Costs & Tax Incentives

Despite these benefits, only 47,000 geothermal units were installed last year in the U.S. That's just a tiny blip compared with the approximately one million conventional heat pumps sold during the same period, even though ground-source heat pumps cost about the same to buy. Here's the rub: You have to bury a lot of pipe—about 1,500 to 1,800 feet for a typical 2,000-square-foot home. (The actual length should be calculated by an expert, based on the optimal heating and cooling loads for the house.) A setup that size could cost as much as $20,000 to install, depending on soil conditions and how much digging and drilling is involved. A house on a big lot, for instance, might be able to use pipes laid horizontally in long, 4-foot-deep trenches. Houses on small lots or rocky ledges could require three or four holes drilled about 300 feet straight down, a much more costly process.

Even with this significant front-end investment, geo­thermal systems are so energy-stingy that the payback period is remarkably brief. A study by the Air Force Institute of Technology calculated that it takes on average just seven to eight years to recoup costs. Your actual break-even point depends on local utility rates, excavation/drilling costs, how well your house is insulated, the efficiency of the model you choose, and what incentives your state or utilities provide. A good installer who's knowledgeable about heating and cooling as well as your local geology will be able to make those calculations for you.

The current federal incentive is limited to the standard $300 tax credit for Energy Star HVAC installations. (Canadians retrofitting an existing home with geothermal qualify for a $3,500 federal grant.) Some forward-thinking utilities have offered low-interest loans to homeowners willing to adopt the technology. "It's a win-win arrangement," says Steve Rosenstock, energy solutions manager at the Edison Electric Institute, an association of utilities. "The utilities reduce peak demand for heating and cooling as their customers dramatically lower their electric bills." And because the plastic ground loops should last 50 years or more, the payoff for homeowners, and for the environment, can last for generations.

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