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fact finder asks; how many years does geo take to pay for itself?
Last Post 05 Feb 2011 10:45 PM by engineer. 54 Replies. |
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arkie6
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| 24 Jan 2011 06:56 PM |
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Posted By docjenser on 24 Jan 2011 03:24 PM
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.
Natural gas prices were exceptionally high in 2008. Prices have since declined significantly due in part to extra production capacity recently created by gas extraction from horizontal drilling and hydro-fracking shale deposits. Average natural gas prices for 2010 are approximately half of what it was in 2008. http://www.eia.doe.gov/dnav/ng/hist/n9190us3m.htm |
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arkie6
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geome
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Cgallaway
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| 24 Jan 2011 11:39 PM |
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So, back to the initial question, to form a conclusion. How many years does it take geo to pay for itself? From everything I've read, here and elsewhere (different threads as well as different websites) the answer is........building in suspense.............it depends. What an anti-climatic answer.
If you plan on putting one in your existing home, without any modifications to said home, then the answer is based from factual usage history combined with expected performance of various different types of system, combined with estimated future costs per unit of energy. I suggest that for future energy costs, you use a baseline of today's costs. Everyone is in agreement that most costs will go up, but no one knows by how much. And we know that energy prices for the various types change regardless of the supply of the other one. Speculation is necessary, but must be taken with a grain of salt. For everyone who points out that natural gas will go up a few hundred percent (in order to sell a geothermal system) also seem to never mention that electricity prices are expected to rise (especially with the idea that wind generation requires stable back up generation and that the coal power plants are currently under the attack of the tree huggers or that nuclear plants still by law have issues with the waste, and despite the need for more generation, the industry isn't exactly booming in generation as much as replacing failing units) And if you talk to a solar panel salesman (or a wind turbine salesman), he will tell you that electricity is on the rise, natural gas is on the rise and those numbers seem to be by high enough margins to make their respective products look good. The difference with geothermal is the cost of the field pipe installation. That installation is usually warranted for 50 yrs, so when the indoor unit fails, the cost of replacement is just for the indoor unit, not the entire field work and excavation. It seems as though defenders of geothermal don't often point that out, while detractors often assume the total cost of initial install (both indoor and outdoor parts) will be the replacement cost in another 15-20yrs. Detractors also don't often seem to mention that the alternatives to geothermal will need to be replaced more often, you can either blame that on lack of quality compared to pre 1980's units or the fact that the stuff made these days are made with smaller tolerances (especially counting the electronics) and therefore don't take as much abuse before breaking as the old ones did. It also seems that proponents of geothermal systems seem to forget that when discussing operating costs, that when you need to use less therms or btu's to heat the same space, the payback in years increases. At some point, it does become unjustifiable from an economic standpoint to pay the extra cost for the relatively little savings. There are other benefits, but it is hard to quantify the comfort level, we might as well all be defining what 'art' is and what it isn't, because it is all subjective.
As an example, if by natural gas, it were to take only 100 therms to heat the house all winter, but by paying an extra $25k for geothermal, you could use only 90 therms (imagine the amount of kwh was converted to therms to give an apples to apples comparison), then it would take a lot of years to pay back the initial cost difference. However, if the geothermal system would use (again converted) 10 therms all winter, that would pay back a lot quicker and would probably be worth the initial cost difference.
Everyone seems to have some good ideas, but it seems that a few are a little too passionate and can't see past the end of their noses. In the end, the choice of geothermal or it's competitors is not only based on a few estimates (that the general public don't know how to fact check) or even a few testimonials, or a perceived comfort or perceived savings. A lot of it will be based on a few things that haven't been in any of these discussion: trust and impartiality. If someone mentions that they want a new fossil fuel hvac system, and you scoff and try to make them feel like idiots for not wanting geothermal, then you are doing a disservice to them, you, and the industry. If you have a grudge against geothermal and feel that anyone who tries it are dumb because it might not have made financial sense for you, then you too are doing a disservice to yourself and to anyone you are purporting to help.
Sorry for the long post, but this seems to be a very touchy subject on both sides and it seems that both sides seem to refuse to listen and comprehend, usually jumping to conclusions without first ensuring that what they interpreted someone else's post was the way it was intended to be interpreted.
Talking is not communication, If you and I have a different understanding of the meaning of my words, then we did not communicate. |
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joe.ami
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| 25 Jan 2011 10:14 AM |
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"So, back to the initial question, to form a conclusion. How many years does it take geo to pay for itself? From everything I've read, here and elsewhere (different threads as well as different websites) the answer is........building in suspense.............it depends."
