".. What are the potential Costumers told by joe. ami, concerning > actual < > operational $savings < what it would save them?" 
Every client that I percieve to be serious recieves a manual j load calc for their home and an operating cost calculation print out which tells them what they might save. Included is a bin report which tells them how long out of each hour the system will run based on outdoor temperatures so they have a certain level of understanding the way the system operates as well as an ear toward proper operation to warn us of trouble. ....based on a 20 year weather average-mileage may vary....

To avoid the next question a serious client does not, for instance, email me prints with little prior introduction and ask for price + design info via email at no charge. Someone, however that invites me to their home to meet them and discuss my design will most likely recieve all that info at no charge.
What's more the info section of my web site allows folks that fill it in to have a ball park op and install cost emailed to them (based on comp houses in our archives) with no obligation. It is intended to indentify serious shoppers in my area (above mentioned info takes no less than 3 hours to prepare and deliver) but I generally respond to folks all over the country when asked too, though I can not predict install costs in other areas, I can still predict op costs.
Nowhere in this information will you see me boast "35%-70% savings...." as I treat each home and customer individually and let the op cost calcs speak for themselves.

It begs the question, how many Years does it take..............?."  I can only answer for mid MI. Generally speaking, with tax credits <10 years in an existing home vs nat gas, <7 years in an new build home with nat gas and <5 years against propane or fuel oil.
 By the way, geo does not work in every situation nor do the numbers make sense for everybody. More than once on this forum and in the analogue world I have told folks geo was not a good fit for their needs.
joe

I have seen this calculation and info from Joe -  It was impressive... Sold me pretty quick. The detail shows that he isn't blowing smoke and actually has an idea of what he is talking about - The figures are pretty clear and he is able to explain the various calculations he uses. For those of you who are looking for a way to get more clients/sell more installations, take note of this^. Being friendly and responding to customer questions quickly helps too

I just did a analysis for a 2500 new built, 57kbtu heatloss for Buffalo New York area. My costs area bit less favorable as Joe’s, since we have higher electricity costs in New York State.
They are based on the following utility costs, kind of the average prices we have seen last year:

0.14 /kwh
1.35 /term natural gas
2.55 /gallon propane
2.88 /heating oil



The calculations estimate annual heating costs of $1110 (geo) compared to $3,319 of propane gas, assuming a 91% efficient furnace, and $ 1669 for natural gas.
In addition we would expect hot water heating costs with a buffer tank of $471 (geo/electric), $337 geo/natural gas, compared to $972 with a propane gas hot water tank only, $942 with electric tank, $472 with natural gas. A/C is $49 with geo and $163 with a 13 SEER system.

Air-conditioning costs would be $49 annually versus $163 of a conventional 13 SEER system.

Total system annual running costs at today’s prices:

Geo = $1,496.00 (geo buffer tank/gas finishing)
Natural Gas = $2,302.00 (gas finishing) ($806 more)
Propane = $4,424.00 (electric tank) ($2.928)

Conventional system costs for heating, air-conditioning, dehumidification and domestic hot water equipment, usually run about $ 10,000.00

Given the 4 ton geo system costs of roughly $24K turnkey with 2 stage units, horizontal loopfield, 10 year warranty and two tank hot water, minus 30% - federal tax credits= $16,800 out of pocket costs. So the increased upfront costs over a conventional system are roughly about $6,800. Straightforward payback is 2-3 years vs propane (I did not do oil but it is similar to propane) and 8-9 versus natural gas. So propane is a slam dunk, but even if you put the $6800 in a mortgage at 6%, you end up paying $408 for it annually, versus $806 savings annually.
But this is only half the story. Apart from the obvious (no fossil fuel, no CO, higher comfort, higher life expectancy, less vulnerable to price fluctuations), there is another issue, that is often overlooked. Namely that one will not pay as much as we pay today for energy, but significantly more.
The only way we can estimate the future is to take the increase from the past and project it forward.

