i see these huge numbers for instalation costs and wonder if people and thinking emotionally instead of rationally.
for most climates a good air source heat pump will be most cost effective.

I researched that air source heat pump doesn't work in the extreme cold climate like Northeast. I would definitely go towards this if it's feasible.

Actually for many climates it won't work. You still need a back-up heat source like propane (if that's what you're on as many looking this route are). The kicker then is, you're now buying less units of propane, so the company gives you a higher rate. Most of the installers on this sight are probably the nightmares of Hank Hill, and they sure don't want you getting off their product. There's also a question of durability. I've generally seen the loop fields getting a 25 or 50 year warranty on parts, which means the hardest part to install on a geothermal lasts a long time. I can't imagine many heat pumps are going to stand behind their devices operating down to -30F every winter for many years.

This is intriguing.  But I haven't been able to replicate your calculation in Excel yet.  Did you do this in Excel?  If so, I was hoping you might be able to post a copy I could look at.

Regarding value added or subtracted to homes too much is in the eye of the beholder for software caculation, which is why we're looking at realestate comps. not predictions. As many are oblivious to geo, we started with the detractor of propane or oil which most do seem to understand.
RE airsource heat pumps, Seneca and I ran cost projections for his home and found that the return on investment was about the same (assuming propane prices stayed flat.....). Of course if you could save a thousand a year on a 4K investment or 5K a year on a twenty thou investment and both continued their return after the first 4 years, which would you choose?
J

I agree that there is an art component to pricing homes.

However, there is also a pattern.  And patterns have a predictable nature that can be formulated and, done well, can get within a + or - range accuracy that can add a useful chapter to the geothermal value story.  Getting over the "first cost" hurdle is a head scratcher for a long list of people that need to include a geothermal solution in their home's heating and cooling evaluation.  With the alarming increase in the cost of utilities required to heat and cool homes that we have seen lately, I suspect energy costs may make it's way to the front of the herd as a price driver for homes. 

At some point, I would expect this price driver to show up in real estate comps.  That just takes time to filter it's way through the system in an economic climate like this one where people are afraid to buy much of anything.

I see value in return on investment and net present value methods in providing tangible evidence that geothermal is a good economic decision.  Adding the comfort and safety features makes the case even more compelling.  The challenge is telling the story in a way people understand the real value they get with a geothermal investment.

To post a file, you need to hit the reply above someone and then it will show you the full reply instead of the quick reply. The file should look something like the attached. Yesterday I thought I had the math wrong, but I realized today you weren't subtracting the initial investment from your figure, but I was. To use the file, rename the type (last 3 letters after .) from pdf to xls. Forum doesn't want me posting xls files, probably to avoid macro viruses.

Thanks Bruce.  Regarding the 3% inflation assumption, if you borrow the money to buy geothermal with a fixed rate mortgage, wouldn't the inflation be zero since the monthy payment amount is fixed?  The other thing I am thinking about is the tax deduction for the interest on the mortgage and how it impacts the NPV.  Any thoughts?

Thanks for the tip.  I was trying to save an Excel file this morning and wasn't understanding why it wouldn't work. 

The NPV approach can tell a powerful story for geothermal.  This is great stuff.

Changing the file type generally corrupts the file (as I think happened here).  The forum does not support posting Excel files and I figured that printing it as a pdf would not be helpful because it does not show the spreadsheed construction, just the answer.

Bruce

My previous repy was a bit incomplete due to lack of coffee this morning.  That is a good trick.  My experience with changing file types is that it corrupts the file.  I have changed the file type to pdf, but the forum will still not let me upload, so I am not doing something correctly.  I am trying it again by saving the excel file as a pdf.............still no luck.

Net Present Value is used to determing the present value of a series of positive or negative cashflows based on an interst rate. 

I do not think the using NPV function to reduce each year's saving and then totalling them is quite correct.  If you do a 50 year study, you should also plan on replacing the compressor once or twice.  I would calculate the NPV in you 50 year study as 398935.

Bruce

This is the difficult part.....the assumptions.  Inflation (or an interest rate) is a real part of these calculations.  Another rate that could be justifiably used is the rate of return you could get for an alternate "investment."  Again, NPV  is better used as an comparative tool than an absolute one. 

