Posted By joe.ami on 25 Aug 2013 11:48 AM
When I was a lad we were schooled that 10% interest meant our money would double every 8 years (when compounded)...

Us engineers figure 9% to double in 8 years. But 12.5% (tax free) is more accurate if you are going to own it for 19 years.

Hmmm perhaps "us engineers" don't compound interest like others. Certainly helpful to the discussion though.
Try on the rule of 72 (or 69 depending on which camp you are in).

Posted By joe.ami on 26 Aug 2013 10:08 AM
Hmmm perhaps "us engineers" don't compound interest like others. Certainly helpful to the discussion though.
Try on the rule of 72 (or 69 depending on which camp you are in).

72/9 (not 10%) = 8 years. Using 69 yields 8.6% (not 10%) compounding interest.

I'm not sure if some people fudge the figures to sell more systems or are math challenged. But you would think that they would be open to improving.

I was just looking at straight forward payback 8 x 12.5%=100%

Sure you can include the annuity:

7 years at 10% = 94.9%

8 years at 9% = 99.3%

9 years at 8% = 99.9%


Is any of that not in the ball park?

Now bring in the annual price increase for fuel, you are probably looking back at 12.5%.


To state that some us fudge figures to sell more systems is insulting.

Internal rate of return (IRR) is one thing, but net present value (NPV) is really the right way to compare investments when the periods are that long. Don't forget to account for out of pocket maintenance and the anticipated lifecyle in the analysis too.

http://en.wikipedia.org/wiki/Internal_rate_of_return

http://en.wikipedia.org/wiki/Net_present_value

But anything that's low risk with low carrying costs that pays for itself in 10 years or less in simple terms (after-taxes) is a fairly high quality investment.

The real question is "What is the risk?"- how confident you are in it's actual performance, which is sometimes tough to know going in, and it's in the hands of the system designers/installers, the quality of whom varies widely. Real operating cost numbers from real prior clients (and not just one) would be good to have before signing the contract.

http://www.buffalogeothermalheating.com/sample_diagram.html

I would argue that the clients would not know the real operating costs, they could not separate the operational costs of the geosystem from the rest of their electrical bill. Real time monitoring or separate metering would be the only way to get that data. Only then you can claim that you are building efficient systems. Those are things operational cost forecast don't cover.

"To state that some us fudge figures to sell more systems is insulting."

Some would rather argue a small point and ignore the big picture.

The real question is "What is the risk?"- how confident you are in it's actual performance, which is sometimes tough to know going in, and it's in the hands of the system designers/installers, the quality of whom varies widely.

I agree. Although most users who are happy don't post on GBT, there are many posts about problems with systems. And almost nobody is able to verify that they are actually getting the cost savings that they were told when they bought a geo system. IMO, the risk of being off by 20% is fairly high. The risk of no savings or losing 100% of the investment is quite low.

The risk of being off is high, yes as there are so many contributors. First the calculations are based on weather averages which obviously vary from year to year and can indeed cause a 20% disparity. Building envelopes sometimes underperform. System owners sometimes decide they like 70F better than the 68F they swore was the highest they'd keep it.....and of course underperforming systems due to bad design are out there as well.

Truth is you can't predict exact savings until you can predict the weather, but I know in my kneck of the woods it'll be about 60% less than propane.