Geothermal Heat Pump part 3: How much did it save?

This is the third of three posts about my new geothermal heat pump system.

Part 1 discusses what was installed

Part 2 discusses how the system performed

This is part 3, where I talk money.  How much did the geothermal system save over the previous system?

Capital cost

I won't give a detailed capital cost except to say that after taking into account the green energy tax credits and the small Duke Energy rebate, the installation cost of my system was approximately the same cost as an equivalent air-source heat pump installation with the same features.  So by my reckoning I'm not out extra for the geo system, and all operating savings will be true savings.

It isn't quite that simple though.  I had to put out the whole cost of the installation when it was completed, and then wait to get the tax credits back.  Luckily my timing was good, my system was finished in November and I got my tax refund in February so it was a relatively short, though lean, period.  Also I don't get all the tax benefits right away.  The federal 30% tax credit all came to me in February.  But the state tax credit, which is $8,400, will come back over two years because the total amount of credits claimed in one year can't exceed 50% of the state tax liability.  So I will get most of it this year and the rest will roll to next year.

I'm sure someone more financially sophisticated than me can work out the time value of waiting to get the tax credits back, but I'll be ignoring that.

Many installers will offer 18 month no-payment no-interest financing that would seem to make the waiting "free" but in reality it isn't really no-interest.  The financing company charges the contractor a fixed fee for the financing, which he passes onto you.  My installer looked into it, we compared costs, and I decided not to do that, using a home equity line to pay for the system instead because the total interest would be less than the flat finance fee of the "no-interest" option.

Operating cost -- the data

Operating cost is where the rubber meets the road.   I won't show all my work because it would beexceedingly dull but suffice to say that I have kept significant data to figure this out.  I have tracked all my propane deliveries and what they cost, and all my per month power usage for the last two years.

You can't just compare the bills from winter to winter though, you also have to take into account how cold the winters were.  This is measured using degree days, which are explained very well here (scroll down to "Degree Days for beginners").  To figure out your degree days you need to have a fairly detailed temperature record that goes back far enough.

I do have a weather station that uploads to weather underground and have all that data, but it doesn't go back far enough to do a full comparison of the last two winters.  However I compared its data to a nearby airport and found that cumulatively over the time that I have records for, my weather station and the airport are within 3%  of each other, which is definitely close enough.

The airport has data going back as far as I need so I used it along with the excellent site degreedays.net to calculate the heating degree days for both this past winter and the previous one, and to make a fair comparison between winters, I figured my cost per heating degree day (HDD) for this past winter, with the geo system, compared to the previous winter, with the propane system.

For my purposes, I defined winter as Nov 3rd to March 12th, because I had exact electric meter readings for those days and that period includes all the cold weather we experienced this winter. .  According to degreesdays.net, using the Raleigh Executive Jetport temperature data, there were 3018 heating degree days for that winter period.

Figuring the cost is definitely not an exact science!  I don't have an easy way of telling how much of my electric bill is for the heat pump, so I approximated it by assuming that the increase in kwh usage, per degree day, from winter 2014 to winter 2015 was the cost of heating with geo, since that's the only major change from year to year.

To figure the cost per degree day of heating with propane, I just assumed all my propane usage was heating.  This works because I hardly use any propane during the warm months, even though it also heats my hot water and we cook with it.  But that usage is pretty negligible, and since I got the desuperator option with my geo system, including the hot water in the calculations is actually more accurate. I also have a gas fireplace but it's used so seldom that it hardly factors.

The results

So enough background, what's the bottom line?

I calculated that, with my previous system, I used on average 0.25 gallons of propane per heating degree day (HDD) during the winters leading up to the geo installation.

I also calculated that the geo system used 1.51 kwh per HDD during the winter of 2014-2015.

How does that translate to dollars, you ask? Good question.  It's easy to figure the geo system cost because the cost per kwh is known: it's 9.635 cents per kwh during the winter. Multiplying that by the 3018 heating degree days for the winter that just passed,  my electric heating cost for the winter that just completed works out to $439.

But my total cost was a bit more than that because I also used 60 gallons of propane this winter, primarily for hot water and for that short shot of backup heat on an 8 degree day.  I know this because, fortunately for the geek in me, my propane tank was topped off just before the geo system was turned on so I can read off my usage using its percent full meter.  I know it's not perfectly accurate, but it will do. The one delivery that I got before the geo system was turned on cost me $1.91 a gallon, so I can say that the propane I used this winter cost me $115, so added to the electrical cost of $439, my total heating and hot water cost for the winter that just passed was $554.

Now for what propane would have cost.  For the winter period that just passed, using 3018 heating degree days and propane usage of 0.25 gal per HDD, I project I would have used 755 gallons of propane over the past winter, instead of the 60 that I actually used, for a savings of 695 gallons.

So to compute my savings I need compare the cost of the gallons of propane I saved, which is 695 gallons, to the cost of the extra electricity I used, which is $439.  My savings would be:

(695 * $price per gallon) - $439

This is where it gets complicated because propane pricing is all over the map. I didn't buy propane at all this past winter so quite frankly I don't know what it would have cost me to fill up 2-3 more times like I used to, as the price usually fluctuates throughout the winter.  But I can make assumptions.

I actually had a pretty sweet deal on propane. Since I own my tank and shop around every fall, I was paying about 80 cents a gallon less than the market price as tracked by the U.S. energy information agency.  So I can make some assumptions on propane cost based on that site and what I was paying before but  they are only approximations, though I think they are pretty good.

The table below summarizes my computed savings assuming either paying my bargain price for propane, or the market value.

Here is the bottom line, summarized in a table:

Assumed Avg Propane price	Hypothetical spending for propane heat and hot water if no geothermal system installed	Actual heat and hot water spending with new geothermal system	Savings for winter 2014-2015
$1.95/gal	$1,473	$554 (actual amount discussed above)	$918 (62%)
$2.75/gal	$2,076	$604 (because the 60 gallons of propane I used would have cost more as well)	$1,472 (71%)

My actual savings were somewhere in between those two numbers, likely much closer to the lower one.  But I include the market price savings as a reference for anyone interested who can't get a good propane price, perhaps because you rent a tank so can't shop around.

But the bottom line story is even better

When I was heating with propane, I set my thermostat at 68 degrees in the house.  With the geo system, I set it at 70 degrees.  Since I have no idea how to account for that difference, I'll simply say that I saved over 60% on my heating cost, while being more comfortable.   I'd say the geo system is definitely a success!