2. Options

(Despite my best efforts the data tables remain difficult to read. I have tried posting using html, separating cells by tab and separating by characters with little success. I have tried to summarize the information following the tables.)

Return on investment is different for each house. The amount of energy required is different due to the size of the home and how well it is insulated. The cost of installation also varies. In our case, the geothermal system included the additional expense of installation of ductwork but eliminated the need to reline the chimney. The other systems could have been tied into the existing supply lines for the radiant heat, but the chimney would have to be relined. To help us decide on our heating system, we compared the installation and operating costs of the different systems over a ten-year period.

To make a fair comparison of the costs for the different types of fuel, it’s necessary to determine how much of each fuel needs to be purchased by converting its energy value to BTUs.

We used 2,030 gallons of fuel oil for the winter of 2007-2008. The number of BTUs purchased is calculated by the formula:
2,030 Gallons x 140,000 BTUs/Gallon = 284,200,000 BTUs

This is higher than the number of BTUs actually required to heat our home because our oil burner is less than 100% efficient. The baseline needed to use for comparison is the number of BTUs used to heat our home, which is calculated by the formula:
2,030 Gallons x 140,000 BTUs/Gallon x 70% Efficiency = 198,940,000 BTUs

The table below displays the cost to purchase this number of BTUs for different types of fuel:

BTUs Source BTUs/Unit Cost/Unit Efficiency Expense*
198,940,000 Fuel Oil 140,000 $3.25 70% $7,511.00
198,940,000 Fuel Oil 140,000 $3.70 90% $5,841.89
198,940,000 Propane 91,500 $2.48 90% $5,988.73
198,940,000 Nat Gas 100,000 $1.28 90% $2,829.37
198,940,000 Electricity 3,412 $0.09 350% $1,499.30

*Expense = (BTUs x Cost/Unit) / (BTUs/Unit x Efficiency)

The table below displays the cost of installation and 10 years of operation for the different systems:
Geothermal Natural Gas Propane Fuel Oil
Installation $32,400 $5,000 $5,000 $5,000
Reline chimney $3,000 $3,000 $3,000
False chimney $1,200
Connection $300
Interest $7,750
Sub Total $41,350 $8,300 $8,000 $8,000
Operation (1st year) $1,500 $2,830 $5,989 $5,846
10 years operation $18,009 $33,977 $71,901 $70,140
Total $59,359 $42,277 $79,901 $77,140
Years to Break Even NA 18 7 7

Notes:

• Costs of operation for geothermal heat excludes the costs associated with air conditioning and hot water, as these benefits are not a part of the other systems
• Costs for a false chimney is a guess at this time (I will update later after I receive a bid)
• Connection costs for natural gas is a guess
• With a 90% efficiency rating, it would be necessary to purchase only 1,580 gallons of fuel oil (down from 2,030 gallons)
• $3.70 per gallon was used as the price for fuel oil because that was the last price I was quoted (a later check showed the price had risen again to $3.789 per gallon in May 2008)
• Assumed a 4% inflation rate for all fuel types
  
• If the rate of inflation for fuel oil matches the average rate of 13% over the last 9 years, the total cost for the oil burner system would be $114,608 over the next ten years and the break even point would be just 6 years
  
• Fluctuations in the cost of natural gas is less predictable because the price is more supply based than a steady trend in inflation (at least in the past)
  

Natural gas turned out to have the lowest cost for the ten-year period. We still chose geothermal for the following reasons (in the approximate order of importance to us):

• At this time, the city does not have natural gas service
• The break even point between natural gas and geothermal for our home is 18 years – we expect to live here for at least that long
• Geothermal heat will provide us with a central air conditioning system and will meet some of our hot water needs
• It is the right choice environmentally and we want to move away from fossil fuels
• The energy costs and the loan payments will be less than our historical cost of fuel oil, leaving us with more cash even if we do not maximize our savings over the initial ten-year period
• It should be a good selling point for the house when it’s time

In any case, we are confident the geothermal system will prove to be a good long term investment for us.