Geothermal vs. Oil my calculations please comment.

 

I have 3200 sq feet house in NH. I use 1500 gallons of oil a year. I keep the house at 70 deg.

 

Heating oil BTU 138,690 per gallon, considering the new generation of heating oil “green” the BTU is probably 95% of the 138,690 which is BTU 131755. My furnace is 80% efficient so I am extracting BTU 105404.

 

To replace the same amount of BTU as in a gallon of oil with electricity I need 30.89 kwh. If I install a geo with COP of 4 I need 7.72 kwh. Is this correct? I think it is.

 

For 1500 gallons of oil I paid last winter $3,750. To generate the same BTU with geo I need 11580 kwh which at 17c a kwh is $1,968. The savings a year would be $1782 minus power used by the pump since I don’t think that is included in the cop of a unit. Does this sound correct?

Posted By Andrzej on 08 May 2010 08:11 PM
Does this sound correct?

Yep, the gallons-to-BTU-to-kWh conversions are correct, but
I wouldn't base the projected savings on $2.50/gal heating oil.

There's very little room for downward fluctuations, and a high
probability of a long-term upward trend. It was nearly $4/gal
(and climbing rapidly) in August 2008.

Also, be sure to check with your electric company for the effect
of geo or "all electric" heating on your electric rates. In the Philly
'burbs, I was paying about $0.16/kWh year-round -- but after
switching from oil to geo, I get a special "all electric heating"
rate that drastically reduces $/kWh during the heating season.

Getting off oil and going to geo is a no brainer. When you stop paying for the oil the roi goes pretty fast.

Figure a COP of 3, not 4, for likely actual operating conditions in NH. Pump power can be quite significant, especially in open loop designs, so plan for it. Small pumps are 40-50% efficient at best.

I hadn't heard of oil furnaces with an AFUE much above 85%; however a scan of Energy Star certified oil furnaces shows a very few condensing oil furnaces offering 95% AFUE. I suppose the newly reduced sulfur limits in fuel oil make this feasible.

That said, I'd be extremely leery of that technology until it has matured (maybe it has and I, basking in sunny Florida, am simply unware...it happens...)

The first few years of condensing gas furnaces were very difficult - heat exchangers corroded owing to acids in condensate. Failed heat exchangers can be dangerous owing to carbon monoxide, although this may be less of an issue with oil-fired furnaces. Some units were vulnerable to being located too near laundry rooms where bleach is used - chlorine fumes caused hydrochloric acid to form in exhaust condensate, if memory serves.

Posted By engineer on 09 May 2010 09:48 AM
...I hadn't heard of oil furnaces with an AFUE much above 85%; however a scan of Energy Star certified oil furnaces shows a very few condensing oil furnaces offering 95% AFUE. I suppose the newly reduced sulfur limits in fuel oil make this feasible.

That said, I'd be extremely leery of that technology until it has matured ....

I may have missed something in the OP's note but didn't see anything related to condensing oil furnaces. But I'll throw in my 2 cents on the topic anyway

I have a Monitor Products FCX condensing oil boiler, a very nicely built unit. Quiet and well made. Based on my experience with this unit, I'd say it isn't really for the masses unless you follow the instructions to the letter with respect to "must use a new oil tank" and get is serviced regularly. Because of the tiny nozzle, it's very prone to clogging. Even though I'd been using oil additives to reduce sludge formation, the first couple years of use was "difficult". It's fine now, but still should have twice yearly cleanings/nozzle replacements to keep things tuned up. This is all with a good quality oil filter. I've also been using it with a B20 low-sulfur oil/Biodiesel blend.

I had a client with a condensing oil furnace and it was a disaster. Horrible P.O.S. and the install was absolutely terrible so they were suing to have it replaced and a different solution put in.

Based on what I've seen, I think oil condensing systems are a mistake for the U.S. market. Service people are few and far between. If I had any option for a combustion system, I'd go natural gas and if that wasn't available, go with propane. These systems are commonplace and clean burning these days.

Anyway, don't want to get too far afield of the thread, so I'll leave it at that.

-Ted

Please keep on the topic. My furnace is standard 80%. I am trying to compare my current solution to a geo solution.