So you look at lets say 1994-2008 period, propane went up from $1.26/gallon up to $3.14/gallon, up 149%. Natural gas went up from $0.87 in 1994 to $1.67 in 2008, up 91%. Electricity (geo operating costs) went from 13.5 cents/kwh to 18.3 cents/kwh, only a 35% increase.

So if you project the future savings over the next 30 years (which is the expected life expectancy of the heatpump, assuming that erything increases in the same fashion as it did in the last 15 years.
Giving the current savings of $800 annually over natural gas, the projections show heating costs of $150K for natural gas and $57K for geo. So a saving of $93,000 over the next 30 years using geothermal vs natural gas ($235.000 vs peropane), if natural gas goes up in the same fashion in the next 30 years as it did in the last 15 years. I think it will be more, but that is another story. And all that for an initial higher upfront cost of $6.800 out of pocket.

Again, those are just estimates, don’t get crazy over the if(s) and but(s), but something to consider.


The annual prices can be found at the NYSEDA website.

http://www.nyserda.org/energy_information/AnnualPrices31ab.pdf

Another thing to consider that has nothing to do with energy costs is the comfort factor. Geothermal systems do not have the kind of temperature fluctuations many systems have in an effort to reduce heating or cooling costs. It's generally more efficient to leave the thermostat alone and let the system run, instead of turning it down every night. Also it's a gradual heating method, there's no blast of hot air when the system switches on, so it dries out the air a lot less than say a Gas system would.   

@docjenser

I realize they are just estimates, but this one doesn't pass the sniff test "the projections show heating costs of $150K for natural gas and $57K for geo" Assuming a heating period of 5 months a year, that would be a cost of $1000 per month every (heating) month for the next 30 yrs. ($150,000/30 yrs = $5,000/yr) Heating costs currently for natural gas seem to be around $150/month give or take a little bit. Because current prices are so low, compared to your estimated 30 yr average, at the end of the 30 yrs, you are estimating that monthly costs would be closer to $2,000 rather than the average $1,000. Does this make sense to anyone else?

At least on the natural gas front, I know they've just locked up a bunch of leases in Arkansas that they say the shale will produce more than the well they've been pumping in Texas for the past 20 yrs. I don't presume to know that prices will level out, (as supply can easily be controlled...just by moderating the flow rates...and therefore they can artificially raise and lower prices based on demand), but the idea of an actual shortage (rather than shortages created by not pumping at full capacity) over the next 30 yrs seems unlikely.

Again, your estimates don't pass the sniff test.

Not everyone has a large enough tax load to take advantage of the tax credit, so you can't automatically deduct it from the system cost.

Given a well insulated house with low air infiltration, that is a very expensive heating system for a light heating requirement - even in my cold Finger Lakes region of NY. Around here geothermal only makes sense if you use air conditioning, something not really required in this climate, though some folks love it.

-Rosalinda

Posted By Rosalinda on 22 Jan 2011 11:27 PM
Not everyone has a large enough tax load to take advantage of the tax credit, so you can't automatically deduct it from the system cost.

A homeowner needs to look at their tax situation to determine what benefit the credit may have on them, but keep in mind the credit can be carried forward to future tax years.  That said, I haven't seen from an official source (IRS) how many years the credit will be allowed to carry forward.

Posted By Rosalinda on 22 Jan 2011 11:27 PM
Not everyone has a large enough tax load to take advantage of the tax credit, so you can't automatically deduct it from the system cost.
-Rosalinda

We mentioned the system is not for every application I guess I was remiss in not mentioning tax credits only work when you have a tax burden. You have several years to claim all or part of it, but it is true, if you don't pay taxes, you can't deduct a tax credit.
Once in the last 15 years have I had a customer that could afford geo that didn't pay/owe taxes. However a withdraw from her savings to buy the system created a tax bill.
joe

In docjenser's example, the homebuyer's out of pocket expense is $24,000 rather than $16,800 unless the energy credits work differently in NY state. (i.e. you pay for the install during the tax year; along about late Jan of the following year you claim a credit on your return and get the money a month or so later.) Now docjenser may say that he meant "final cost" and misspoke, but there is no "you know what I meant" exemption in the NY fair trade and deceptive practices act.

