The Project

Costs and Savings of Geothermal Heating and Cooling

Simply put, the cost of geothermal heating and cooling installation is higher than a traditional systems. There's the drilling and ground loop tubing, and then the heat pump system itself. Based on our research, and talking with people who have residential geothermal systems, we think it is worth the investment.

Initial Cost of Geothermal Heating and Cooling Installation

Expect to spend around $20,000 for a complete geothermal heating and cooling system. Yes, geothermal costs a lot of money, but it is cheaper than many new cars. Most estimates say it takes three to seven years to pay it off. I'm guessing it will be longer for us since we were using natural gas (which is cheaper than propane or heating oil) prior to the geothermal system so our savings won't be as dramatic as others might experience.

The ground loops are guaranteed for 50 years, and the heat pump itself is supposed to last longer than a conventional system. For one thing, the air conditioner is indoors, not exposed to the wear of the elements outside. The initial cost of geothermal heating and cooling installation seems more bearable when you factor in the longevity of a geothermal heating and cooling system.

One factor in our favor was a grant program from the State of Maryland, which offset some of the cost. The Maryland State Legislature has increased the grant amount to a maximum of $3K for residential geothermal installations (be sure to check since these things change over time—as of 2011 the max was 2K). Other states have incentives as well.

Savings and Benefits

Calculating energy and cost savings for our geoexchange system over the past four years turned out to be a challenging task. Fluctuating gas and electricity prices, weather differences, energy-saving changes to our home, and other factors needed to be considered. As a result, this analysis provides a broad look at how our heating and cooling costs changed.

Although energy savings are the focus of this analysis, comfort is also of prime importance. For home heating we don't feel any difference compared to our former natural gas furnace. Air conditioning is far superior with geoexchange. The house cools quicker and the humidity drops faster. AC was also where the largest savings were in our analysis. Because of this efficiency, we tend to run the AC more in the summer. This represents a significant increase in comfort during the summer months.

We were surprised to find that our system did not produce savings in the 30-70% range suggested by many geoexchange vendors and articles. It is possible that our analysis is faulty but looking at dollars spent each year we are only saving 13% with geoexchange. However, it's a much more efficient system, using about 50% less energy year-round. Any comments on our analysis are most welcome.

A few things to consider:

  • Shifting from fuel oil, propane, or heating with electricity to geoexchange will likely produce much larger savings.
  • A geoexchange system lasts about twice as long as a standard system. This was not calculated in our cost analysis but is an important consideration.
  • We use more electricity now, and electricity has a bigger carbon footprint than natural gas. Our share of emissions would be larger than before if we weren't signed up for 100% wind power.


For a balanced comparison, we looked at data from the two years before with the two years after installing the geoexchange system. Our house is approximately 2,000 square feet, and our system is a 3-ton size. We tracked therms and kilowatt hours (KWH) as well as cost. Rates for gas and electricity fluctuated during this time period, but not by much, so that was not factored in. We were mainly interested in usage data and the bottom line cost summary. Also, the calculus required to accommodate changing rates was beyond the skill of the English major doing the math. We were also unable to compare weather or heating/cooling days, as we lacked that data.

Total Cost
Correcting for the effect of the more efficient refrigerator, we spend 13% less for all our energy needs, gas and electricity combined. Looking at the raw numbers that include the fridge, the savings are closer to 18%.

Adjusted totals (removing $30/month from pre-fridge costs)
2006-2007: $1804
2008-2009: $1575

Raw totals
2006-2007: $1924 (new refrigerator May 2007)
2008-2009: $1575

Total Energy Use
Converting therms to KWH for the sake of comparison, we went from a year-round average of 1885 KWH/month to 907 KWH/month, a 52% reduction.

Electricity: 420 KWH/month
Natural Gas: 50 Therms == 1465 KWH
Total: 1885 KWH/month

Electricity: 702 KWH/month
Natural Gas: 7 Therms == 205 KWH
Total: 907 KWH/month

Gas Usage
We use 86% less gas year-round, going from an average of 50 therms per month to 7.

Electricity Usage
Total electricity usage went from a year-round average of 420 KWH/month to 706 KWH/month. Average year-round usage was calculated using the months of February 2006 through January 2008, which includes one unusually cool summer. (One calendar year including a more typical summer gives us 526 KWH/month before geoexchange.) To calculate baseline usage, we averaged data for months where no air conditioning was used (February-May 2006 and October 2006-May 2007).

Isolating the difference in air conditioning costs, we compared KWH for the months of June, July, and August. We then subtracted the baseline usage figure of 415 KWH/month to get an approximation of the amount solely used for air conditioning. We now use 52% less energy to cool the house.

Air Conditioning: June/July/August
Before Geoexchange: 572 KWH/month (including one cool summer. The summer of 2006 was 730 KWH/month)
minus 415 baseline
157 KWH/month for AC

With Geoexchange: 490 KWH/month
minus 415 baseline
75 KWH/month for AC

We were surprised how much we saved each month by getting an up-to-date refrigerator. Energy use dropped about 223 KWH/month, saving us roughly $30 every month. It didn't take long for it to pay for itself (see graph and analysis).

We got the fridge in May of 2007. With the numbers we had, it was necessary to compare June through January of 2006 with June through January 2007 to ensure a reasonably accurate comparison with similar seasonal electricity usage. That gives us an average of $81.79/month before and $52.05/month after replacing the refrigerator. That's a $29.74/month savings.

Other Considerations

These figures look at natural gas costs only. If you're using fuel oil or electricity to heat your house, you may see greater cost savings. Also, we seem to use less energy compared to national averages. Other households may see greater cost savings with greater use.

If we got rid of our gas appliances (water heater, oven, and clothes dryer) and stopped gas service altogether, we could save another 16% off our total energy expenditures. With such low usage, most of our gas bill goes to fees. In our case, the cost of replacing all these things would negate the savings.

We've provided our data and welcome comments and suggestions on analyzing it. You can reach us by email.