 

Based on replies from others in regards to efficiency of geo (adjusting the COP to 3) I need to update my comparison.

 

For 1500 gallons of oil I paid last winter $3,750 ($2.50 a gallon).

 

To generate the same BTU with geo I would need 46320 kwh considering I only extract BTU 105404 from a gallon of oil.

 

When I factor the COP of 3 I still the need 15440 kwh which at 17c a kwh is $2620. Now NH gives a 20% discount for heating so it is $2096. However to get the discount I need to remove oil backup from the house.

 

Looking at the numbers without a discount from PSNH there is only $1130 savings a year. With the discount it is $1654.

 

Considering the installation is $12,000 per for drilling and over $20,000-$22,000 (no duct work needed) for the pump and installation then even with a tax break I am looking at $22,400-$23,800. It would take 13.5 – 14.5 years with PSNH electricity discount. Without the discount it would take up to 20 years. None of this includes capital cost or lost investment opportunity cost which is at least $5,000.

 

I can’t see this as a good investment. I may have to replace parts of the system before the system pays for itself. I don’t get why these geo pumps and installation cost so much (over $20,000) not including the drilling. This is crazy. They are made in a factory like cars. They are not worth so much as a car even a $20,000 car.

 

In regards to having oil as a backup if you live in NH and the power goes down for a week (last year) I connect my generator to the furnace and I have heat in the house plus the generator provides enough power for cooking and everything else.

 

As you can see unless someone pokes a hole in my calculations at these costs geo is a bad idea at least until cost of installation is comparable with traditional systems or oil costs way more than it does today more like $3.20 to pay for the system in 10 years.

Posted By Andrzej on 09 May 2010 01:59 PM
None of this includes capital cost or lost investment opportunity cost which is at least $5,000.

Investment "opportunity cost" is anyone's guess. On Friday, the S&P 500 closed at 1110.88,
down 23% over the last decade (or, adjusted for inflation, down over 50%!). Some opportunity!

You're also neglecting the effect of a geo capital investment on future property value. Yeah,
difficult to assign a number -- but not nearly as ephemeral as "investment opportunity cost."

...you pay for what you get,

Looby

I haven't seen a clear explanation for the large cost difference (excluding the geo loop) between geothermal HP installations and similar air source heat pumps. It is certainly slowing adoption.

x

Andrzej,
How much work (in dollars) is your current furnace likely to need in the next 20 years? Will it need replacing (if so, I'd figure ROI based on incremental system cost/annual savings)? Are you factoring this into your calculations?
You may want to do some research on geothermal longevity.
When units need replacing, loops may be able to be reused, saving on overall replacement cost.
How many quotes from installers have you received? Did you get quotes from different installers that sell units from the same manufacturer?  How many drilling quotes have you received?
I agree with Looby on opportunity cost. I'd bet on utility cost increases outpacing any form of guaranteed interest investment (like CD's, etc.)
Depending on your generator size, a geothermal system with a soft start may work.
What do you think oil will cost in 10-20 years? How are you factoring future oil prices into your calculation?
Cars depreciate. Geothermal systems may pay back within their typical life span. Which is the better investment?

Installing geo is not a capital investment, Looby. It is a capital expenditure, the difference being that mechanical systems depreciate annually until they fail and require replacement. Nor should you treat your home as an investment rather than as a place to live. If buyers had been clearer on that point over the last 10 years, real estate would not be in its present sorry condition.
Typically you'd use a life cycle cost analysis to evaluate a capital expenditure, which would embrace such factors as expected lifespan, annual maintenance costs and what the money could earn in a safe investment such as Treasury bills. This risk free rate of return is minisicule at the moment, but you'd still want to use a historical rate of 5 percent or so on the general principle that free lunches don't last. What's more, in Andrzej's situation, I'd calculate payback without utility incentives because there is no assurance that they'll be around in 2020 either.
Adjusted for inflation, oil was more expensive in 1980 than it was in 2008, and there was plenty of room for downward fluctuations in the following years. In fact, both peaks had the predictable result: over the long run prices cannot outstrip consumers' ability to pay.
You must be ignoring dividends in your S&P 500 figures because I show it down 9 percent in the last decade in nominal terms, or 29 percent adjusted for inflation. Over 20 years, it is up 386 percent, or 184 percent after inflation.