CG,
Hasn't this indeed been said over and over again by the contributors here?
You mention that speculation is necessary and I don't agree. I use a 20 year weather average and current energy prices in my calculations.
Todd,
I gave you real numbers of people in my area which might, in part, explain my geo passion to you. Suggesting that a tube of caulk will reduce someone's energy consumption by 75% is just silly. The weatherization plan you mention is not necessarily available to the recently downsized GM exec or line worker.
Discussions of envelope are often part of our design, particularly when I have a home that's on the cusp between tons.
You continue to attack peoples short hand attempts of explaining the dollars and sense (not a typo) regardless of other positive examples simultaneously cheating on your math. It reminds me of another semantical discussion where I was schooled in why geo is not an investment and therefore there can be no ROI.
Did you really suggest you want to stick with real numbers and then quote the DOE? They're the folks that say closed loop geo installed is $2,500/ton. You even conceded the number is inaccurate (dated). Did your energy costs happen to rise from 2005? Dramatically perhaps? This is how you back your arguments? You don't see how ridiculous it is to criticize others and use this kind of supporting data?
Really?
j
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Joe Hardin
www.amicontracting.com
We Dig Comfort!
www.doityourselfgeothermal.com
Dig Your Own Comfort! |
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gonegeo
New Member
Posts:65
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| 25 Jan 2011 10:33 AM |
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Cost IS location specific and sometimes gas might look like the better choice. There are other factors to consider.
With GEO
No noisy fans taking up space in the yard for AC
GEO buildings don't blow up like gas. There are no flammable liquids in a geothermal home.
Oh yeah, Carbon Monoxide poisoning won't happen in a geo house either.
And then there's that GREEN thing. You are not polluting as much with geo. Unless you have coal burning electric plants. But you can most likely choose your power generation.
What about when home appraisers get on board with value of renewable energy?
So what is the total cost over time when considering these other minor or major facts? Even is gas cost me the same monthly, I would go with geo. These other things are important to me.
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www.energysquid.com "Dirt Cheap Energy for Life" |
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Looby
Basic Member
Posts:401
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| 25 Jan 2011 10:50 AM |
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Posted By gonegeo on 25 Jan 2011 10:33 AM
There are other factors to consider.
Yep. Compared to fuel oil: no odors, no soot, no black streaks
down the chimney, no annual negotiation/coin-toss to lock-in
a fuel price, no missed deliveries, no fuel tank, ...etc., etc.
"Not everything that can be counted counts;
not everything that counts can be counted."
-- Albert E. |
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toddm
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| 25 Jan 2011 12:55 PM |
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I am perfectly happy to let the reader decide who to believe, Joe.
But ditto Cgallaway's comments. You are hurting yourself on this forum. The folks who come here are testing what they heard from a geo salesman, or are doing their homework beforehand. The last thing they want is hard sell. They don't need me to recognize spiel when they read it. (Choose geo over natural gas so your house won't blow up!) Hard sell on the Internet is a nonsequitur, in fact. This site may be one of 20 a browser is visiting. Show a naked agenda and the list is down to 19.
All of the pros on this website see it as a sales tool, surely, but most are smart enough to keep a lid on the hyperbole.
But not here in the Geo Whiz corner. |
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Looby
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| 25 Jan 2011 04:07 PM |
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Posted By toddm on 25 Jan 2011 12:55 PM
I am perfectly happy to let the reader decide who to believe, Joe.
How can I get a piece of that wager? |
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docjenser
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| 25 Jan 2011 04:34 PM |
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Posted By toddm on 23 Jan 2011 10:03 AM
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.
I do not see any sense in your argument when the tax credits, which are actually a cash value to the customers, are not counted by you to offset the price of the system to the customer.
In addition, the 6% of mortgage rate payment I quoted included the payment against the principal, todays average 30 year mortgage is 4.81%, $6.800 do cost you $428.64 at todays average rate.
http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx
The heatpumps are very reliable, we are exchanging many 30+ years old units which are still running strong but the newer once come with higher efficiency, new warranty and tax credits. We also tie into the old loopfield, so after 30+ years, only the heatpump is replaced.
Nor did I claim the the electric rate will only raise as modest as it did in the past. I cited historical data where natural gas has risen much quicker in the last 15 years than electricity, and used that data to forecast what one might pay in the next 30 years. I cannot predict the future, nor can you. If you think that fossil fuels you use to heat your house will remain cheap or get cheaper, and that is the only decision making point, then geo is not for you.