If you take out a loan, you should have fixed payments.  These payments would offset your energy savings, but would eliminate or reduce the inital pament.  For me the correct methodology would be to use your net annual payment/savings (which could include tax benefits). 

You can go crazy if you make it too complex and try to figure depreciation, tax implications, etc.   I am not a numbers guy. I know enough about this to be considered dangerous by my number crunching MBA colleagues.

Remember the old saying "figures don't lie, but liars figure."  A good example is Wall St. today.

Bruce

If you want to email me the excel file I can post it on my site and link it here for anyone to grab. Just email to me at

nevermab at uwgb.edu

nonsense. i live in south dakota. it doesnt get much colder than that.
there is no need for propane backup. the electric strips will do fine.
sure they will kick on often at 0 or less but it doesnt stay that cold very long.
my hvac bills average about 50 per month. how long will it take to roe an 80k
geo investment saving half of 50 per month?

If you are paying $50 a month in South Dakota and you are not using geothermal, I may need to buy a coat and move north.  In Texas, I'm paying $50 a month for everything besides geothermal. 

Having said that, I'm not understanding your numbers.  At $7K per ton, an $80K system is somewhere in the neighborhood of a 12 ton system.  $50 a month to run a conventional system that big doesn't sound right, even it is a geothermal unit.  

Back before he passed away, Wilt Chamberlin said he had slept with 20,000 women in his life.  A local sportswriter, Blacky Sherrod, wrote that Wilt must have gotten his addition mixed up with his multiplication.  Your numbers sounds like you have made a similar math error.  Either that or you have an extension cord run over to the neighbor's house.

Regarding savings or ROInvestment, you guys have already glazed my eyes over. A simple, digestable, operating cost projection with side by side comparisons of different equipment routinely shows a 5 or less year pay back around here. Get your best interest rate if you have to borrow the money, but how about having an end in sight vs ever higher gas/oil bills. Pretty easy to wrap your head around. Throw in a supported 10ish percent value added to home (based on real estate comparisons of similar homes with NG or oil or propane, sold recently in the immediate area) and now we're easy to digest, supported and defensible. The only numbers that matter are the easiest to understand- how much to run; $XXX/mo- will my house be worth more; based on sales, this year in your area homes that have LP or oil sold for X% less. Our retrofit market, has a different clientelle than the techy enthusist of ten years ago. Too much information overwelms in some cases and at the very least is dis-interesting. Keep it simple, but be prepared for the more detailed questions.
Regarding the ASHP question, I'm not sure if someone has stumbuled on to the "geothermal heat-pump" site by accident or if we have been targeted for conversion :-) I honestly believe that everything has it's place, and have used ASHPs in some applications and fossil fuel appliances in others as well as electric baseboards. To suggest that one system is the catch all do all is folly. In the retrofit market of an exceptionally large home such as Seneca's an ASHP would generally be backed up by a fossil system due to the 84MBH load as opposed to a 150 amp 30K coil since as we know at some temperature ASHP's do shut off completely while GSHP's can continue to 'supplement' heat production. Lower air temperatures cut btu out puts on air source systems that generally cause us to oversize them in our area, so when in larger homes with single duct systems multiple systems would have to be used making the installation costs much higher for all electric and some fossil back-up systems. No thanks, we'll use the 6 ton package system there. We did include a split system Daikin ASHP as one of the solutions suggest for the unducted breezeway and bonus areas. Here there is electric base board available for back up once we get to 20 or so degrees out side. I'm not sold on the down to Zero system as a good ROI. And while their VRV technology looks interesting, the cost/vs benefit still has to work for my customer.
While you've picked a tough crowd for your ASHP pitch, I think you would find interest if you were to start your own thread and support those remarkably low operating costs with data.
Joe

I'm with Joe....

My background is construction not accounting.   How would I use this in a sales presentation as I'm sure most consumers don't have a clue what NPV means to them when considering  a heat pump purchase.


How does NPV compare to ROI?   Which would be better to use in a sales presentation?


In the spreadsheet,  the total of the annual savings is $68,730.  This seems more impressive to me than a NPV of $25,934.


Just wanting to learn something here  please don't mock my ignorance.