Geothermal Systems - How Tax Credits Have Made Them Affordable

We get many questions on geothermal systems, particularly from homebuyers interested in a greener approach to their new home.   Top questions include affordability and steps to installation for a geothermal system.

How Much Does a Geothermal System Cost?

A geothermal heating and cooling system in the Triangle area generally starts at about $8,000 per ton, installed.  This compares to a cost of about $2,000 per ton for a traditional HVAC system. 

Example Geothermal System

Just to make the numbers easy, let's look at a 3000 sq ft home.  A 3000 sq ft home generally requires about a 5 ton system.

Traditional HVAC system -

5 tons at $2,000 each

$10,000 for total system - Traditional HVAC

Geothermal Heating and Cooling system -

5 tons at $8,000 each

$40,000 for total system - Geothermal Heating and Cooling

Geothermal Tax Credits

Ok, now we get to look at the tax credits.  Remember, you'll want to consult a tax professional, and you will have to wait to get "refunded" for the tax credits.  But the savings can be significant.

Federal Geothermal Tax Credit

30% of the cost of the Geothermal System, or $12,000 credit.

North Carolina State Geothermal Tax Credit

35% of the cost of the Geothermal System (with a cap of $8400) - $8,400 credit

Progress Energy Credit

$1200 credit

Cost of Geothermal after credits:

Original price tag = $40,000

- $12,000 Federal Tax Credit

- $8400 North Carolina State Tax Credit

- $1200 Progress Energy Credit

= $18,400 total cost. 

Thus after credits, the cost is much closer to a traditional HVAC system.  On average, a geothermal system saves 35% on energy costs for COOLING your home versus a standard HVAC system, and 70% on energy costs for HEATING your home versus a standard HVAC system.

Geothermal can be a great part of building green.  Again, you'll want to talk with your tax professionals about how the tax credits work, but these credits have made a significant difference this year in the total cost of a geothermal system. 

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The Basics of Geothermal Heating

Why Geothermal Makes Sense - and What Geothermal is All About

Special thanks to Brant Wurster of Sustainable Building Solutions for contributing this great article on Geothermal systems.

Here's what Sustainable Building Solutions has to say:

Thinking Geothermal?

Getting Started with Geothermal

Ever wonder "what is Geothermal"?  Do you try to change the subject if someone says the word, in an effort not to seem eco-igno?   Maybe you associate all things "geo" with the rock collection you had as a child.  Or perhaps could you expect to track seismic readings from the mechanical room in your house?  What does the ground have to do with the heating and cooling system in your house anyway?

Here is the skinny on the environmental counter culture know as geothermal.  

Geothermal - It's all Greek

The word "Geothermal" is derived from the Greek words Geo (earth) and Therme (heat).  

Yes, it's that simple.  Take the heat from the earth and move it into your house or business.  The ground maintains a constant temperature all year around at about 60 degrees Farenheit.  This is warmer than the air in the winter and cooler that the air in summer. 

So by using this favorable temperature difference you can greatly reduce the cost of your heating and cooling bills.  By greatly we mean 40-70%!  It's also possible to save up to 30% on your water heating costs.  Carpe Diem!

Geothermal is Environmentally Sound

Want to get out of the greenhouse?  Greenhouse gases, that is.  You could make a difference by planting forests in the "back 120,000" or just install a geothermal heat pump in your home.

According to geoexchange.org a typical 3-ton residential geothermal system produces an average of about one pound less Carbon Dioxide (CO2) per hour of use than a conventional system.

To put that in perspective, over an average 20-year lifespan, 100,000 units of nominally sized residential geothermal systems will reduce greenhouse gas emissions by almost 1.1 million metric tons of carbon equivalents.

That would be the equivalent of converting about 58,700 cars to zero-emission vehicles, or planting more than 120,000 acres of trees.

That's why according to the U.S. Environmental Protection Agency (EPA), geothermal heat pumps are the most energy-efficient, environmentally clean, and cost-effective systems for temperature control.    

