July 10, 2023
How Soon Will You See a Return on Investment for Geothermal HVAC?
Over the past few years, more and more homeowners in the Saint Louis, MO, area have started to prioritize energy efficiency like never before. Some do so because they worry about the already-mounting effects of climate change. Others do it because they’ve seen energy prices skyrocket and can’t take on any further cost increases. That new reality is pushing more and more people to explore the possibility of switching their homes to geothermal heating and cooling.
Geothermal systems are, by far, the most efficient HVAC systems on the market. However, they’re quite costly to install compared to conventional HVAC. Naturally, then, homeowners wonder how long geothermal systems take to pay for themselves in energy savings. To answer that, here’s a deep dive into the costs of geothermal and how much money the average home might save in energy costs by using one.
The Costs of Geothermal HVAC
Today, the average conventional HVAC system costs approximately $7,500 depending on a variety of factors, including installation. While that may sound like a lot of money, it’s nothing compared to the costs of installing a new geothermal HVAC system. That costs anywhere between 20 and 30 thousand dollars, depending on the size of the system you need.
The reason for that is the fact that geothermal HVAC systems require extensive underground pipe loops to function. To install those pipe loops, a geothermal installer has to either dig a large, horizontal trench on your property or a smaller but far deeper vertical one. Or, if you have a pond or other large body of water on your property, they can install the pipe loops there instead.
In all three cases, the amount of labor involved in the process pushes up the initial installation price of a geothermal system significantly. However, the good news is that the aboveground components of a geothermal HVAC system don’t cost much more than a standard air-source heat pump.
The Efficiency of Geothermal HVAC
Of course, geothermal HVAC systems deliver energy efficiency far above other types of HVAC systems. For example, the most efficient gas furnace on the market operates at approximately 98.5% efficiency, and the most efficient central AC system has a SEER rating of 25. On the heating side, that’s as close to perfectly efficient as you can get. For air conditioning, even a system with a 25 SEER rating still consumes a massive amount of energy to cool your home.
A geothermal HVAC system, however, can operate at efficiency levels that conventional systems can’t touch. In the right conditions, a geothermal HVAC can operate at efficiencies approaching 600%! That’s six times the value of even the most efficient furnace and many times that of the best AC.
The secret to the efficiency of geothermal heating and cooling systems is that they don’t consume fuel to generate heating or cooling effects. Instead, they consume it to circulate fluid through their pipe loops to take advantage of the stable temperatures found underground. This allows them to harvest heat energy from underground in the winter to heat your home and deposit heat collected from inside your home there in the summer.
That unique heating and cooling process can trim between 40% and 60% off your yearly energy bills. Depending on the age and type of HVAC system you’re replacing, the savings can be massive. But there’s a catch. The average geothermal heat pump will last you about 25 years before needing replacement. So, the question is, can those massive efficiency gains recoup your installation costs within 25 years?
Estimated Payback Time for Geothermal in St. Louis
Unfortunately, figuring out how long a geothermal system would take to pay for itself in your St. Louis home depends on multiple home-specific factors. These include the type and efficiency of your home’s existing HVAC system and your specific energy rates. However, it’s possible to come up with a ballpark estimate for the payback time of a geothermal system here if we make a few assumptions.
First, we’ll use some publicly available energy cost data. According to EnergySage, the average home in St. Louis spends approximately $1,620 per year on electricity. Naturally, that includes air conditioning. Then, according to Spire Energy’s data, most local natural gas customers pay a total average of $820 per year with the majority devoted to wintertime heating. Together, that comes to $2,440 in energy costs every year.
Then, we can apply the average energy savings figures mentioned earlier. That would mean a geothermal system that decreases your home’s energy costs by 40% would save you around $976 every year. And a geothermal system that cut your energy costs by 60% would save you $1,464 each year. That’s an average savings of $1,220 every year with a geothermal system.
Using that savings number, it would take you about 20 years to pay off your geothermal HVAC system. That’s firmly within the average geothermal heat pump’s lifespan. However, there’s one more thing to consider that will speed up your system payback time even more.
Geothermal HVAC Tax Credits
Right now, the federal government provides generous tax credits for homeowners that install geothermal HVAC systems. For all new geothermal systems placed in service until January 2033, you can get a tax credit equal to 30% of your system’s cost, including installation.
So, if you purchased a geothermal HVAC system that cost $25,000 including installation, you’d get a tax credit worth $7,500. That would lower your total cost to $17,500. Using that as your payback figure, your system would pay for itself within 14 years or so.
A Word on Usage Patterns
It’s important to realize, however, that your system payback time can be far shorter than the estimates provided here. Your results will depend heavily on how you use your home’s heating and cooling systems and your home’s overall energy efficiency.
You’ll notice, for example, that the estimates above don’t account for an exact percentage of your energy bill that represents heating and cooling costs. If you rely heavily on your home’s heating and air conditioning, you may find your payback time shortened significantly. On average, nationwide, statistics suggest that most owners break even on their geothermal HVAC systems within 10 years. Some people break even within three years although you shouldn’t bank on that.
The point is that the best way to estimate how long it will take for your geothermal HVAC system to pay for itself is to consult with the experts at Scott-Lee Heating Company. Our geothermal installers can evaluate your home and existing HVAC system and its associated costs to give you a far more accurate payback estimate.
Consult the Geothermal Experts
If you’re thinking about investing in a geothermal HVAC system for your home, Scott-Lee Heating Company can help. Since 1978, we’ve provided quality HVAC services to residents in and around the St. Louis area. We handle heating and cooling installations, maintenance, and repairs, as well as air quality solutions, HVAC zoning systems, and metalwork, too! Most importantly, we’re one of the most trusted geothermal HVAC installers in the area, and we carry the latest in geothermal heat pump technology from industry leader GeoComfort.
If you’d like to find out if a geothermal HVAC system is a good fit for you and your St. Louis, MO home, contact Scott-Lee Heating Company today!