Tuesday, July 24, 2012

Geothermal Verses Solar


July 23, 2012
Geothermal Verses Solar:

I have been mulling over data and trying to determine if geothermal is actually a good idea or not.  I have been doing this not because I want to discredit geothermal and promote solar but because I am building a Zero Energy home and want to make the best decisions for my project.  Solar is a given for the project regardless of the outcome, the question is whether geothermal should be the heating source or not.
Initially, my gut says no because I don’t like something that I can’t touch and fix and half of the invested capital in geothermal ends up under ground and out of reach.  If it fails, I have to reinvest in new wells to replace them as they cannot be fixed.  But I can’t just go with my gut so I have decided to let the numbers tell the story.

I began by looking at energy price trends and trying to determine if investing in a pure electric system, even as efficient as geothermal is, is a good idea.  Electricity prices in PA have been rising at an average 7.5% YoY for the past five years and began accelerating over the past two years surpassing 10% averaged between West Penn Power and Duquesne Light.  Gas on the other hand has stayed virtually flat or decreased in price over the same term.  Domestic gas reserves are massive with shale and the market is predicting stable low costs for years to come, while electric rates will have to bear the brunt of the cost of new power plants to turn this cheap gas into electricity and the cleaning up of old power plants to meet tough new pollution guidelines.  Trends and projections both look good for gas but very bad for electricity.
Given the political climate and the recent Supreme Court decisions regarding the EPA, electric utility companies like AEP are forecasting additional increases of up to 30% over the next five years just to compensate for currently enforceable EPA regulations let alone the plethora of proposed new regulations.  This is compounded by the need to build new power plants that burn the regional shale gas reserves.  They will need to invest a ton of capital over a relatively short period of time and it will all be recovered via higher rates.

If we look at the cost of a Btu of electricity verses the cost of a Btu of gas in today’s dollars, electricity is 3.5 times the cost of gas for heating your home if both are the same efficiency.  Of course geothermal is far more efficient than gas because it only needs to move energy from the earth to your home instead of altering its state via combustion to release the energy into heat.  

How much more efficient is geothermal than Gas?  Well the efficiency of gas is easy to determine.  Every gas furnace has an efficiency rating called Annual Fuel Utilization Efficiency or AFUE.  Most are now over 90%, and 95% is not very expensive in comparison to lower efficiency systems.  This means for each unit of energy we put in, we get something less than one unit out because some is wasted in the combustion and exhaust.  Geothermal on the other hand uses some sort of jargon to tell how efficient it is.  Each unit has a Coefficient of Performance or COP.  For example, a COP of 4.6 would return 4.6 units of energy for each unit of energy inputted into the system.  Simple math makes this look like it is 460% efficient, however, we need to account for the unit of energy entered so it is more like 360% efficient.  

Shooting from the hip here, if electricity is 350% more expensive than gas and geothermal is only 360-380% more efficient than gas and it costs twice as much to build a geothermal system than a traditional gas/AC system, then it is not looking good for geothermal.

So again my question is can the increased efficiency of geothermal compensate for the increased installation cost and the increased fuel cost projections to justify the investment?

What I did to attempt to answer this question is to create a spreadsheet that compares the real cost of heating a typical new home with geothermal verses Gas/AC.  This model should scale for commercial applications as well.  

I made some assumptions but most variables can be changed on the spreadsheet.  Change Green cells freely, be careful changing Red cells as they are typically formulas.

Assumptions:
  • Geothermal installation would cost 2X the price of a similar sized gas furnace with AC but would also qualify for a 30% tax credit to help offset this cost.
  •  Cooling load of home is 1/3 of heating load
  •  Gas rates remain stable for the next few years, and then gradually increase until they match the forecasted increases in electricity rates.
  •  Electric rates in PA are artificially low in comparison to other states on PJM due to many years of rate regulation.  PA was recently deregulated and will now balance rates with the rest of the PUC.  NJ, which has a much higher average rate than PA, is used as the target rate.  The model moves the rates at historical increases until they reach parity with NJ, then they move at 3% YoY which matches NJ current rate curve.
I took these numbers and crunched them a dozen different ways, changing COP, Gas efficiency, SEER etc. and cannot find a way to make an argument for geothermal.  If you can prove me wrong, please do.  I have had many engineers and energy professionals look at it but I haven’t gotten a counterargument from anyone yet.

Beyond the numbers, let’s look at how ‘green’ geothermal is.  Most of the power consumed in PA is from Coal.  I hear talk all the time about ‘clean coal’ but this is an oxymoron.  There is no active clean coal plant; it is all research at this point.  Some plants are cleaner than others but, from an environmental standpoint, all plants are dirtier than burning natural gas.  Even if a coal plant was to achieve this delusional ‘clean’ status, there would still be no way to extract it from the earth cleanly.  One need only look at the DEP studies of PA streams to see the lasting devastation PA is living with due to coal mine runoff.  Every time a geothermal compressor kicks on it is using coal fired energy unless of course, it is powered by distributed solar.

If you are interested, please look over the spreadsheet and rip it apart and help me to find out whether geothermal is a waste of money or I am missing something.  

It is my opinion that any building that is considering geothermal should instead use traditional heating/cooling and invest the difference in cost of installation into Solar.

Feel free to contact me directly to discuss.

Joe Morinville
Energy Independent Solutions
535 Clever Road
McKee's Rocks, PA 15136

1 comment:

  1. Thanks for sharing this! Since moving up to Canada, I have been looking for some furnace installation because I have been told that it gets pretty cold up here. I think it's important to go with something that is Energy Start qualified since it will save people some money on their energy bills every month.

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