"Cash flow positive" is itself a red herring. Heat pumps require service and wear out, so you must account for annual upkeep and expected lifespan in your analysis. The latter is critical if a fast-talking geo salesman is telling you to roll the cost into a 30-year mortgage and enjoy net savings from Day One. If they cart a dead heat pump out of your house in year 20, you will be paying for its replacement plus roughly half of the initial geo install. Some deal.

A life cycle cost analysis is the only appropriate evaluation for geo: You weigh energy savings against initial cost plus annual upkeep plus interest plus depreciation (what you must set aside each year for its eventual replacement).

Since a car analogy is required apparently on this thread, a life cycle analysis gives a very different look at that '89 beater. It's life is certain to be short and the annual upkeep figure cannot be ignored. Well, in 2031, a geo system installed this year will be the functional equivalent of that '89 beater.

Yes, unlike ASHPs or fossil fuel burners, GSHPs eventually wear out.

BTW, how do does one account for quiet, eco-friendly, odor-free,
combustion-free, etc. in a "life cycle cost analysis?" My HP-12C
has a keys for NPV and % -- but none for decibels, CO2, or smell.

"A cynic knows the cost of everything, but the value of nothing."
- Oscar Wilde

Alas, that would only be combustion free, odorless, quiet and eco-friendly on the customer side of the electric grid.

Q: How can you tell when a salesman is lying to you? A: His lips are moving. -- Anon.

Hydro electric??

Tidal power electric??

Wind turbines???

Eric

Solar?
Hamster on wheel?  Scratch that.  Methane by product would result in global warming.

Posted By toddm on 25 Sep 2010 05:02 PM
Alas, that would only be combustion free, odorless, quiet and eco-friendly on the customer side of the electric grid.

OK, so how does "the only appropriate evaluation for geo" handle the other side
of the electric grid ...plus the Gulf of Mexico ...and fracking fluids PA water wells?

...your cell must have some really cool apps, huh?

Looby

With any stretch of imagination, why don't we just throw in a projection on the cost of oil, gas, and electricity over the 30 yrs your in the house with geothermal running on electric that only goes up an avg of 2.5%/yr vs ??? for oil. If you are heating with oil/propane in 30 yrs, you will need a 2nd mortgage just for comfort, I think. Maybe someone can provide the projected prices.

Just saying that if geo is a great deal you should be able to sell it with facts instead of BS cash flow arguments or emotional appeals or tax incentives.

Sorry, gonegeo, no one can predict prices, particularly of oil and its geopolitical baggage. But roughly half of the economist community worry most about deflation -- falling prices. As the housing bust demonstrates (and the oil shocks of '73 and '79) you can't raise prices faster than your customers' ability to pay. With 10 percent unemployment, that ability is just about zip.

For the record the rest of the economists worry most about mounting govt debt and the prospect of defaults (Greece) and interest rate shocks. While there is no way to know who's right and who's wrong, a prudent person would avoid debt, and particularly variable rate debt. In deflationary periods, you repay debt with dollars that have more buying power and are harder to come by.

I don't have many apps on my phone, Looby, but it's a great deal. 300 minutes/mo, unlimited internet and texting, no contract. $25/mo. (Virgin Mobile.) If you can't find bargains today, you aren't trying. Which is why, I think, people look at geo and ask what's wrong with this picture.

Posted By toddm on 26 Sep 2010 08:53 AM
300 minutes/mo, unlimited internet and texting, no contract. $25/mo. (Virgin Mobile.)

Sorry to hear that you hooked up with VirginMobileUSA after
all the good deals were discontinued. We bought in early, so
our rate is $15 every 90 days. That's cheap enough to keep a
crappy entry-level phone in each car -- just for emergencies.

...if you can't do better than $25/month, you aren't trying,

Looby

If it's just for 911 type emergencies, you don't need any service at all - $0/mo.

Hello? ...hello? ...911 operator? ...please call my wife
and tell her that I have a flat tire -- so, she'll have to
pick up the cat at the vet, before closing time. Thanks.

