In Canada it is time to consider geothermal heating


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Peak Oil is finally starting to get some respect in the press.  Under the radar natural gas is also steadily climbing.  The price on the chart here is in MMBTUs which is roughly equivalent to a Gigajoule.  The price I pay here in Saskatchewan is $6.57 per GJ.  Canadians which have already been hit by high gasoline prices are about to pay a lot more to heat their homes.  Natural Gas prices historically trend upward in Sept and Oct and usually don’t spike in spring. 

When does geothermal make sense?  It all depends on how much energy you use, the cost of electricity and the cost of natural gas.  Geothermal pumps use electricity so a switch will see your natural gas bill drop but your electricity bill go up.

According to Manitoba Hydro an average home uses $385 worth of electricity at 5.8 cents per KwH.   So the geothermal pumps use about 6183 KwH to heat an average home.

Manitoba Hydro estimates that the average home with a high efficiency furnace uses about 1700 cubic metres or 62 Gigajoules of natural gas in one year.  In Manitoba that cost is $880 when factoring in the delivery charges and infrastructure fees.  The cost to heat this home with a mid-efficiency natural gas furnace is $1000 and a conventional furnace runs about $1280.

Manitoba Hydro’s example is likely a brand new 1000 sq/ft home.  My older house uses about 170 GJ of natural gas not 62.  If my house was in Manitoba then going geothermal would be a no-brainer.  I would be paying about $2050 to heat my house with a mid-efficient furnace verses $828.40 worth of electricity.

This is how my house would look.

Energy Cost Per Unit Energy Cost Delivery Charge Total Cost
170 GJ $11.2 per GJ $1905 $156 $2056
14300 KwH $0.058 per KwH $828.40   $828.4

In Saskatchewan the numbers change because we pay much more for electricity and much less for natural gas.  Our cost for electricity is 9.4 cents per KwH and natural gas is $6.57 per gigajoule.  Right now geothermal heating would actually cost me more money each month.

Energy Cost Per Unit Energy Cost Delivery Charge Total Cost
170 GJ $6.57 per GJ $1120 $156 $1276
14300 KwH $0.94 per KwH $1340   $1340

However if we look at market price for natural gas the numbers change heavily in geothermal’s favour.

Energy Cost Per Unit Energy Cost Delivery Charge Total Cost
170 GJ $12 per GJ $2040 $156 $2196
14300 KwH $0.94 per KwH $1340   $1340

The cost of the electricity isn’t the only cost with Geothermal.  You have to have to put down a significant amount of cash to get it installed.  A typical residential situation will cost about $20000.  If you have a lot of space in your yard the pipes can be laid down horizontally rather than drilled vertically and this drops the price to $16000.  For me a $20000 investment will likely save me $850 a year.  Not a great investment even with natural gas prices at $12 per GJ.  However the federal government has a program that will rebate home owners $3500 for a geothermal installation.  Now we are looking at $16500 and things start too look a bit rosier.  In Saskatchewan the provincial government will match the federal grant and bring the price down to $13000.  

What if you don’t have $13000 to invest in your home?  If you have equity in your home you could refinance your mortgage.  Adding $13000 to 25 yr mortgage at 6% will increase the monthly payment $84.  If I borrowed money to put in geothermal my monthly utility bills would go down $71 and my mortgage payment goes up $84.

There are a couple other factors that make this strategy more tempting and some that make it less.  In the long term the price of natural gas will trend upwards outpacing inflation.  It is a finite resource and the production of natural gas has already peaked in North America.  The price may settle back down but there is much more upward pressure on natural gas prices than there is on electricity.  There are too many unlimited sources of electricity that cost just a little bit more than what we pay now.  We will never run out of wind, solar, wave and hydro energy.   The price of electricity will likely go up as we shut down cheap coal plants and natural gas fired stations but it will likely never double.  

Geothermal heating can also cool your house and it definitely increases its value.

Are there alternatives to natural gas and geothermal?  Yes you could go with a biomass furnace.  Go back to the old days of using wood to heat your home.  It costs a lot less than geothermal to install and the operating costs are close to what natural gas will be in the hear future. It looks like the cost for me would be around $2200 for the year.  Not much savings over natural gas but the price of pellets is likely to be more stable than natural gas because grass and wood are renewable resources.

The other way to reduce costs is drop your joules.  If you use less energy it costs less regardless of your source of heat.  Insulating my house, replacing my windows and stopping the leaks would likely cut my energy use in half.  That is a very expensive messy upgrade.  The best long term answer is to do both.  Eventually natural gas will get too expensive to use. 

Currently if you only use $700 worth of natural gas to heat your home geothermal isn’t going to save you much and the installation cost is not going to change much.  Going geothermal is a relatively painless upgrade (installation of the pipes does mess up your lawn) compared to new insulation and windows and those items can be done one at a time. 