As you guys noticed I did not include capital cost at all. I just brought it up but never included it in.

My current oil system is 5 years old if it were 10-15 years old it would be much simpler calculation.

I don't know what the geo system would last. I have a high end GE refrigerator and it broke down less than 5 years after I purchased it new. Good I had an extended warranty.

 

If a geo system breaks down it will probably be more expensive to fix than oil based system unless heat exchanger goes bad. Oil technology is old and parts are cheap. There are also plenty of technicians versed in the technology so service price is not an issue. With geo the number of people to go to is limited and prices much higher.

 

I would like to install the geo. I am still not giving up, but the decision is not that easy considering the real world math.

 

If I had a crystal ball to tell me how the prices of oil are going to behave it would be much easier to decide.

 

The price of oil today is not based on demand and supply but speculation of companies like Goldman and Sachs. Any given investment company in U.S. can accumulate as much futures as they want affecting oil prices. This is happening. There is a huge push now to limit investment companies for holding oil futures. If this happens price of oil is going to go down. Everyone says it is a different economy now and oil is never going to be cheaper. The same BS we heard with regards to Real Estate and you can see what happened. The truth is no one knows the chances of oil costing $100 a barrel are as good as the chances of oil costing $60 a barrel. Investing in geo is as much speculation as buying oil futures. I can make money on that if I know the oil price will go up. So, we can only go by what it is today.

 

Anyway I am still seriously considering geo system and I am not trying to bash it. I am simply making a statement that geo system installation is like investment in oil future. If you are right then you win otherwise it will be a bad investment. In addition please remember electricity is coming out of fossil fuels so when oil goes up electricity price will also go up.

 

Lots of variables here…

 

Thank you everyone for posting. Having different points of view is very helpful.

I will be defintely getting more estimates.

Posted By Andrzej on 09 May 2010 09:42 PM

I will be defintely getting more estimates.

I would let them know that you need them to sharpen their pencil if they want the job, but that's me.    Best wishes.

I brought up condensing oil furnaces only because OP mentioned 95% efficient oil furnaces - only way to get there is via condensing water vapor out of flue gas. Subsequent post suggests I'm correct to be leery of such technology.

I'm curious to know why a geo unit, separate from the loop and ductwork, costs $20k installed. That's either way out of line or I don't know the whole story

A 3200 SF house in NH using 1500 gal fuel oil might benefit from some envelope improvements. Reducing load might pay back faster than changing means of meeting load. Given the high (17 cent) kwh rate, geo may be a harder sell in this case than it is in areas with kwh rates at national average of 11 cents.

Given 17 cent power I'd look hard at propane since it can meet other large heat loads (dryer, water heater), is nifty to have available for gas grill and is an excellent fuel for standby generator. In short, Propane is much more versatile than fuel oil. In addition, the learning curve for 95% efficient condensing propane furnaces is behind us - that technology is now mainstream.

Posted By toddm on 09 May 2010 09:31 PM
You must be ignoring dividends in your S&P 500 figures because I show it
down 9 percent in the last decade in nominal terms ...

And you're ignoring the index scorekeepers' slight-of-hand in quietly
replacing corporations that go belly-up. It can greatly enhance one's
batting average if strikeouts are expunged from the record, huh?

Re capital investment: Yep, a heat pump wears out, but the loop field
and ductwork will likely outlive me by many years. In the meantime, the
house is worth considerably more with geo. You may choose whatever
nomenclature you like, but it would be foolish to pretend that a geo
retrofit adds no value.

BTW, thanks for the investment tips, but despite today's "sorry condition"
in the real estate market, my home has been a far better investment than
any major index fund over the past ten years -- or twenty, for that matter.

Apparently you need some investment help, Looby. The S&P 500 is capitalization weighted, meaning that the proportion of the index given over to a particular stock is equal to the total value of its stock in market as a whole. Practically speaking, that means a 10-cent change in Exxon's price has more impact than wiping out the bottom 10 stocks in the index altogether. Failing companies have an impact on the way down, obviously, but the index starts selling on Day One, while investors who don't use formulas have a tendency to double and redouble their mistakes.

