but subsequently dropped to 75 cents / liter in 2009. I expect the price of oil to rise back to at least a dollar / liter within the next 2-3 years.

The increase in electricity costs this past winter was $ 320.

We saved 3,000 * .75 = 2250 - 320 = $1930 this year at 75 cents / liter.

I project we will save 3000 * 1.00 = 3000 - 320 = $2680 per year in the future. This assumes constant electricity rates. I also assume that oil prices will rise faster then electricity in this province.

Another important factor: the efficiency of a geothermal system is 1:4. That means each unit of electricity provides 4 units of heat. We are just moving heat, not creating it. For instance, if someone heats their house with electricity via heating coils, and the cost of electricity goes up, they will have 4 times the increase in heating costs compared to a geothermal system. This is important from the perspective of a retired person as it shields us somewhat from inflationary energy costs.

So how is my return on my investment? I save approximately $ 2,000 dollars this year with my one time incremental cost of $26,000. That is a 2000/26000 * 100% = 7.7 % return (note, even without the government grant, that's a return of 2,000/30,000 = 6.7%). And that is a non-taxable return (they haven't figured out how to tax money not spent!). I feel that my money is working well for me.

Another advantage is the increased value of our house if / when we should decide to sell it. It is hard to say what percentage of my investment we would get back. At the very least, it will make the house much easier to sell. I expect that as geothermal heating becomes more common, the advantages will become more obvious and that we may see a 70 % return from a new value perspective (70/100 * 36000 = $ 25,200).

It just feels good to be green:
I believe the IPCC findings regarding global warming. I recognize that my contributions to carbon dioxide loading of the atmosphere is a mere drop in the bucket, but you can't expect a government to make policies that you yourself will not follow.

Oil produces 2.6 kg of CO2 per liter burned. We have therefore reduced our carbon footprint by 3,000 * 2.6 = 7,800 kg of CO2. That is 7.8 tonnes of carbon!
Electricity in Quebec comes from Hydro, so the resulting $ 320 of extra electricity I consume would have a negligible carbon footprint of its own.

Another way of looking at it: my car averages 8.5 liters of gas per 100 km. I now drive about 15000 km per year and therefore consume 1275 liters of gas per year. Gasoline creates 2.5 kg of CO2 / liter. My driving therefore produces 1.5 * 1275 = 3188 kg of CO2 / year. I save the equivalent of 2.44 years of driving!

Other Options in Comparison
We looked at a couple of different options:

1. A super high efficiency air source heat pump that extracts heat as low as -30 C called the "Acadia" sold by a small Maine company called "Hallowell". Here is a link:
This looked like a less expensive option and we seriously considered it. I had to track down the Canadian distributer of this. It is a new technology and we would have been the first installation in Montreal, the second in Quebec. There were good reviews of this product in the US, but I was concerned about being the first to put it in and the lack of experience, if not expertise, with this product in the local market. I had a quote, and this was going to cost a bit over $ 20,000. It did not qualify for the government grant.
Another concern is that it sits out in the open and would be subject to rain, snow, ice, ice build-up and any bumps by activity around it.

1.5 While we were looking, Mitsubishi came out with a competing product to the Acadia. Link:

2. The brand of heat pump that we went with is the WaterFurnace "Envision" heat pump. Our installation has 4 modes: low power heat pump, high power heat pump, 10 kw electrical heating element and finally it will kick in our existing oil fired hot water system. This last option was never used and we learned to avoid the 10kw heating element by not setting the thermostat more that a couple of degrees lower at night. That runs counter to general advice, but for a geothermal heat pump, it is more efficient to maintain a (nearly) constant temperature.
Here is a link with lots of useful information about heat pumps and specific information about our unit:

3. There are other brands of heat pumps available for the geothermal system. A bigger consideration for us was the company that was going to install and support the system. We had several representatives over to our house to give us their recommendations and quotes. Here are the important considerations:
- One company was going to do the work for less, but not use the correct "filler" around the vertical wells. They were significantly cheaper, but this work would not qualify for the eco-Energy federal grant because a certified system needs to use "bentonite" which acts like a concrete to prevent pollution of the aquifer.
- We looked carefully at using our existing hot water radiators to transfer the heat from the heat pump. This can be done, but would not work as the sole source of heat since heat pumps do not warm the water up to high enough temperature. We would have required a hybrid hot water / forced air combination and would have incurred higher costs, so we did not pursue this.
- The most important consideration was the expertise of the contractor. We choose a local company called "Thermo-stat" because their representative impressed us with his thoroughness. He is also the WaterFurnace technical expert in this market. They contract out the drilling and fitting of the pipes and then install the heat pump themselves. We have been very happy with their work.