Posted By toddm on 25 Sep 2010 09:45 AM
"Cash flow positive" is itself a red herring. Heat pumps require service and wear out, so you must account for annual upkeep and expected lifespan in your analysis. The latter is critical if a fast-talking geo salesman is telling you to roll the cost into a 30-year mortgage and enjoy net savings from Day One. If they cart a dead heat pump out of your house in year 20, you will be paying for its replacement plus roughly half of the initial geo install. Some deal.

A life cycle cost analysis is the only appropriate evaluation for geo: You weigh energy savings against initial cost plus annual upkeep plus interest plus depreciation (what you must set aside each year for its eventual replacement).

Since a car analogy is required apparently on this thread, a life cycle analysis gives a very different look at that '89 beater. It's life is certain to be short and the annual upkeep figure cannot be ignored. Well, in 2031, a geo system installed this year will be the functional equivalent of that '89 beater.

We get that you are disillusioned with geo, but to use your words, if you'd like to pretend to take the high road, you should employ facts instead of BS arguments. 
("Just saying that if geo is a great deal you should be able to sell it with facts instead of BS cash flow arguments or emotional appeals or tax incentives.")
How about a real world example for you.
An existing home (let's not burden the heat pump with the cost of a duct system) I looked at was to recieve a new furnace and air or heat pump. Tax credits are necessarily part of the conversation because they are available for either system.
So a tax credit qualifying furnace and airconditioner will cost about $6,000 after current credits and rebates, the geo system after tax credits about $12,600.
The difference in cost $6,600. The difference in operating cost (all heating, cooling and hot water) $2,070/yr with 11 cent kwh and $1.99 propane. By the way with no credits or rebates, the difference in purchase price is about $10,000.
Now what baggage shall I saddle the geo system with to make this a bad idea?
Maintenance cost? Ok, don't forget that furnaces require maintenance as well; how about geo is $500/yr to propane's $100 (that would be high for geo and low for gas). Replacement? Let's see in 20 years all may need to be replaced, so the next geo won't need electric infrastructure or ground loops so at todays rates, difference between high end furnace and AC and a geo heat pump is about $2,000 (or another $100 year).
Let's add that up....
non-tax-credit price difference between geo and furnace/AC package is $10,000. Annual operating cost savings is $1,570/yr after deducted $500/yr for maint. and replacement cost.
Still seems okay......what other baggage did you want to put on this? Loans? Ok, you suppose someone who can't write a check for $18,000 has $8,000 lying around? We'll say $500/yr extra for the additional money borrowed....now we save $1,070/yr.
What about braces? My child could need some ortho work and I won't have the equity in my home.......What if the moon really is made of cheese?......

Is $1,070/yr not a good return on a $10,000 investment? How about a $6,600 investment? If we get the furnace and air instead, what do we get for our $8,000?

It is true, that ROI calcs are similar to statistics in that the user can be selective in the numbers employed to present an argument. When the numbers are this good, however, I don't mind a little extra scrutiny.

I hope you find peace in propane or whatever your fuel of choice.
Good Luck,
Joe

Some precision in language, please. If it doesn't earn income or appreciate in value, it is not an investment. You can look it up. And it's annual savings rather than ROI, there being no "I" involved. You may not want to call it what it is -- an expense -- but when you don't you'll hear from the sales spiel police.

That said, your numbers are in fact a lifecycle cost analysis. Almost. You forgot to amortize the cost of the equipment over 20 years. Paying the extra $6,600 for geo would reduce annual savings from $1070 to $740. This assumes that you match the term of the loan to the life of the equipment. Otherwise the interest clock keeps running in a 30-year mortgage -- even after the HVAC equipment stops -- on a balance of about $9,000 for geo vs $4000 for furnace and AC. (One suspects that very few homeowners apply their IRS refunds to the mortgage.)

Even so, $740 a year is argument enough for me. If I lived in a 1910 farm house I am sure I'd choose geo over propane after I sealed and insulated it as well as I could.

But mine is new construction, and so small and tight that geo wouldn't make sense. Dunno how this makes me disgruntled and disillusioned.

Looby, I need that mobile Internet. Weather.com's radar maps are the size of a postage stamp on a cell display but they tell me when to pack up and cover up.