  1. #1 by Jason on October 13, 2008 - 7:05 pm

    I beileive that geo-thermal is a wet drean for now. Like you mentioned, the initial cost is out of reach for ALOT of families, so it is not a viable option. Let’s us not forget that you will require a new/er home that is half ass tight. The cost of upgrading your older existing home, and the cost of installing a geo-thermal unit doesn’t make any financial cents. You would never recoup the cost. No way.
    Now Biofuel (wood, corn, sunflower etc..) pellets is the viable option for know for the unforseen future. Here in Manitoba, I can heat my 1964 4 level split home on 3 tons of wood pellets. I paid 150.00 per ton. Let’s do some math, 3 tons at 150.00 gives me 450.00. I paid nearly 3400.00 in natural alone the previous winter. Even if I had used 5 tons, I’m still way ahead. Geo-thermal is like the electric car, very, very cool, but have you seen many zipping around? You see a few, but not many. They are too expensive, and don’t go very far before requiring a charge up, not very practical, for now.
    Geo would have to cost around 5000.00 for make it feasable. Most families would throw it on the mortgage. That 5000.00 will cost you alot more, once it’s paid off.
    Bio-fuel is renewable, readily available, and plentiful, making it “cheap”. And you could think of it as a pay as you go heating. I could go on, and on. thanks

  2. #2 by Davo on November 16, 2008 - 10:57 am

    $0.94 per KwH
    >this should be $.094

    Just for reference:
    30 Oct 2008 – The default electricity rate for Calgary will be 10.81 cents per kilowatt hour (kWh),

    $0.1081

  3. #3 by Callum Harris on May 11, 2010 - 1:33 pm

    Gas prices these days are just getting higher, i think the government should focus more on alternative energy.”,

  4. #4 by MIke L on October 10, 2010 - 3:21 pm

    We had an oil furnace that we needed
    four 900 litre fills to heat the house when
    we first moved in. In 2006, heating oil was
    1.10 per litre in Ontario – yeah, pushing
    $4000 a year for heat. We looked at
    natural gas + geothermal options.Our
    small lot required vertical loops and
    drilling. Not cheap due to the Niagara
    escarpment – $14 000. The entire
    system was $31 500 – an $8700
    rebate from the governments and
    about $1000 from the cool savings
    program took us to about $22 000
    in with all services & taxes included.

    The system requires electricity to run
    the pump and to convert the heat (via a desuperheater); 70+% of our hot water
    now comes from this process too.
    Looking at our average annual KWHr, it
    has gone up tremendously – from 8700
    KWhrs in 2007 to 14 294 in 2008 after
    the new furnace was installed. Looks bad
    right? Well, we are fortuante in Ontario to
    have resonably priced electricity. Even
    with the time of use rates, the average
    cost is 7.35 cents per KWhr. This means
    the difference in cost of the electricity
    went from about $640 in 2007 to
    $1050 in 2008. So about $400 per
    year more. The hydro debt repayment/
    delivery charges remain unchanged on
    the bill.

    One thing that always seems to stand
    out is the presumption that a ground
    source furnace has the same efficiency
    as electric base board heaters. Our
    system has a COP of 4.3 – so over
    four times the efficiency of a straight
    electrical conversion.
    So. An increase of $400 and no more
    $3000-4000 heating oil bills. An easy
    choice. Estimates for natural gas heat
    for us ranged from $80 – 120 per
    month – is that too little?. So lets say
    $1250 per year. That’s $850 more
    per year. How much would it cost to
    install a high efficiency gas furnace,
    high SEER central air, and run a gas
    line to the house? I would think $10
    000 is a kind estimate. So a $12 000
    initial difference with a annual savings
    of $850 means a evening point of
    14 years. That’s if gas prices do
    not rise and service rates stay the
    same. I neglected to add in government
    rebates for a high efficiency natural gas
    furnace. But both gas and oil furnaces
    also require electricity to run which I
    have not calcualted here either.
    Our furnace has a 25 year warrenty –
    (try to get that from gas or oil furnace
    manufacturers) & the ground loop lines
    are warrantied for 50 years. A longer
    pay off than our original oil furnace
    (which is about 9 years), but the value
    added to the house, no longer having a combustable fuel in our home, the
    environmental impact, not worrying
    about costs of fuel(s) and the even heat
    that it provides makes us very happy and comfortable with our choice. Once the
    break even points are met, the $3500
    if we stayed with oil, or the $850 if we
    convereted to gas stays in our bank
    accounts and the sytem essentially will
    make money for us via its savings.
    Looking at costs/savings from the big
    picture, it seemed to be our best option
    given the need to change from our
    outdated oil system.

  5. #5 by MIke L on October 10, 2010 - 3:29 pm

    From the first coment, our house is a
    two story home but in 1954. It had
    poor insulation (as most back them
    did) and had oversized duct work
    to compensate for heat loss. The
    new furnace had a right return vs
    a left and that’s the only modification
    that was needed.

    As for seeing “many zipping around”
    … well that’s another advantage – no
    chimney for off gasses, no rattling
    central air box outside, no nothing
    from the outside. You couldn’t know;
    there isn’t anything to indicate one is
    in a house.

    $5000 for a geothermal furnace
    sounds great. But if you cannot
    buy a high efficiency gas furnace
    and central a/c for that cost, how
    could you reasonable expect any
    other system to cost $5000?

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