Wednesday, October 29, 2008

Incentives in play - does geothermal make sense for you?

The Emergency Economic Stabilization Act of 2008 (perhaps better known as the “bailout” bill) included several provisions for energy efficiency and conservation tax credits. Among these is a tax credit of up to 30% for use of renewable energy systems in homes including wind turbines and geothermal heat pumps. (See a summary of the enacted bill.)

While geothermal heat pumps have been around since the 1940’s, it’s seen considerable growth in the past few years (about 20% growth per year according to the Geothermal Heat Pump Consortium). Factoring into the increased use are higher oil and natural gas prices along with a greater desire for clean energy technologies. Some Cincinnati area builders are now including geothermal as a standard feature in the home, or at least making it available as an option. Though the installation costs have been a roadblock to broad usage in the past, we could see costs come down as more homeowners opt for this approach.

How it works:

Operation of a geothermal heat pump is similar to a standard air heat pump, except that it is based on relatively stable ground temperatures rather than air. Installation of underground piping is used to transfer heat to and from the home via a water/antifreeze mixture and heat exchanger. Electricity is used to drive components of the system, but the efficiency rating can reach between 300-600% (in essence using the earth’s heat energy to compound the electricity input).

Some factors to consider:


  • Highly efficient, better at heating and cooling than a standard air heat pump.
  • Can be used to supplement hot water needs in addition to home heating and cooling.
  • Long life span, low maintenance


  • Higher up front expense for equipment and drilling.
  • Requires land area that will support “ground loop”. Price may increase if vertical loop installation is necessary vs. a horizontal loop.

While it may not be the best option for every situation, it should at least be given consideration. Anyone looking at new construction should assess how much they can reduce their total monthly costs by including the price of installation in their mortgage. The same goes for anyone buying a home that has an inefficient furnace which can be replaced using an Energy Improvement Mortgage. Beyond those situations, the time to recoup your initial investment could be anywhere from 2 – 10 years with 5 - 7 years a likely average. It’s not unreasonable to expect that an installed system would also add value at resale.

To learn more, see the Department of Energy’s geothermal guide.

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