As I have pointed out before, final cost and financed amount are not identical unless the homeowner uses his tax refund to pay down his loan. If the buyer rolled the entire $24k into a 30 yr mortgage at 6 percent the annual vig would be $1728, or roughly $1k more than the annual hit for a $10k conventional HVAC system. As I have also noted, a comparison of financed geo based on monthly or annual cash flow is misleading on its face because the homebuyer will still owe about $13,000 of the $24,000 in 2031 when the geo system's mechanics is on its last legs. (Repaying $6800 at 6 percent over 30 years would cost $480 a year rather than docjenser's $408.)

Finally, to claim that electric rate hikes will continue on a modest path -- and that geo involves no CO -- begs the question of what happens to the seven coal-fired generating stations in upstate NY once the feds and the state apply a true price tag to the pollutants they emit.

Many examples of how numbers can be twisted to the user's advantage.
Since most of my customers don't finance their systems, interest payments are never within my presentation.
Nor is lost buying power (or savings) of the extra money required to buy propane or fuel oil.
We are all presumably grown-ups here and I do not make it a secret that I am a geo advocate/seller/installer that also sells furnaces as I do not think geo is a perfect fit in every application.

The flip side is; some come here with an agenda against geo or a desire to "educate" folks on the misuse of terms such as ROI and invariably criticize folks who do their best to simplify the math and offer their best, honest, free advice.
It again is interesting to me that the math employed against Doc's, for instance, ignores the interest value of extra dollars spent on fossil if invested in the mortgage or an IRA etc. It also simultaneously discounts the impact of tax credit because consumers "may" not invest it or repay principle with it. The math above obviously presumes the furnace will last 30 years even though the geo wont since fossil realizes no penalty for failing inside of the mortgage life (in that equation). Many folks I know finance for 15 years. Most (post 1995) furnaces don't last that long but geo's often do.
You want to fight incomplete equations with incomplete equations? Really?

Financing most any appliance in a new home for thirty years is a horrible idea, if you think about it, as you will likely be on your second of anything and third of somethings. Many roofs and siding systems and windows and doors et al may not have a 30 year lifespans either, so with this mind set you could probably spend your time better as an advocate of 15 year mortgages than opponent of geo systems.
Then there is the fact that many more folks spend 5 or ten years in a home than 30 so itemized interest figures are never realized.
How 'bout the fact that people pay less for houses with propane. Shall we speculate value added to the home for geo and weigh it in to the equation?


Again at $2.50 to $3.00 gallon propane or fuel oil my customers may spend $3,000 less on all heating/cooling and hot water with geo. That is not a 30 year pay back but if my customers choose to finance it over 30, I'm sure I can use Todd's math (with a few appropriate corrections) and make a $20,000 geo system pay.

The end point is when "grown-ups" shop it is up to them to educate themselves on the best bang for their buck. Geo is seldom a horrible fit though the math sometimes doesn't add up short term. Propane or fuel oil however can and has either run some of my neighbors out of their homes or had them living in conditions (in temperatures) that many here would find intolerable (55* day time settings less at night).

Not a lot of the naysayers' math is of interest to those folks when they are comfortable for the firs time in years at 68* and still paying thousands less each year (loan or not).

Joe

Posted By toddm on 23 Jan 2011 10:03 AM
(i.e. you pay for the install during the tax year; along about late Jan of the following
year you claim a credit on your return and get the money a month or so later.)

That's true ONLY if you're a TruePatriot™ who generously provides
interest-free loans to the US Gummit.

A more rational (if unpatriotic) approach would be to immediately
file a new IRS Form W-4 to reduce/eliminate your tax withholding,
as appropriate. In fact, a gummint-hating geobagger could abuse
this approach by filing a new W-4 before making any payments to
his geo contractor(s) -- thus starting to collect the evil, socialist
subsidy months before incurring any out-of-pocket expense.

