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Geothermal and GeoExchange® - Does it Have a 20% Return on Investment?

See also this article: Building for the Texas Climate
Click here for an Illustration of Types of Geothermal Loops  

Click here to view our video of a geothermal loop lake installation (Lake Travis)

What Closed Loop GeoExchange® Is Not:

It is not, for our purpose, tapping into an underground hot water or steam source, such as trying to harness some of Yellowstone National Park's Old Faithful geyser. This is often referred to as harnessing geothermal energy, tapping a hot water or steam source. That is not what GeoExchange® (closed loop) heating, air conditioning, and hot water heating is. If it were, there would be very limited applications available.

It is not drilling a water well or using an existing well or water source and pumping water from the well or source through machinery, then discharging the water back into a yard, pond, or well. While this type of system, called an open loop system, is done, our experience with several on Lake Austin and a twin well off of Anderson Mill and Hwy 183 is that these systems have ongoing significant service requirements. The open loop system also costs more to operate because of pumping horsepower. there is a greater risk of water damage with the open loop system, because of a continuing source of water under pressure. With a closed loop system it is not necessary to find water at all!

Closed loop GeoExchange® does not use a cooling tower and thus is not an evaporation of water heat exchange process. A cooling tower can only cool. It does not offer a heat source. It, too, has a significant service requirement and risk of deterioration of performance efficiency over time because of scaling or dirt.

GeoExchange® typically does not have any hydrocarbon fuel needed. Consequently, it has no flame, no vent, no carbon monoxide, no carbon dioxide generation and no emission at all.

What Closed Loop GeoExchange® Is:

GeoExchange® systems use standard air ducts. Typically, there is no outside machine at all. Thus, there is nothing outside to hide or for which to landscape, nothing outside to run electricity to, to feed to the weather, to the fire ants, to the maintenance persons, or to the weedeater! Thus, it is true to say that there is nothing to see, hear, hide, maintain, or repair outside.

There is an earth, lake, or pond, heat exchanger. It is made of high density polyethylene pipe and fittings, joined by heat fusion techniques, bringing the material to 500° F. Thus, the fittings become fused to the pipe, so that the joint is actually continuous material, stronger than the pipe itself.

The piping is formed into loops and headers. Typically, in the vertical loop heat exchanger the length of the loops is 250' into the ground, or in our area, into the rock. The distance between the loops is usually 12 feet in residential applications and 15 to 20 feet in commerical applications, so as to avoid any ground heat saturation.

Many people, who hear we drill down 250' in rock, think of that as a huge undertaking. In some respects, that is true, using a well drilling rig to bore the holes. But, I would share with you, that we have drilled 7 holes in one day on Keenan Road, just off of Red Bud Trail. So, it is not a prohibitive activity with the proper tools.

A question that often comes up is, "What do you do if there is a leak in the piping, especially if it is down in the borehole?" The most important answer for the owner of the system is that, as a general rule, the loop systems are warranted through the dealer, equipment manufacturer, and the pipe extruder for 25 to 55 years. In short, it is not an owner's worry. The installing contractor should be an IGSHPA certified installer (International Ground Source Heat Pump Association). To achieve that certification, there is both classroom and field training and testing.

When there is a leak in the piping, it is identified by pressure testing the parts of the loop. If the leak is in an accessible area, it is simply repaired by cutting out the damaged or faulty partand replacing it. We had such a case recently at Robert E. Lee Elementary School, where they were adding on to the building. A foundation rig bored through some loop piping that they did not know was present. We tested the integrity of the adjacent loop, then repaired the damaged pipe, and flushed the air out of the loop. Then the system that it served was restarted. Had there been a downhole leak, that particular loop would have been abandoned and another drilled to replace it.

You might be interested to know that AISD has converted or built over 60 schools using the GeoExchange® System and has more than 6000 loops in the ground.

The material that circulates in the heat exchanger, typically in Austin, is that highy non-toxic chemical known as water! It is the medium used to move heat to or from the earth as the mode might require.

A review of one lesson in thermodynamics: heat travels from a warm body to a cold body. It does so in three ways. Radiation is one way, such as from the warm sun to the cold earth, without heating the air or vacuum in between. Another example of radiation that we do not often think about is when our warm body radiates its heat to a cold glass window, making us feel cold. Conduction is another way heat moves from a warm body to a cold body, such as when you have an ice cube in your warm mounth and the heat melts the ice, or a hot water bottle warms a sore ankle by being placed against it. the third method of heat transfer is convection, such as occurs in the heating systems in most homes, where the warm air moves throughout the home and heats the cold furniture, walls, and people.

