Tax incentives and savings over time help defray the cost of a geothermal system.
Last year, Angie's List member Janet Levy, who lives in the Broad Ripple area of Indianapolis, faced an investment decision. Her 1940s Cape Cod's 20-year-old air conditioner died, and the 18-year-old gas-fired furnace threatened to follow. Rather than purchasing new replacement equipment, Levy says she decided to invest in a long-term solution by spending $18,000 to install a geothermal HVAC system.
"It was twice as expensive as a high-efficiency conventional system," Levy says. "But I could pay myself back in the savings in six to seven years."
A growing trend
Local geothermal heating and air contractors say more Central Indiana homeowners like Levy are making similar decisions.
"It's become very intriguing for a lot of people recently," says Greg Woods, operations manager for Lindley Heating & Cooling Inc. in Lizton, Ind. He estimates his company has installed 50 percent more geothermal systems this year than last.
"One of the biggest reasons is money," he says. Relying on the year-round 50- to 60-degree temperature found just 3 to 5 feet below the soil to heat or cool their homes, homeowners can expect to reduce their heating and cooling bills by 50 to 70 percent on average.
However, those savings come with a higher upfront cost.
"The average geothermal customer will initially invest $20,000," says Joe Huck, president of Williams Comfort Air in Carmel, Ind., who estimates geothermal installations have steadily grown to now represent 30 percent of his installation business. "A similarly sized conventional system costs about $10,000."
Overcoming the cost hurdle
Homeowners who invested in geothermal this year could rely on multiple incentives to defray geothermal's higher cost. The federal government, for example, offers a tax credit of 30 percent of a system's cost until 2016. A $6.1 million American Reinvestment and Recovery Act program through Indiana's Department of Energy Development that offered $1,000 rebates for geothermal systems — and lesser amounts for high-efficiency conventional systems — was depleted just five months after its February debut.
Indiana also offers a property tax deduction for geothermal systems and more exotic energy systems such as solar panels and wind turbines. In a recent report by the Department of Local Government Finance, seven of nine Greater Indianapolis counties reported an average 24 percent increase in energy-system deduction applications from 2008-09.
"The federal tax credit was a big part of it. It made it a lot more affordable," say Indianapolis residents and Angie's List members Torrey and Lori Bievenour, who hired Williams Comfort Air to install an $18,000 geothermal system in their northside home last November after the home's existing 20-year-old heating system failed.
The couple says their decision to go geothermal stemmed in part from their environmental consciousness — they recycle, drive fuel-efficient vehicles and monitor their utility bills religiously — but ultimately, they were won over by the promise of utility savings and recouping a $5,400 tax credit. They estimate they've saved at least $100 a month in heating and cooling bills.
"Geothermal is an area where you can be 'green' in terms of money," Huck says. "For many, it's a no-brainer financial investment."
Better installation techniques have also yielded more geothermal converts, Huck says. Geothermal or ground-sourced heat pumps rely on hundreds of feet of looped tubing buried underground. The water-filled tubes transport the ground's constant 50- to 60-degree temperature to an indoor exchanger, which removes heat from the home during the summer and supplies it in the winter.
Up until a few years ago, most residential applications depended on horizontally installed tubes, which required hundreds of feet of deep trenches crisscrossing an adequately sized yard.
"We used to have to nuke your yard," Huck says.
The alternative at the time — vertically installed tubes — took up much less surface area, but required using an unwieldy truck-mounted drilling derrick and added thousands of dollars to an installation.
But recent advances allow geothermal loop installers to bore into the ground diagonally, installing the tubing from a single 5-foot-wide, 6-foot-deep hole.
"We can put them in some pretty tight places now," says Stan Bassett, owner of highly rated Bassett Services Inc. in Plainfield, Ind. "The days are gone when we'd have to destroy someone's yard to install geothermal," says Woods.
Both contractors say customers should expect to spend an additional $500 in landscape repairs once the installation is complete.
With fewer moving parts than conventional heating or cooling systems, and without an outdoor air-conditioning compressor exposed to the elements, converting to a geothermal unit can also yield savings in reduced maintenance costs.
"The reliability and longevity is there. Once we dial them in, they don't break," Bassett says.
Where a conventional system may last 12 to 15 years, the indoor unit of a ground-sourced heat pump can be expected to last 18 to 24 years, he says.
Once buried in the ground, the loop system can be expected to last up to 50 years and an existing loop installation can be utilized again when the time comes to replace the indoor unit, Huck says.
A geothermal system, however, may not be the right heating and cooling system for every home.
"If you have a terribly constructed home or air distribution system, you should not convert, it's not the right thing to do," Huck says.
Efficiency upgrades such as updated weatherization, additional insulation and ductwork repairs should be in place before any new highly efficient heating or air system is installed, says Bassett.
With all the benefits of a geothermal system, one might expect a drawback other than the high installation cost: "People always expect there to be a catch," Torrey Bievenour says. "But we haven't found it."
Have you installed a geothermal system, or would you like to? Tell us about it in the comments below.
Editor's note: This is an updated version of an article that was originally posted on Sept. 17. 2010.