Geothermal - 50 Years and Counting

Geothermal systems have been in use for over 50 years now.  So you don't have feel like part of a science experiment to have one in your home or business.  In fact over the past few years there have been significant advances in the materials and equipment at the heart of these systems.  New systems available today are extremely efficient and reliable. 

Geothermal Can Hem Your Pockets

Geothermal systems can seem expensive because of the higher up front cost.  But they typically have the lowest life cycle cost of any system.  In many situations you can realize the saving in as little as 5 years.  Pair this with the 30% tax credit Uncle Sam provides and you're in the "green" quicker than you think. At the same time they add value to your home because of the decreased costs of energy bills.

This means you can be "Mr. Smarty Pants" with out the cumbersome discomfort of over sized pockets.

For more information, please contact:

Brant Wurster

HVAC & Geothermal Manager

Sustainable Building Solutions

www.buildinggreennc.com

bwurster@buildinggreennc.com

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Special thanks to Johnny Vaughan of Bowman Mechanical Services Inc in Garner NC for sharing this information on Geothermal Systems!

Here's what Bowman Mechanical Services has to say:

How Much Does a Geothermal Heat Pump Save?

Geo = Earth

Thermal = Heat

Geothermal heat pumps use stable ground temperatures for home heating and cooling.  According to the EPA, the geothermal systems can save 40 percent to 70 percent on home heating and 20 percent to 50 percent on home cooling costs over conventional sytems, although installation costs are higher. 

Geothermal Facts

If one in twelve California homes installed a geoexchange system, the energy savings would equal nine new power plants.

Current geoexchange installations equal 14 million barrels of crude oil saved per year.

Putting a geoexchange system in a typical home is equal in greenhouse gas reduction to taking two cars off the road.

Global Movement Towards Geothermal Heat Pump Systems

The United States was the world leader in GHP technology and market development from the 1980s to the early 2000s, but today GHP shipments in Europe are believed to be 135,000 to 190,000 units annually compared to 60,000 in the United States.

Asian Countries embrace Geothermal, Europe surpasses U.S. production

Rapid market growth is also reported in Asia, especially China and South Korea, owing to supportive government policies, including GHPs being highlighted at the 2008 Beijing Olympic Games.

Geothermal Heat Pumps - How Do They Work?

A heat pump-like an air conditioner or refrigerator-moves heat from one place to another.

In the summer, a geothermal heat pump (GHP) operating in a cooling mode lowers indoor temperatures by transferring heat to the ground.

Unlike an air conditioner, though, a heat pump's process can be reversed.

In the winter, a GHP extracts heat from the ground and transfers it inside. Also, the GHP can use waste heat from summer air-conditioning to provide virtually free water heating.

The energy value of the heat moved is typically more than three times the electricity used in the transfer process. GHPs are efficient and require no backup heat because the earth stays at a relatively moderate temperature throughout the year.

Geothermal Heat Pumps Include Three Major Parts

The GHP system includes three major components: a ground loop (buried piping system), heat pump itself (inside the building), and a heating and cooling distribution system.

The earth-coupled (or closed-loop) GHP uses sealed horizontal or vertical pipes as heat exchangers through which water, or water and antifreeze, transfer heat to or from the ground.

Because of their versatility, earth-coupled systems dominate the GHP market. Typical loop installations for the earth-coupled systems are expected to work for 50 years.

Applications of geothermal technology include:

most building types, combined geothermal piping/well fields, hot water recovery, radiant heating, snow melting, Refrigeration equipment, optimized pumping, lake rejection and process cooling.

Geothermal Heat Pumps use the only renewable energy resource on the planet that cannot be depleted

Only through the use of alternative energy will we be able to meet energy demand increase and reverse the growing carbon footprint that many suggest is on a path to catastrophic climate change. Heating and air conditioning account for over 43% of the building energy cost and CO2 emissions in the U.S. 

Power generation to meet electricity needs will be the biggest driver of higher energy demand representing more than 40% of the increase while fossil-base fuels will continue to provide the supplies for this demand with oil and gas close to 60%. Demand for coal will grow as the demand of electricity in developing countries rise.