The closed circuit GeoExchange® heat exchanger is designed to function by conductive heat transfer. For example, in the heating mode, heat from the warm earth, which is at the same temperature as Barton Springs, normally 69° F, moves to the cooler than that heat exchanger. In the cooling mode, the heat moves from the warmer than 69° F heat exchanger to the cool earth. therefore, the heat exchanger needs to be either warmer than or cooler than the reference temperature for the heat exchange to take place.

Notice that I have used the term earth, which can be water, rock, soil, clay, sand, gravel, or whatever one might find. Note also, that there is no requirement of flow of water over the heat exchanger. Thus, the loops can function in a still pond, as is Lake Austin, or a moving body of water, such as the Guadalupe River below Canyon Dam, or in a dry rock hole that is back filled to provide good conduction, such as on Red Bud Trail. It can also be below the water table such as on Eck Lane, beside Lake Travis, where we hit water at 140 feet down. Because it is designed for conductive heat, it can function well with no movement around the heat exchanger piping, such as in a hole or in mud at the bottom of a pond. Obviously, if there is flow across the loop, it simply increases the capacity and efficiency.

The heat-carrying medium, water, is circulated at very low cost, usually with 1/6 h.p. or two 1/6 h.p. pumps from the earth or pond loop to the inside machine, where there are at least two heat exchangers. The one is a water to refrigerant, tube in tube or flat plate, heat exchanger. the other is a refrigerant to air heat exchanger, which has the typical centrifugal blower moving air over it and then throughout the home, office, or school, through duct work and registers or grills.

Because the water temperature is in relation to the below ground temperature of 69° F, it must be warmed or cooled in order to make heat travel to or from it. Likewise, the 69° F temperature is not warm enought to heat with, nor quite cool enough to remove moisture in the air, so a compressor and refrigerant circuit is utilized to compress the heat to a more useful temperature.

The machinery is made in factories under close tolerance and exact standards. Likewise, it operates in relatively clean environments, such as a closet or attic, thus lasting longer than standard systems. This is easily understood with our experience with refrigerators versus that of standard air conditioning systems. We generally keep our refrigerators until we want a different one, not usually until it is broken. Our standard air conditioners we change on average, every 12.5 years.

I have sometimes referred to the system as a 3-ringed circus, in an effort to make it easy to remember and to be understood. Ring number one is the closed loop water circuit moving heat to or from the earth, pond, lake, or river, to the refrigerant. Ring number two is the refrigerant loop and moves heat to or from the water loop circuit to the air loop exchanger. Ring number three is the air loop, which moves heat to or from the refrigerant air exchanger to the space being conditioned.

They system is thus called a heat pump because it moves heat to or from the space to be conditioned. Because the system never sees any freezing condition, it never has to stop and defrost, unlike an air to air heat pump. By the same token, since its reference temperature is 69° F and its medium for moving heat, water, has a density of one, as compared to the very much less dense air medium of the standard system, the water medium system is both highly efficient and much more comvortable. The air coil is warmer in winter than in the typical air to air heat pump and colder in summer than the typical air conditioner. this leads to a constant heating air temperature and a colder and thus drier, because more moisture is removed, cooling ciruculated air. Hence, the claim that the closed circuit GeoExchange® Heating, Air Conditioning, and Water Heating system is, in fact, more comfortable than any other system!

Another benefit of the closed loop system is the fact that it uses the same water over and over and over or round and round. Because it is used at not extreme temperatures and because there are no new oxygen or minerals added to it, its heat exchange efficiency does not change over time, unlike the air exchange systems, fuel burning systems, or cooling tower systems, which have dirt, precipitants, moisture, soot, bacteriological sludge, or insect build up over time, which reduce operating efficiency.