Historically, home appreciation runs at or 3 or 4 percent a year after inflation, while the stock market appreciation runs 6 to 7 percent. When markets get ahead of themselves as stocks did in the '90s and real estate in the '00s, you can expect an equally long and deep period of underperformance, also known as reversion to the mean.

Yes, geo will have some residual value even if the heat pump doesn't work, although you'll need a very good real estate agent to get that point across. My car has residual value, too, but it isn't an investment either. It is an expense.

Wow... I am learning more about $$$$$ than I have in years.... Keep up the chatter all... I love the info...

I too am real leary of Geo.... around here... the earth at my house in my cellar drops to 35 degrees.... ok... the highest... 47 degrees.

Next point.... I don NOT use air conditioning. What I was told... is... the summer cycle aids tremedously in figuring a years worth of expenditure on energy for a home here in Upstate NY.

Next point... the price of install is insane. The pieces and parts.... someone who does this for a living should post a complete wholesale detailed list of costs including labor hours.

Next point... Here... 17 cents/KW.... $18 a month just to get a bill... That's just bulls**t to me. I am working on going off grid.... Solar panels are dropping in price tremendously and will continue to... oversupply of production is just about here in that market. And Lowes selling will get the price dropping too.

COPs... rediculous numbers "MARKETING AT IT'S FINEST!!!" Anyone who can prove to me with documented history... real data... in my area of a COP above 2 taking all costs into consideration... bring it on. I am all ears and eyes.

As you can telll I am a huge fan of bashing.... the "pink insulation" business... of snake oil salesmanship.... yaa... buy this stuff... why?... cause it's pink!... and don't yaa like the pink panther???????????????

have a nice day
aj

Posted By toddm on 10 May 2010 08:07 AM
Apparently you need some investment help, Looby.

No doubt. OTOH, apparently you could use some help with statistics.

...Failing companies have an impact on the way down ...

True, a failing company affects the index on the way down, but only
until it is removed from the index and replaced with a non-failing
company. The index never gets the joy of using Enron certificates
as T.P. ...but someone does. Thus, even a very broad market index
can systematically outperform the market. Google: "survivor bias."

My car has residual value, too, but it isn't an investment either.
It is an expense.

Unlike your Ferrari, my WaterFurnace was cashflow positive from Day #1.

Question:
If I spend capital to reduce a perpetually recurring expenditure, (i.e., heat),
do I count that as a "return on investment," or just a "smaller expense?"

Answer:
WHO CARES!!!

What you are contemplating on spending on a geothermal system may get you quite a bit on building envelope upgrades.
 If you are using 1500 gallons of oil at 80% efficiency 1500*135,000*0.8 = 162 million btu’s per year. divide this by 3200 ft^2 = 50,625 btu/ft^2 year.
If we use a ballpark value of 7500 Heating degree days for NH, this works out to 6.75 btu/ft^2 /heating degree day. That is not terrible, but not good either. Your house is around the national average for houses in a heating climate.  This means there is probably room for improvement without spending a fortune.

 I would always  want to lower the amount of BTU's I need before I tried to get the BTU's cheaper.
 I think a very well built and insulated house should be down under 1.5 btu/ft^2HDD
 

numbers from NERL for houses in heating dominated climates  in percentage of houses at each energy usage level
> 5 btu ft^2  12%
5-10 btu ft^2 39%
10-15 btu ft^2 23%
15-25 btu ft^2 14% 
>25 btu ft^2 10%

Posted By eric anderson on 10 May 2010 02:44 PM

 I would always  want to lower the amount of BTU's I need before I tried to get the BTU's cheaper. 

It's the word "always" that I don't necessarily agree with.  If a homeowner's current HVAC system is on the way out (this is not the case with the OP), choosing geothermal may be a good first choice if funds are not available for both a new system and new/upgraded insulation, windows and doors.  Of course, gaping holes are a different matter.  In a perfect world, I would agree with your reasoning.