It is the same analogy with cars, if you think that fuel will remain cheap, go ahead and get the Hummer, if you think it will significantly go up, may be a Prius (bad example) is the better choice for you. |
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| www.buffalogeothermalheating.com |
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docjenser
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Posts:1400
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| 25 Jan 2011 04:42 PM |
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Posted By arkie6 on 24 Jan 2011 06:56 PM
Posted By docjenser on 24 Jan 2011 03:24 PM
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.
Natural gas prices were exceptionally high in 2008. Prices have since declined significantly due in part to extra production capacity recently created by gas extraction from horizontal drilling and hydro-fracking shale deposits.
Average natural gas prices for 2010 are approximately half of what it was in 2008.
http://www.eia.doe.gov/dnav/ng/hist/n9190us3m.htm
That is why one should look at a long term period, like the 15 years I gave as an example, and not just cite one very high versus very low year! Prices will always fluctuate. In addition, just because gas prices are half does not mean you gas bill is half. It also includes taxes, fees and delivery, which actually went up. What you were citing was the wellhead price for gas, I don't think any consumer has access to that gas price. You forgot the middle man: your utility company. And uncle sam, and the public service commission, and.... |
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docjenser
Veteran Member
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| 25 Jan 2011 06:12 PM |
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Posted By toddm on 25 Jan 2011 12:55 PM
I am perfectly happy to let the reader decide who to believe, Joe.
But ditto Cgallaway's comments. You are hurting yourself on this forum. The folks who come here are testing what they heard from a geo salesman, or are doing their homework beforehand. The last thing they want is hard sell. They don't need me to recognize spiel when they read it. (Choose geo over natural gas so your house won't blow up!) Hard sell on the Internet is a nonsequitur, in fact. This site may be one of 20 a browser is visiting. Show a naked agenda and the list is down to 19.
All of the pros on this website see it as a sales tool, surely, but most are smart enough to keep a lid on the hyperbole.
But not here in the Geo Whiz corner.
Most people come here for technical help, advise in regards to geo, or the exchange of ideas. All of that free of charge. I admit there is a certain bias towards geo, but that does not mean people are not credible or give false information.
While you seem to think that this is just a sales show, I must tell you that I never got a single customer from one of the forums.
So let me tell you how the selling works for us:
So far all of our customers come to us either by 1) referral from other customers, 2) they did us putting a system in somewhere or 3) they did research on their own and are now interested. Very rarely is someone asking for the savings potential, they all have done their homework, so yes, they are the smart ones you are referring.
If they ask me, I usually give them ball park numbers, we see electricity of $300/ton annually, for heat, A/C and domestic hot water. Then I leave it up to them to do the math themselves. I also give them our (complete) list of customers and advise them to contact any of them, especially the ones who have similar system designs then the one I propose. I tell them to look at the systems in action, and to ask for the operational and maintenance costs.
So I do not sell those systems, I do not have to, my previous customers do. May be they are now bias too in favor of geothermal, but isn't that the purpose?
This is not a place to vent, if you are so bias against geo and rejecting all arguments which both installers and happy customers have, why are you here, using language and tone which is cynical and borderline offensive, from the anonymity of the internet?
If you like data and facts so much, look at customer satisfaction surveys where geo systems usually score the highest among all HVAC systems. At the end of the day, isn't that all what counts?
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Palace Geothermal
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| 25 Jan 2011 09:18 PM |
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Posted By docjenser on 25 Jan 2011 06:12 PM
.....I must tell you that I never got a single customer from one of the forums.
.....
Same with me. I have been posting on these forums for over three years and have not sold one system from my efforts. Plus I doubt that I ever will. |
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Dewayne Dean
<br>www.PalaceGeothermal.com<br>Why settle for 90% when you can have 400%<br>We heat and cool with dirt!<br>visit- http://welserver.com/WEL0114/- to see my system |
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joe.ami
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| 26 Jan 2011 10:30 AM |
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Posted By toddm on 25 Jan 2011 12:55 PM
I am perfectly happy to let the reader decide who to believe, Joe.
But ditto Cgallaway's comments. You are hurting yourself on this forum. The folks who come here are testing what they heard from a geo salesman, or are doing their homework beforehand. The last thing they want is hard sell. They don't need me to recognize spiel when they read it. (Choose geo over natural gas so your house won't blow up!) Hard sell on the Internet is a nonsequitur, in fact. This site may be one of 20 a browser is visiting. Show a naked agenda and the list is down to 19.
