How long until geothermal pays for itself?
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Introduction
Geothermal heat pumps—which can be installed in your home or business—can save you money on heating and cooling. And they’re more energy efficient than traditional systems, which means they help you reduce your carbon footprint. But how long will it take for your geothermal system to pay for itself?
The True Cost of a Geothermal System
The cost of a geothermal system can vary widely depending on the size of your home and the type of system you choose. The average price for a geothermal installation is about $10,000, but that’s just for the wiring and pipes—not including things like landscaping or ductwork.
The real cost of a geothermal system isn’t just what it takes to install it, though; it also includes annual maintenance costs (which are often minimal) and potential repair costs if something goes wrong with an older unit.
Financing a Geothermal Heat Pump
Financing a geothermal heat pump can be a good idea if you want to stretch out the payments over several years. It’s important to note that the cost of installing a geothermal system will vary depending on where you live. But as an example, in central Illinois, geothermal systems typically cost between $12 and $15 per watt, so for a 2-ton unit with 14 SEER (seasonal energy efficiency ratio) ratings, one might expect to pay around $2,000-$2,500 upfront.
If you finance this type of system at 4% over 20 years with no down payment required (i.e., all cash flow goes toward debt servicing), then your monthly payment would be around $20-$30 per month and your total payoff period would be around 5-7 years—but again these are just ballpark figures because different lenders may have different rates available depending on their own policies.
If you want to determine how much money your new geothermal system could save your family on their energy bill each year in terms of dollars saved per day and month compared against conventional heating methods such as propane or oil furnaces (or even natural gas), consider this sample calculation:
The Payback Period
The payback period for a geothermal system is the amount of time it takes to recoup the cost of the system. The formula for calculating the payback period is simple:
Payback Period = (Total Lifetime Savings)/(Cost of Geothermal System)
For example, if you install a geothermal HVAC unit that costs $10,000 and you save $12,000 over its lifetime, then your payback period would be two years ($12K – $10K = $2K divided by $10K). In this case, it’s been determined that paying out of pocket would be worth it in two years because you’d recoup half your investment after just one year. This means that after two years all future savings will go toward saving money without having to make any additional payments to cover installation costs. If you decide not to install a geothermal heating system and instead opt for traditional methods like gas or electric heaters instead, then those systems will likely cost more than $10K but produce less than $12K in lifetime savings—meaning there would never come an instance where they could be paid off within two years–and thus should not be considered when deciding whether or not installing them would benefit your wallet in any way whatsoever.”
A geothermal system will pay for itself in 6 to 8 years.
Geothermal systems are more efficient than other heating and cooling systems.
Geothermal systems are more energy efficient than other heating and cooling systems.
Geothermal systems have a longer lifespan than other heating and cooling systems.
Conclusion
If you’re considering investing in a geothermal system, there are a number of factors to consider. The upfront cost is high, but the return on investment can be very quick. In fact, most homeowners will recoup their investment within just 6 to 8 years.