I have mentioned the water heating as part of the description of the system. Most often the machine comes with a separate heat exchanger, which is a refrigerant to water type with double walls to the domestic hot water for health safety. This heat exchanger utilizes what is known as throw away heat in the cooling mode to heat domestic water. Thus, it has the added benefit of free water heating in summer, and very efficient water heating, usually with a coefficient of performance of 3, in winter.

the Hot Water Assist feature is just another way that the energy cost is minimized, the utility peak is dramatically reduced in witner and some what reduced and displaced to later in the day in the summer mode. Hence dual peaking and winter peaking utilities are very much in favor of, and in many caswes, specifically promote the GeoExchange® system. Our Austin utility is a summer peaking utility and thus benefits by the lower and later in the day peak in summer.

With the knowledge of what it is not, what it is, how it works, and its water heating benefits, the question occurs, what does the system cost to operate?

What Does It Cost to Operate, Maintain, and Own?

The best path to follow in choosing a heating, air conditioning and water heating system is clearly to choose a good contractor, allow, or require that contractor to properly size the system, by taking into account your particular needs for temperature, humidity and indoor air quality, and then have that contractor present system choices with economics andother criteria for each.

The methods of choice are to choose a contractor known to you or known to someone you trust. If you need further assurance, ask for and check references, particularly with the Better Business Bureau of Austin. Once selected, the contractor should carefully review your plans or home or office to be conditioned, so as to arrive at a known quantity of air for each room or space, if duct work is involved, or for the zone or structure as a whole, if replacement is being done. the residential method of choice is ACCA's (Air conditioning contractors of America) Manual J and the commercial method is that from the ASHRAE (American Society of Heating, Refrigeration, and Air conditioning Engineers).

With the capacity required to heat, cool and heat the water known, the alternative styles of machinery can be run through the operating cost methodology to provide specific data for the economic portion of your decision.

I have performed those comparisons for a typical home, for this instance in the Austin area, using Austin utility costs. These can of course, be done for Texas Utility and Lone Star Gas, or Pedernales Electric Cooperative and propane gas or with whomever your project is presently served.

The results are summarized here:

Hot Water
Yrly. Total
All Electric
Air Source HP
Natural Gas

One surprise is the fact that propane is as expensive as it is. Most people would guess that propane is less expensive than air source heat pumps and that it would be very much cheaper than the all electric.

Another surprise is that the GeoExchange® operating cost is so low, only 36% of the all electric alternative and a full 47% less than its nearest competition, natural gas. Now, you begin to see more fully, why I am so enthusiastic about being involved in the GeoExchange® business in the Austin area.

The comparable maintenance costs are said to be, on a national basis from ASHRAE statistics:

All Electric 28.9 ¢/sq. ft.
Propane 27.0 ¢/sq. ft.
Air Source 28.9 ¢/sq. ft.
Natural Gas 27.0 ¢/sq. ft.
GeoExchange® 23.9 ¢/sq. ft.

Our experience actually shows a lower cost than the data for the GeoExchange®. Once the system is properly commissioned at start up, we see very little service requirement in our numerous systems.

Although we do not use it in the economic return on investment equations, the expected life of the equipment is:

All Electric 12 years
Propane 18 years
Air Source 12 years
Natural Gas 18 years
GeoExchange® 20+ years

It is comforting to know that a strategy, which is predicated upon a long-term investment, has the additional benefit of a long life along with its low maintenance.

All of which brings us to the central question for this inquiry, what are the costs and more importantly, the return upon investment?

The capital costs for the various systems in this replacement example are:

All Electric $ 4,417
Propane $ 5,976
Air Source $ 5,685
Natural Gas $ 5,890
GeoExchange® $ 10,936

When the relative operating cots, the capital costs, an effective income tax rate of 28%, and an appreciation of 5% in fuel costs are assumed, and the numbers are crunched, the results tell the following tale. The GeoExchange® system payback and rate of return are:

Equiv. ROR
All Electric
5.0 years
4.4 years
Air Source HP
6.2 years
Natural Gas
7.6 years

Thus the answer to the question posed is that yes, in most cases the investment in the GeoExchange® System does indeed return better than a 20% return! That is without putting a dollar value upon the benefit of the quiet, the beauty of the lack of maintenance, of nothing outside, or the value of the safety of having no flames, fumes, or emissions from the inside machinery, or the value of the extra longevity of the system. It also does not put a dollar value upon the technology, which is the least cost to operate from a source viewpoint from power plant through manufacturing and use. finally, it does not put a value upon the GeoExchange® System's superior comfort in both winter and summer with more even temperatures and better humidity control.

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