Geothermal & CO2 Gases

Emission of "greenhouse gases" into the environment has become an increasing concern. Deregulation of the electrical market will allow consumers to select power suppliers that utilize "green power." Geothermal power is classed as "green power" and has lower emissions of carbon dioxide per kilowatt-hour of electricity than even the cleanest of fossil fuels, natural gas.

However, previously published estimates of carbon dioxide emissions are relatively old and need revision. This study estimates that the average carbon dioxide emissions from geothermal and fossil fuel power plants are:

geothermal 0.18

coal 2.13

petroleum 1.56

natural gas 1.03

pounds of carbon dioxide per kilowatt-hour respectively.

Geothermal Is Part of the Solution

Nobel-Prize-winning Intergovernmental Panel on Climate Change In 2007 identified the building sector as having the highest Green House Gas emissions, but also the best potential for dramatic emissions reductions.

GHPs were specifically identified as a solution that is economically feasible under certain circumstances in continental and cold climates, and cases were cited where total electricity use decreased by one third and heating energy use by 50 to 60 percent.

Special Thanks to Bowman Mechanical Services, 919-772-6460, Garner NC. 

About Bowman Mechanical Services: We are a full line American Standard, Florida heat pump and Climate Master dealer with an alternative brand, Goodman, for the more budget conscious.  We have an expertise and consider ourselves (as do our peers!) the most qualified company in the area to install GEOTHERMAL heat pump systems.  With over 700 of these systems to our credit in the last 25 years, we have developed an expertise unmatched.

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House and Senate Pass Geothermal Tax Credit

For anyone considering a geothermal heating and cooling system, this is good news! 

Federal tax credits for energy efficient home improvements or construction were originally established by the Energy Policy Act of 2005.  However, most of those tax credits expired on December 31, 2007.

The "Bailout Bill" just passed by the House and Senate and signed into law by President Bush included something called the "Extension Act of 2008" (H.R. 1424, Division B), which extended, and improved, tax credits on a variety of energy saving features like solar power and geothermal heating.

Like the solar power section of the bill, the Geothermal Tax Credit has been extended 8 years, and will not expire until 2016.

Geothermal Tax Credit Increases

The geothermal tax credit was originally just $300, but has now been extended to $2000, with possible increases available to homes owned by more than one person. 

Homeowners can file for the geothermal tax credi by completing the Renewable Energy Credits subsection on their tax return forms for 2008. 

Currently no proof of purchase is required to be submitted with tax paperwork, however in case of audit, homeowners are encouraged, as always, to keep detailed invoices in their permanent files.

A geothermal contractor who sells and installs geothermal systems should note the purchase as a "Geothermal Heat Pump" on the invoice, and detail that it "Exceeds requirements of Energy Star program currently in effect".

Renewable Energy

If you're interested in finding out more about renewable energy sources for your new home, here's some great places to get started in the Raleigh area.

Geothermal Systems - Heating and Cooling Using the Earth - How Do They Work, and How Much Do They Cost?

Solar Water Heaters - How Do They Work and How Much Do They Cost

Southern Energy Management - Solar Photovoltaic Systems

Or contact us - we'll send you printable materials and information on energy savings, cost and more.

Read the full articles on the tax credit extension:

Lawmakers Approve Energy Tax Credits, Bailout

Wind, Solar Tax Credits Extended in $700 Billion Bail-Out

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Green Home Building in the Triangle

What is a Green Home?

What Is Geothermal?  Geothermal News and Information

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Geothermal Heating Systems - Answers to Top Questions

Homeowners looking to build greener are considering geothermal heat pump systems.  What's the buzz all about?  Here are answers to some of the top questions - including how much this type of heating and cooling system will cost, and how it works, and whether you should install one.

What is a Geothermal Heating and Cooling System?

A series of pipes, or loops, are buried in the ground near the building or home that is be heated and cooled.   These loops circulate a fluid that either absorbs heat from the surrounding soil, or dissipates heat into the ground.  The fluid can be water, or a mixture of water and antifreeze, depending on the climate and the type of system. 