4. A final consideration was where to do the drilling! We chose to have holes drilled where our driveway is. The pavement needed replacement as it was. The location was close to the foundation so a long run of pipes was not required. It avoided any damage to existing trees or gardens.

5. Maintenance. Everything is either underground or in our basement. Geothermal systems have actually been around for over 20 years. Failures of the pipes in the ground are extremely rare. They will likely last for 100 years. The heat pump should be reliable because it is not exposed to the weather. The Waterfurnace heat pump has a 10 year labour and parts warranty. The pumps have a 5 year warranty. The heating element also has a 5 year warranty.

From the day of the drilling to the final hook-up of the heat pump was 3 weeks.

It's an all-round impressive project.

Here's a final photo of my friends drilling, turning dirt into dollars.

Update 14 Sept: The Green Building Talk forum has a lot of advice and experience from people in the USA who've done geothermal. They keep emphasizing how important the contractor doing the installation is. The equipment itself seems to be fairly close in efficiency and reliability from one manufacturer to another. Re ongoing maintenance, one post says the pumps tend to wear out and need replacement after about 5 years at a cost of $200-250US but other than that, a well installed system seems to go 15+ years without any attention whatever.


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Anonymous said...

I wish you case study would show potential savings over a 25 year period. At least this would factor in replacement of the pumps / maintenance to the system.

You don't get you money back from your initial investment until the 11th year which doesn't factor in maintenance costs....

Anonymous said...

My parents bought a home with a geothermal furnace 5 years ago. The old guy that put it in originally 20 years ago was well ahead of his time.

Steady heat and cooling and the system is good as new. My mother actually had a repairman in to simply service the system; repairman simply said "looks good", didn't fix a thing and left...

CanadianInvestor said...

The Canadian GeoExchange Coalition website has a useful Buyer's Guide to Residential Ground Source Heat Pumps, which includes a very detailed worksheet for figuring how much money you can save. The publication claims maintenance costs are much lower than with conventional systems and gives credible reasons why. It also claims life expectancy for a geothermal heat pump is 18-20 years vs 12-15 years for an outdoor air conditioner or outdoor heat pump. The Ground loop portion is meant last 50-75 years.

Another way to judge maintenance is to look at warranty reserve on the financial statement of WaterFurnace. Warranty reserve is for what the company expects to pay out based on its historical experience. Currently the balance is about USD$12.5 million, which is quite low since this represents the total exposure for all past years and sales are now running at $100 million annually.

Anonymous said...

You should be very, very happy you didn't go with the Hallowell Acadia system. Mine cost me well over 20k and has been serviced more times than I can count. The last service seemed to fix the problem, however both Hallowell and the company that did the install are now bankrupt and my 10 year parts & labour warranty are now worthless.

Anonymous said...

I live on an acreage near Prince Albert, Saskatchewan, Canada. It gets pretty cold here and dips to -30 C and more quite often. I put a 1600 sq ft bungalow on helical piles. The house is about 3 feet above the ground. I skirted the above ground crawlspace and insulated the skirting with 3 inches of spray foam. It cost me $15,000 for the Zuba Central with 17 kilowatt backup coils and the ductwork to be installed. The unit itself was $8,000. Running natural gas to the site would have been $33,000 plus a furnace and A/C unit, geotherm was $45,000. I am in the heating season now and temperatures have been -10 C to - 30 C and the backup coils have yet to come on. The Zuba Central is heating the house and crawlspace easily and I highly rate this system. Once I go thru a full winter which is approximately 6 months I can comment on the cost. This system works in cold weather. I have seen systems with better ratings but they need an alternate system at -16 C. I was Leary of this technology at first but am now very impressed.

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