Posted By toddm on 26 Sep 2010 03:08 PM
Some precision in language, please.

But mine is new construction, and so small and tight that geo wouldn't make sense.

Where is your manual J calculation, closest major city, analysis of geo compared to your current system, etc.?  I could have taken a wild guess that a geothermal system wouldn't have worked for us, but I would have been mistaken.

P.S.  Like most of us here, I don't live in a 1910 farm house.

I live in a pre-1910 farmhouse....

But that is not my point. I am pro geo all the way hardcore. If you take away the emotion, and I hate projected, pro rated, amoritorised math you are left with a choice. The choice to go geo or not. If you choose not, fair enough. If you choose to geo we can help.
The discussions about anything else are just discussions. What I have learned over the past 45 years is that I could prolly live just fine in about 1,000 square feet, super insulated and heated with a hot plate. Everything else.... just a choice.
Eric

Posted By toddm on 26 Sep 2010 03:08 PM
Some precision in language, please. If it doesn't earn income or appreciate in value, it is not an investment. You can look it up. And it's annual savings rather than ROI, there being no "I" involved. You may not want to call it what it is -- an expense -- but when you don't you'll hear from the sales spiel police.

That said, your numbers are in fact a lifecycle cost analysis. Almost. You forgot to amortize the cost of the equipment over 20 years. Paying the extra $6,600 for geo would reduce annual savings from $1070 to $740. This assumes that you match the term of the loan to the life of the equipment. Otherwise the interest clock keeps running in a 30-year mortgage -- even after the HVAC equipment stops -- on a balance of about $9,000 for geo vs $4000 for furnace and AC. (One suspects that very few homeowners apply their IRS refunds to the mortgage.)

Even so, $740 a year is argument enough for me. If I lived in a 1910 farm house I am sure I'd choose geo over propane after I sealed and insulated it as well as I could.

But mine is new construction, and so small and tight that geo wouldn't make sense. Dunno how this makes me disgruntled and disillusioned.

Ok Mr. Percision, got me there it's an expense not an investment if I look it up. What do your other EXPENSES save you each year.
Since percision is your thing by the way, when did I suggest my example was a 110 year old house? The 100 + year old house I evaluated recently would require a 4 ton for similar square feet but earn....I mean save more.
Why do you also continue to suggest that these things are paid for over 30 years? Most of my customers pay cash or otherwise. Only a handful are taking mortgages.
....and if they don't apply tax credits to the loan is geo now responsible for that? ....kinda back to the orthodondist bill.
If you are not disgruntled or disillusioned, then you have an awfully big axe to grind for someone without geo experience.
Back to the 30 year thing, if you built your house and financed in the heating system, how much did the propane guzzler save you?...I mean return....earn...nope....or whatever.
Buy whatever you like. But don't suggest our numbers don't make sense based on your flawed assumptions.
j

Expenses don't save anything. You save money by minimizing expenses, and I am sure Joe has realized by now that what people would love to minimize about geo is that $18,000 price tag. Homeowners are after the same thing whether they buy geo, or a propane furnace or Eric's hot plate. They want comfort at the least cost. (OK, my neighbor with the bumper sticker "What's our oil doing under their soil?" has other objectives. Bless him; it's his money.)

Yes, Joe offers an example where geo saves money compared to propane and AC, but HVAC isn't the only answer and Joe's example doesn't seem overly typical. Take a look at this DOE tool: http://www1.eere.energy.gov/buildings/challenge/escale.html This calculator assumes that a typical existing home performs 30 percent worse than new houses built to energy code. Moving them to 20 percent better would save $898 a year. This job likely would require replacing windows so it wouldn't be cheap, but it has many inherent advantages over geo such as far fewer moving parts.

