Geothermal Economics

   

Richard Simmons Drilling Company, Inc.

Geothermal Heating and Cooling

Choosing a System

Because heating and cooling systems are expensive, it is essential to carefully study your needs and available options.

The examples and discussion in this presentation should not be used to influence a final decision; they are intended only to demonstrate what might be possible.

Long-term Goals

• Heat and cool the interior of your building at the lowest possible operating cost.

• Recover excess installation costs of the most efficient system in a reasonable amount of time.

• Do your part to reduce carbon emissions and reliance on energy imports.

• Do all of the above if possible.

Your Situation

You may be in one of these situations:• You a planning to build a new residence or

other building.• Your existing heat pump system is twelve

years old, is inefficient, and may need to be replaced soon.

• Your existing heating and cooling system just failed and needs to be replaced.

Your Needs

• If installation of a new or replacement system is at hand, you want to make the smartest choice.

• You may want to engage a mechanical engineer to determine system specifications.

• Then, you will carefully evaluate options, considering installation and operating costs, aesthetics, and environmental friendliness.

Fulfilling Your Needs

• A geothermal heating and cooling system is the most efficient type currently available, reducing cost of electricity by 30 to 70%.

• A geothermal system has no visible components outdoors and is quiet.

• 100,000 homes using geothermal systems reduce carbon emissions by 2.18 million tons over the 20 year life of the equipment, and foreign oil consumption by 2.15 million barrels annually.

Cost Analysis

A housing development in Durham, NC is comprised of twenty homes, all with geothermal systems. A study by Advanced Energy, a nonprofit energy research firm, determined that the average cost of electricity was reduced by 60%.One home, all electric, was paying an average of $35 per month for electricity in 1999.

Cost Analysis

Assume that the owner of a 2,000 square foot home needs a new heat pump and is paying an average of $150 per month for electricty to power the heating and cooling system. Replacement with a geothermal system will reduce cost to $150 x 40%, or $60 per month.

Cost Analysis

Assume that choosing a geothermal system will add $17,000 to HVAC replacement cost.The cost of electricity will increase 10% in year three.“Carbon tax” legislation will be enacted in year five, increasing cost of electricity by 15%.The cost of electricity will increase 10% again in year ten.

Cost Recovery

Year Cost @ $150 Cost @ $60 Savings Cum. Savings

1 1,800 720 1,080 1,080

2 1,800 720 1,080 2,160

3 1,980 792 1,188 3,348

4 1,980 792 1,188 4,536

5 2,277 911 1,366 5,902

6 2,277 911 1,366 7,268

7 2,277 911 1,366 8,634

8 2,277 911 1,366 10,000

9 2,277 911 1,366 11,366

10 2,505 1,002 1,503 12,869

11 2,505 1,002 1,503 14,372

12 2,505 1,002 1,503 15,875

13 2,505 1,002 1,503 17,378

Cost Recovery

The cost recovery period is thirteen years.The estimated remaining life of mechanical equipment after cost recovery is seven yearsThe remaining warrenty period on the underground system thirty-seven years.

Cost of Mortgage

In the same example, assume that to install a geothermal system, $17,000 is added to a mortgage with an interest rate of 5% and a paydown period of 20 years.• The addition to the monthly mortgage

payments before income taxes is $1,584 / year. Assuming a tax rate of 20%, the annual net cost is $1,417 / year.

• In year one, the out of pocket cost is $1,417 less savings of $1,080 = $337.

Comparative Shopping

How can it be possible that spending an extra $17,000 on a heating and cooling system makes sense?

Consider other purchases that you routinely make.

Comparative Shopping

You spend $35,000 to buy a new car. You own the car for five years, then spend $35,000 to replace it.

Comparative Shopping

You pay $17,000 in additional cost to upgrade from an air source heat pump to a geothermal system.Your new mechanical equipment has a twenty year life and the underground system is guaranteed for fifty years.In the first month after your installation, the power company (through reduced bills) begins to reimburse you.

Comparative Shopping

Which is the better deal?

Next Steps of Action

• Begin a conversation now with a contractor who might be involved in installing your geothermal system.

• Consider Richard Simmons Drilling Company, Inc. for installation of the underground portion of your system.

• Call Stephen Brooks at (540) 254-2289. Or email s.brooks@simmonsdrilling.com.