BTW, home equity lines are currently running about 3.5% APR,
or about 2.5% net of taxes = $50/month interest on a $24k loan.

Tell you what, Joe. You get your colleagues to stop playing games with numbers and language and you won't hear from me again.

It's not abuse to change your W4, Looby. All the IRS requires of taxpayers is to prepay 90 percent of taxes due or 100 percent or more of last year's bill, plus some timing requirements for estimated taxes. But it may be imprudent to make an early grab for the whole amount of the energy credits; woe be to you if you don't have your certificate of occupancy by 12-31. The earlier poster used new construction and a 6 percent 30-year mortgage, so I did as well. (See above.)

Posted By toddm on 23 Jan 2011 04:12 PM
It's not abuse to change your W4, Looby.

In that case, you prolly shouldn't have contradicted docjenser on the
subject of out-of-pocket expense.

"An awkward, unscientific lie is often as ineffectual as the truth."
-- Mark Twain

OK, Looby, you ignore the prudence of whacking your withholding to nothing or near nothing, trusting that your new construction won't go off the rails. How are you on practical?

If you go here http://www.census.gov/compendia/statab/2011/tables/11s0691.pdf you will learn that the median U.S. household income is ... not very much. In fact, roughly half of U.S. tax payers owe nothing or end up money ahead (thanks to the earned income tax credit.) If you rank in the 80 percentile of households, you make about $100.000 a year. With two kids and a 401k to feed, you'd almost owe enough federal tax to take the credit on a $24k geo install in a single year. Almost.

The credits carry over of course, but the Looby W4 Gambit is good for one year only.

"An aphorism is a poor substitute for knowledge" -- me, just now.

Posted By toddm on 23 Jan 2011 07:25 PM
OK, Looby, you ignore the prudence of whacking your withholding to nothing
or near nothing, trusting that your new construction won't go off the rails.

Reading comprehension much?

Posted By toddm on 23 Jan 2011 04:12 PM
Tell you what, Joe. You get your colleagues to stop playing games with numbers and language and you won't hear from me again.

So......if they stop playing games with numbers........?
Neat how you dodged most of my points about the flaws in your equation and continued to criticize others'.

I don't care or not if I hear from you again, but I promise you that if you stop playing games with numbers I'll stop pointing out where.

j

I didn't offer an equation, Joe, so I am somewhat at a loss in addressing perceived flaws in it. But I'll try.

You: "Financing most any appliance in a new home for thirty years is a horrible idea."
Me: Yes, horrible but unavoidable, except in the case of the fellow who urges you to install HVAC that is 2.5 times as expensive and then uses cash flow from 30 year financing to convince you that it is a good idea. (see docjenser post above.)

You: "Then there is the fact that many more folks spend 5 or ten years in a home than 30 so itemized interest figures are never realized."
Me: Or geo savings realized based on $150,000 in natural gas heating expenditures projected over 30 years. (See docjenser post above.)

You: "Shall we speculate value added to the home (at resale) for geo and weigh it in to the equation?"
Me: No. Let's see some real numbers.

You: "Again at $2.50 to $3.00 gallon propane or fuel oil my customers may spend $3,000 less on all heating/cooling and hot water with geo."
Me: Because they live in houses that are very large, very poorly built, occupy a particularly cold spot in Michigan, or a combination of the above. The DOE estimates that the average household in the east north central midwest spent $1123 on heating, cooling and hot water in 2005. While the figure is dated, there is no inflation rate that could make your $3,000 savings seem typical without also producing riots. http://www.eia.doe.gov/emeu/recs/recs2005/c&e/summary/pdf/tableus15.pdf

You: "Not a lot of the naysayers' math is of interest to those folks when they are comfortable for the firs time in years at 68*"
Me: But at what price? Michigan has offered weatherization grants to low-income residents since 1976. The energy credits included incentives for more insulation and better windows. The stimulus package offered block grants to local governments for energy efficiency programs. All three are little known and lightly used. To date, local govts have spent about 25 percent of the block grant money. http://www.nytimes.com/gwire/2011/01/20/20greenwire-mayors-scramble-to-preserve-block-grant-fundin-70540.html
Bungling bureaucrats? Yes, but the private sector doesn't come off much better in my view. The sad fact is that it is much more fun to sell a $24,000 geo system than a $6 tube of caulk.

