July 25, 2014

To Buy (Geothermal) Or Not To Buy?

After many years, my geothermal system developed a freon leak in May of this year. The leak was in the worst of all places, and fixing it would cost about $2,000. We had already been debating when to replace our geothermal system for the past three years. Should we replace it while the system is still working to take advantage of the 30 percent tax credit, or do we wait until the system breaks down and take the chance the credit may be gone? As the executive director of the Michigan Geothermal Energy Association (MGEA) it would be really embarrassing to replace it with a gas or propane system. The question was not what kind of system to buy, but when.

Over the past 14 years, the average heating and cooling bill for our 2,700-square-foot house (with a 1,200-square-foot basement) has been less than $60 a month. I know many of you have heard that a geothermal home must be kept at 60 degrees in the winter and 88 degrees in summer, but that is an Urban Legend (Country Lines told me I had to include the word “urban” in every article). I prefer to keep the house at 71 degrees in the winter, but my wife prefers 72, so we keep our house at 72 degrees (every husband needs to reread this line). We keep our house at 73 degrees in the summer. Even at those settings, we have paid for our geothermal system many times over, and my bills are about $1,000 a year less than my neighbors-who keep their homes at 68 degrees.

The real question was timing. Currently, there is a 30 percent federal tax rebate on geothermal through 2016, and it is unlimited. About three years ago, we got a 2.4-kilowatt solar panel array on our roof and got a 30 percent tax credit (about a $7,500 credit) for that. Now we will get another tax credit, but we all know how government programs work—funding can run out (cash for clunkers) and the program can end prematurely. It is equally likely that the 30 percent tax credit could be extended. Who knows? If anyone thinks they can predict government, I have a bridge in Brooklyn to sell you.

So, the question is: Do you buy a new geothermal system now before the tax credit runs out or do you wait till the unit dies and replace it without the tax credit? Here is how I looked at it: We intend to stay in our house for at least 10 more years. The current geothermal system will probably not last another 10 years. Therefore, we are going to have to replace it anyway in the next 10 years. Therefore, it makes more sense to do it with a 30 percent tax credit. My new unit should last 20 years, so this will be the last heating and cooling system I buy.

When my existing unit needed repair, it expedited the decision. Either that or it was incredibly brilliant planning on my part to replace the unit in May when we didn’t need heating or air conditioning that week.

Of course, my new unit will be more efficient and quieter. Between my solar panels and geothermal unit my summer bills are quite low—52 cents last July. June was less—where the utility actually paid me. I mention this even though I know I get absolutely no sympathy from anyone (maybe my accountant).

If you’re thinking about a geothermal heating and cooling system, check out the MGEA website at earthcomfort.com to find a dealer near you. I would also urge you to take advantage of that 30 percent credit before it is gone. Getting money back from the government really feels good. Almost as good as a 52-cent electric bill in July.

Larry Kaufman is executive director of the Michigan Geothermal Energy Association. MGEA is a 20-year trade organization that promotes high-quality geothermal energy systems that meet the comfort, efficiency and environmental needs of customers.