How can the ground heat and cool air or water?

Have you ever been in a cave?  You probably noticed that the air was nice and cool, no matter how hard the sun was blazing up above ground.   A geothermal heat pump system takes advantage of the natural temperature stability underneath the earth.  The ground underneath the frost line (usually about 4 feet deep) stays a constant 50-55 degrees, no matter what the weather up above is like. 

How does the geothermal system heat the air?

It's similar to a traditional system - but in this case, the earth's temperature has done most of the work.  A geothermal heat pump works with the fluid from the loops, removing the heat.  It then concentrates that heat, and transfers it to the home's standard duct system.  When cool air is needed, the process is reversed. 

How much space is needed for the geothermal loops?

The loops needed for a geothermal system can be buried either vertically or horizontally.   The horizontal method is preferred if enough suitable land is available.

Horizontal Loop System

Horizontal installation of geothermal system loops is probably most common.  Several different methods and layouts are available.  The most common: two pipes (one of which is buried 6 feet deep while the other is buried 4 feet deep), or two pipes (placed side by side in a two foot wide trench, at a 5 foot depth).   There is also the "Slinky" method, in which pipes are looped in a spiral pattern, allowing more pipe in a shorter trench.

Vertical Loop System

Vertical loops require drilling equipment.  Four-inch diameter holes are drilled about 20 feet apart and 100 to 400 feet deep.  Two pipes are inserted into each hole and connected at the bottom with a "U-bend" to form the required loop.  The vertical loops are connected near the surface with a horizontal pipe system, which is then connected to the heat pump in the home. 

What is a Geoexchange system?

A geothermal system is called many different things, including geoexchange, ground water, ground water source, ground water assisted, and water furnace heating and cooling.  All refer to some type of "loop" system that harnesses a constant underground temperature and uses it for heating and cooling.

How can I install a geothermal system into my Raleigh new home?

If you are considering installing a geothermal heat pump system, you'll want to make your decision before the foundation is completed, if possible.   There will be some cost savings if the trenching work can be done at the same time as other lot and foundation preparation work.  Also, once the framing is completed, most home builders will have already ordered a conventional HVAC system. 

What home builders in the Raleigh area will install a geothermal system?

Even though geothermal systems have been used since the 1940s, they are not a typical feature of most homes.  Look for a custom home builder or a green home builder who is willing to work with nonconventional building methods and materials.        

How much does a geothermal system cost in the Raleigh/Triangle area?

Like any heating and cooling system, the total cost depends on several factors.  How large is the home?  What is the climate like?  And in this case, what are the soil conditions?  Is there enough room for a horizontal loop system?  At what point was the decision to install made? 

In general, your heating and cooling equipment and installation costs will be at least double or triple a conventional system - depending on the type of system, the excavation needed, and the size of home.   Several recent quotes in the Raleigh area gave a price tag of $17-30K more than a conventional system, for a new home. 

Update - Find Out How Federal and State Green Tax Credits Have Reduced Geothermal Costs!

Do I save any money by having a geothermal system?

According to Energy Star and the US Department of Energy, a geothermal heating and cooling system will save you about 30% on the cost of heating and cooling energy each month. 

There are other benefits too.

A reduced use of energy reduces air pollution. 

Most geothermal systems have a 25 year manufacturer's warranty - but keep in mind this is just for the loop system itself.  The actual heating and cooling unit usually has the standard 10 year warranty typical of Westinghouse and Trane warranty. 

There are aesthetic features as well - a geothermal system has a smaller indoor-only unit, so there's no big air conditioning unit sitting outside the home.  Homeowners say these systems are quieter and offer more uniform heating and cooling.

Should I install a geothermal system?

A conventional and geothermal heating and cooling system each have attractive features.  The lower cost on a conventional system attracts many homebuyers, but the potential long term savings and healthier environmental impact influence others to choose a geothermal system.   Work with your home builder to determine which system is better for your needs. 

Quick Fact:  Iceland gets 99% of its electricity using geothermal sources!

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