Joe says that the raw savings in his example is $2,070, or twice as good. But is it typical? Click on zero energy use on the calculator. What ho! If we eliminate or offset all of the energy expenses in typical homes, the savings are only $2,335 for existing and $1,796 for new construction? And non-heating or -cooling uses like appliances or lighting account for 40 percent of consumption? Yes, indeed. The DOE estimates that the average household energy budget is $2,200. Here is a chart from 2005, when annual expense was $1,810: http://www.eia.doe.gov/emeu/recs/recs2005/c&e/summary/pdf/tableus15.pdf

Your results will vary obviously. You could pay a lot more iif you live in International Falls, MN, or in a mcmansion -- or a 1910 farm house. But to jump to geo without considering the possibility that your house is an energy hog in bad need of weatherization is unwise in the kindest description, particularly in states that subsidize energy audits and fix easy stuff on the spot. Here is a guy who spent $75 and got perhaps $900 in annual savings. http://www.slate.com/id/2245899/ My house, now under construction, should do much better than the typical new home in the DOE calculator. At a modest 1,600 square feet and designed for passive solar, its annual energy cost would be $1,400 using electric resistance backup according to UCLA's energy modeling software. I'll use a woodstove boiler instead, and my target is $600/year.

I am not anti-geo. Geo would be on the top of my list if I were building a 4,000 square-foot house because its resale would hinge on its energy efficiency.

I am anti-snake oil. The most persuasive cash flow argument for geo, is to compare how much it adds to your monthly mortgage payment with your anticipated energy savings. So let's do that math. We'll need to amortize the entire $10,000 difference because the salesman likely forgot to say that that the tax-adjusted price won't apply in 100 percent financing unless the homeowner mails the IRS check to the lender. That whacks the annual savings in Joe's example to $570. The extra interest over 30 years takes it to $520. Still respectable but somewhat different than "$12,600 would add $67 to you monthly mortgage payment but save you $172 on energy. " Eh?

No, Joe didn't make that claim. From his posts, I would conclude that Joe is an honest and capable fellow who wants to help people. But when a geo guy talks cash flow positive you might think of a variation on my neighbor's bumper sticker. What's your hand doing in my pocket?

As I recall, when oil went to $4/gal, wood prices went through the roof also. How do you pay to feed that wood boiler while a geo guy is just sitting back and enjoying not even touching the thermostat. No setback, nothing... That alone is worth something. Most people are too busy to worry about feeding pellets, wood, coal etc..setting back thermostats or programming the house to do something that effects comfort negatively. If you get the wood for free, it might be worth the headaches. I've done this before for 2 years, never again. Oh, and those windows, good luck on the payback for what they will save you over the cost... A man hears what a man wants to hear and disregards the rest.... Snake oil... hmmmm maybe we can sell you some to burn when your local delivery is costing too much. I wish you would say something that would convince me to stay with my oil gluttonous boiler but I haven't heard it yet.

Homeowners don't have to guess about windows, gonegeo. Do a blower door test. If the wind whistles through them, payback will be very quick indeed. Or fit storms and put some low-e film on those in direct sunlight. Payback on the most important weatherization task, stopping air infiltration, can measured in weeks. I bought two cases of 60-year caulk at a recent auction for $40.

Firewood falls from the sky where I am building. It does not cut and stack itself as you note, but this is backup heat. The UCLA software predicts that my passive house in So central pa will stay between 55 and 85 with no HVAC. Thus the small bills even with resistance coils. Passive solar is as simple as grouping windows to face south, designing overhangs to shade them in the summer, putting some thermal mass in the house to buffer and store heat and installing a distribution system if necessary. My construction costs are less than conventional.

That said, you need an appropriate site and climate and some, maybe a lot of tolerance, for temperature variations, glare, color fading and active management of the house. Most importantly, the wife has to sign off on no area rugs over the ceramic tile (set on a concrete slab.)

Finally, I am not trying to convince you of anything. I've written a couple of times that geo at current pricing is an excellent ace in the hole. You played it. You love it. Good for you. I am going a different direction, but I acknowledge that passive solar isn't for everyone. Now it is your turn. Is geo for everyone?

No system is the perfect fit for everyone. However, for the majority of Americans who would not tolerate swings in their comfort level in their homes geo is probably overall the best choice. Where open loop is feasible and homes require domestic water well geo shines it's beauty!!!! I would agree totally on energy wise construction and I am sure fellow geo installers would love putting in a 1.5-3.0 ton unit where normal construction would require 4.5-6 tons. Ah to live in nirvana in a close to perfect world...