Updated 2016-09-09

Recommendation:

Install a standard air source heat pump heating and air conditioning unit and pair it with solar. Geothermal (also know as a ground source heat pump) does save energy, but it is so expensive to install that you would be better off simply shifting whatever extra money you would have spent on a geothermal system into a larger solar array.

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All the Facts:

Yes, there is a pattern in the “Stuff to Skip” category. PV panels have become so inexpensive in relation to energy efficiency products that installing a relatively standard product (hybrid water heater, heat pump space heater/AC, or low end energy star windows) usually provides the best results. By best results I mean, getting as close as possible to zero emissions while taking the path of fewest dollars spent to get there.

Geothermal Costs vs. Heat Pump Costs:

According to Jay Egg one of the authors of Modern Geothermal HVAC Engineering and Control Applications the cost of a geothermal system is approximately $5,000 per ton. Heat Pump Price Guides puts the average cost of a 3 ton system at $4550 including installation. That works out to $1,516 per ton. So, for a 3 ton system, a geothermal install would be $10,450 more than installing a heat pump system. The department of energy claims a geothermal system saves between 25-50% in energy consumption. With this cost analysis I plan to give geothermal the benefit of the doubt. So we are going to put the average energy spending for a US household at $2,000 per year as per the Lawrence Berkley National Laboratory estimates, but bump up the heating and cooling percentage to 54% of energy consumption as per the DOE instead of the 42% estimated by LBL. That makes the average heating/cooling cost $1,080. A higher heating and cooling cost means a larger amount that could theoretically be saved by using geothermal.

Geothermal Annual Energy Cost Savings:

Let’s assume that the heating/cooling cost can be reduced by 25-50% (the potential energy savings of a geothermal system).

  • At 25% you save $270 per year = geothermal breaks even in 38.7 years
  • At 35% you save $378 per year = geothermal breaks even in 27.6 years
  • At 50% you save $540 per year = geothermal breaks even in 19.3 years

Since the standard warranty for a geothermal unit is 10 years, the unit will not break even, before it breaks. From a cost perspective, that means a standard air source heat pump system will be less expensive, but is there a way to save money over a geothermal system and reduce your GHG emissions?

Solar Comparison:

Now what if you used the extra $10,450 that you would have spent on a geothermal unit on a PV solar array? For this thought experiment I will assume that a PV system is already going to be installed and the added $10,450 will be additional panels to the overall PV system. Thus the top end of pricing would be no higher than the average per watt pricing for an entire system. In the 1st quarter of 2016, average U.S. residential system pricing was $3.21/watt (Note that pricing below $3.00/watt is not unheard of). So, an additional 3.25 kW of PV array could be added at $3.21/watt. Using PVWatts we get the following results for dollars of electricity created annually for a handful of sample cities.

  • New York City: $746 at $0.18 per kWh
  • Los Angeles: $1081 at $0.21 per kWh
  • Chicago: $665 at $0.16 per kWh
  • Houston: $435 at $0.10 per kWh
  • US Ave kWh: $541 at $0.13 per kWh

Note: The Bureau of Labor Statistics May 2016 numbers were used for average $/kWh for each city. The locations were determined by the closest weather station to each city available to PV Watts. For the US Ave kWh option, the array location used was Chicago.

The results show a wide variation in value of energy creation. Using the source information I have provided, it should be fairly easy for readers to plug in their actual location and electrical rates to the PV Watts calculator and find out what the resulting value of solar energy creation would be. Since this article is really about averages rather than specifics, let’s take a look at the last calculation from the list above “US Ave kWh”. In that scenario, the dollar value of the energy creation approached the top end of theoretical savings from a geothermal heating/cooling system. So you might think, well that is a toss up, if it were not for the fact that geothermal systems might only save you 25% instead of 50% on your heating and cooling bills.

On top of that thought, there is the optionality inherent in solar electricity creation. If you have an all electric household, the electricity created from your solar array can be used for anything. If you have a geothermal system, all you can do is efficiently heat and cool.

The next thing that sets the two options apart is warranty period. As noted above, a geothermal system standard warranty is 10 years. Where as the main component in a solar array, the panels, have an industry standard of 20 years, but some manufacturers already have bumped that up to 25 years. Additionally, there is third party testing for panels showing a useful life of 35 years. In all fairness though, the second most expensive part of a solar array is the inverter. A good warranty on an inverter is 10 years.

The last point in regards to installing an additional 3 kW of solar is pricing. If you only install 3 kW, you will likely have to pay above average prices. The average system size in the US is 5 kW anything below that and the cost of the inverter, wiring, labor and mobilization becomes a larger piece of the overall price. Conversely, if you install a larger than average system, the percent of the cost attributable to those pieces of the install goes down. As you can see in this graph from SEIA, the panels themselves are only about 20% of the overall cost in a residential array (Note: this is old pricing data. Overall system pricing has dropped since 2015).

2015 Q4 residential solar costs

The only reason to consider a solar array over a geothermal install is if a solar array already makes sense for your home. If it does, then you will likely install the largest system that fits on your roof to accommodate a fully electric house. In that instance, the $3.21/kW pricing used for the cost comparison will be higher than what you would have to pay. The heating and cooling that geothermal provides is only a part of the overall electricity usage of a given house.

Conclusion:

A solar array paired with a standard air source heat pump appears to be a better option than a geothermal system due to the expense of a geothermal installation and much longer warranty period of solar arrays. The only way to give geothermal the edge over solar is to assume the top energy savings of 50% from a geothermal system, assume 54% of energy usage is for heating and cooling, and assume electricity costs that are below the national average.

When reviewing your options, keep in mind that system costs, solar resources, and electricity rates can vary dramatically from region to region. It is highly likely that solar plus an air source heat pump will be the best way to cost effectively decrease your fossil fuel usage. To know for sure, you can always do the math using numbers that represent your specific conditions. It never hurts to do the math.