Posted By toddm on 24 Jan 2011 12:39 PM
  The sad fact is that it is much more fun to sell a $24,000 geo system than a $6 tube of caulk.

As I have pointed out before, final cost and financed amount are not identical unless the homeowner uses his tax refund to pay down his loan. If the buyer rolled the entire $24k into a 30 yr mortgage at 6 percent the annual vig would be $1728, or roughly $1k more than the annual hit for a $10k conventional HVAC system. As I have also noted, a comparison of financed geo based on monthly or annual cash flow is misleading on its face because the homebuyer will still owe about $13,000 of the $24,000 in 2031 when the geo system's mechanics is on its last legs. .

Insulating will only get you so far. You could insulate the hell out of a house, in the end your going to require some type of heating system to keep it warm. A well insulated house will just require a smaller heating system, it will never allow you to exclude the expense all together. In theory I guess it would be possible to design a house that can be heated with solar gain only. The problem is, after a certain point, building codes require you to pull air from the outside source, otherwise you risk suffocating yourself from lack of fresh air. I wouldn't think there be a  lot of solar gain on cloudy days either.

As for financing the system over 30 years, you can either pay a higher heating/cooling bill or less of a mortgage increase. Technically the homeowner can apply there saving on there energy bill towards there mortgage to pay off the system faster.
 
   

Posted By Cgallaway on 22 Jan 2011 08:45 PM
@docjenser

I realize they are just estimates, but this one doesn't pass the sniff test "the projections show heating costs of $150K for natural gas and $57K for geo" Assuming a heating period of 5 months a year, that would be a cost of $1000 per month every (heating) month for the next 30 yrs. ($150,000/30 yrs = $5,000/yr) Heating costs currently for natural gas seem to be around $150/month give or take a little bit. Because current prices are so low, compared to your estimated 30 yr average, at the end of the 30 yrs, you are estimating that monthly costs would be closer to $2,000 rather than the average $1,000. Does this make sense to anyone else?

At least on the natural gas front, I know they've just locked up a bunch of leases in Arkansas that they say the shale will produce more than the well they've been pumping in Texas for the past 20 yrs. I don't presume to know that prices will level out, (as supply can easily be controlled...just by moderating the flow rates...and therefore they can artificially raise and lower prices based on demand), but the idea of an actual shortage (rather than shortages created by not pumping at full capacity) over the next 30 yrs seems unlikely.

Again, your estimates don't pass the sniff test.

Again, this is based upon the average increase in gas prices over the last 15 years between 1993-2008. It is unlikely that you will be paying for fossil fuels as much as you are today. So I downloaded the average annual price from the public service commission and assumed that the same increase will occur over the next 30 years. Download the data and run your own numbers. I posted the link. The supply is there, but delivery is going up continuously. And yes, you are right, supply will likely be reduced in order to increase the price. The same with oil. It is not that we do not have enough supply right now. The demand is relatively constant. But the price for oil for a long time already not regulated by actual supply and demand. Energy and water will be our two most valuable resources if you look around globally.

Techgromit, roll it into a 30-year mortgage if you want. Just use a life cycle cost analysis to make sure your decision is the right one. (Energy cost plus upkeep, plus amortization and depreciation over its expected life, plus interest expense over the life of the loan.) You'd do an analysis for each of your HVAC options. Do not listen to people who want you to calculate savings by subtracting the extra on your monthly mortgage payment from geo's monthly energy savings. They also want you to believe that the system will last as long as the note, will require zero maintenance and will be replaced free of charge in 2041. Joe and I went through the math in the "why does geo cost so much?" sticky starting at page 4.
Insulation can make a difference. There comes a point in small, tight, well insulated houses where energy use is too modest to justify paying a premium for geo.