All of the pros on this website see it as a sales tool, surely, but most are smart enough to keep a lid on the hyperbole.
But not here in the Geo Whiz corner. Hard sell (twice)? Spiel? I'm hurting myself? Naked agenda? Hyperbole? Shall we review the first post of this thread? " 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" It's there for all to see. Sounds like high pressure sales to me. Geo Whiz! Your reading retention is as bad as your math  As far as the naked agenda, hmmmmm people on a geo forum that are pro geo.......who'd-a-thunk-it. Yours is the hidden agenda. j |
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Joe Hardin
www.amicontracting.com
We Dig Comfort!
www.doityourselfgeothermal.com
Dig Your Own Comfort! |
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ICFHybrid
Veteran Member
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| 26 Jan 2011 11:10 AM |
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As far as the naked agenda, hmmmmm people on a geo forum that are pro geo.......who'd-a-thunk-it.
Yours is the hidden agenda. Isn't this first and foremost a "Green Building Forum" for both homeowners (consumers) and professionals? I think of it as a place where questions about Green Building can be aired out in the interest of all parties. I think Todd's posts have been very intelligent and directed more towards the big picture, yet some here (witness the unwarranted attacks against me) act like they have some sort of territory to defend. That is a personal interest on their part and not in keeping with overall promotion of manufacturers products or the technology. And, even though I quoted you, I am not thinking primarily of you in this respect. I greatly appreciate your expert contributions here, yet you do erode some of that when you take such personal offense at some of these things. You yourself have acknowledged that the industry isn't perfect, so wouldn't it be best to treat the negative stuff as exceptions and continue to focus on professional practices? |
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joe.ami
Veteran Member
Posts:4377
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| 26 Jan 2011 11:19 AM |
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ICF,
Well and reasonably stated.
I would percieve this as a geo forum within a green building technologies site...but ok.
Regardless I am somewhat suprised when folks are taken aback by people that are passionate about the headlining technology.
I have dabbled some at the radiant heating forum and am never shocked to learn that the pros there think radiant is the best and most efficient way to heat a home. It seems like a forgone conclusion.
You seem to be dispassionately seeking the best system to condition your home and that is what all should do.
Good Luck,
Joe |
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Joe Hardin
www.amicontracting.com
We Dig Comfort!
www.doityourselfgeothermal.com
Dig Your Own Comfort! |
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docjenser
Veteran Member
Posts:1400
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| 26 Jan 2011 03:45 PM |
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Posted By ICFHybrid on 26 Jan 2011 11:10 AM
I think of it as a place where questions about Green Building can be aired out in the interest of all parties. I think Todd's posts have been very intelligent and directed more towards the big picture, yet some here (witness the unwarranted attacks against me) act like they have some sort of territory to defend.
Well, here are some of Todd's quotes, which I took offense from, may be you could point one out which has to do with intelligence or looking at the big picture.
"All of the pros on this website see it as a sales tool, surely, but most are smart enough to keep a lid on the hyperbole.
But not here in the Geo Whiz corner."
"Tell you what, Joe. You get your colleagues to stop playing games with numbers and language and you won't hear from me again. "
"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. "
Or here is my favorite:
"The sad fact is that it is much more fun to sell a $24,000 geo system than a $6 tube of caulk. "
We started of by discussing the payback time of geo systems. I offered a view where I was predicting costs not based on current prices but I was trying to project future increases based on historical data, clearly stating that the assumption was that the prices go up in the same fashion as in they did in the past period cited, and I referenced the source of the data, which for me is a credible source ( New York State Energy Research and Development Authority). This is not a sales show here, this is a discussion forum. We are not playing games with numbers, we discuss different views. Everyone is welcome to pitch in and bring forward new or his/her points of view, Todd was simply not able to do so without accusing others of hyperbole, and a sales show without objectivity. I am not defending any territory,but we are trying to exchange ideas and know how here, and not sarcasm and accusations. |
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Cgallaway
New Member
Posts:47
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| 26 Jan 2011 09:21 PM |
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@Joe
You stated
"CG,
Hasn't this indeed been said over and over again by the contributors here?
You mention that speculation is necessary and I don't agree. I use a 20 year weather average and current energy prices in my calculations."
Yes, the answer was "it depends" and that has been stated over and over, I was stating it once again due to the arguments over facts, figures and estimates. I did state that speculation is necessary. Any time we compare future prices for various heating methods, it is all 100%, pure, unadulterated speculation. There are so many factors for price changes in one medium, much less 3 or 4 or 5. The factors range from things we can control (our usage) to things we can't (domestic and international politics, supply company business tactics and ethics, society wide supply/demand). So just about any figure we come up with as a future fuel cost is a possibility, some more reasonable than others. However, it seems that if I talk to a gas furnace salesman, the future cost of electricity is estimated a lot higher than the future cost of natural gas. If I talk to someone who sells electric heat pumps, then the future cost of natural gas is estimated a lot higher than the future cost of electricity. Talk to a wind powered generator salesman or a photovoltaic panel salesman, and the future cost of gas and electricity are both sky high. Truth of the matter is that anytime we estimate future anything, we are speculating. I estimate future loads on the distribution system 4 yrs into the future....I do this by using graphs of 30 yrs worth of actual data, look at the trends and extrapolate from the data. That is still speculation. It is a reasonable expectation, based on past evidence. However, loadings for an entire distribution system is more stable than that of individual loads.
When building a new house, we only have speculative information. We have formulas that estimate what the heating/cooling loads SHOULD be, but we have no actual, definitive, raw data. When trying to figure out which hvac system to install in the new build, we do have to estimate future costs of fuel for our system, to try to make an educated guess as to if the extra cost for the high end system will be worth it compared to just getting the cheaper system that we have been familiar with most of our lives. If cost wasn't a prohibitive factor, no one would care about future fuel costs and they would be asking about comfort first, rather than cost.
It is a fact that you will not get actual future costs by looking in the past. And there are so many things that influence future costs, that we can't even truly make guesses of future increases with a certain degree of accuracy. The only thing we can do is speculation.
All that said, from your end (the installer side), I don't expect that you have to speculate as to your cost to install a system...but you would if you were asked what would it cost to install 30 yrs from now.
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toddm
Veteran Member
Posts:1152
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| 26 Jan 2011 09:37 PM |
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Docjenser was kind enough to list the passages in this thread that show me to be intellectually challenged, so allow me to return the favor.
He ended his elegy for geo on page one of this post by saying that you, too, can have "all that for an initial higher upfront cost of $6.800 out of pocket." He arrived at the figure by subtracting the $10,000 a new home buyer would pay for conventional hvac from a geo price of $24,000 and then subtracting the 30 percent federal tax credit as well. Helpfully, docjenser notes that the extra $6800 would add $408 to your mortgage payments each year but get you $806 in energy savings. I pointed out that actual upfront cost would be the entire $24,000 because contractors insist on being paid while the IRS asks you to wait, and that financing the entire $24,000 would cost an extra $1,000 a year.
What's the diff? docjenser answered. The buyer still gets the use of the money.
Well, here are two ways it matters a great deal. Let's say your boss tells you three years hence that your position has moved to Houston so maybe you should, too. You borrowed an extra $14,000 to install geo. Will you get that money back in your sale price? I dunno. Would you take that risk with housing in the shape it's in?
And if you stay in the house for 30 years? Well, an extra $14,000 on the note would cost you $16,000 in interest at 6 percent, or $30,000 to be paid over 360 months. Docjenser's "upfront out of pocket" $6,800 would cost $7,900 in interest, or or roughly half as much. And this is what gets me: his savings calculation assumes that you use your refund check to pay down your loan. He just doesn't tell you that his savings figure is too high if you don't. Interest expense isn't the only sleight of hand in a cash flow argument that compares mortgage payments and energy savings. If you hear one, clamp your hand over your wallet and back slowly to the door.
And then there is his projection of $150,000 in heating costs over 30 years, which assumes that natural gas price hikes continue at the 1993-2008 pace. When Arkie6 pointed out gas prices were unusually high in 2008, docjenser answered, "that is why one should look at a long term period, like the 15 years I gave as an example, and not just cite one very high versus very low year!"
Now really we need one of Jeff Foxworthy's fifth graders here, but I'll do my best. A statistical snapshot is based on just two numbers whether there is 15 years separating them or 15 months. Pick the right two years and you can make any case. For example, natural gas delivered to the home cost a national average $5.86 in Jan., 1983. 15 years later, in 1998, it cost $6.41, for an annual inflation rate of 1.1 percent. http://www.eia.doe.gov/dnav/ng/hist/n3010us3m.htm
By docjenser's projection method, it should cost $7.39 today. Not quite, you say?
From 1993 to 2008, gas prices climbed 11.5 percent a year. So which is period has more to say about the future? I have no earthly idea. But neither does docjenser. |
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Looby
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| 27 Jan 2011 12:35 AM |
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“He can compress the most words into the smallest idea of any man I know”.
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