Running Head: Introduction to Environmental Science: Investigation 1

Introduction to Environmental Science:

Investigation 1
U49701984
University of South Florida Sarasota-Manatee

Introduction to Environmental Science: Investigation 1

The financial costs of electricity and natural gas are on the rise, as are the environmental
costs from the use of these energy sources. There are many angles that this problem can be
addressed, one of which is by homeowners. But what could homeowners, as private citizens, do
to make a difference, and why would they do it? I will explore one way that homeowners could
make a difference and how by making a difference, theyll not only benefit the environment, but
also themselves, since that is what will appeal to the majority of homeowners. Residential
geothermal heating and cooling systems could play a significant role in reducing both the
financial costs of electricity and natural gas, and harmful costs to the environment from the
emissions that are released from the generation and use of these energy sources.
Withgott and Laposata (2014) stated that 600,000 homes in the U.S. currently use
geothermal energy systems (p. 34). According to the U.S. Department of Energy (2016), There
are approximately 50,000 geothermal heat pumps installed in the United States each year
(energy.gov). According to the U.S. Census Bureau (2015), there were a total of 134,789,944
housing units within the United States (www.uscensus.gov). That means that approximately
0.0048% of all the homes in America were taking advantage of these high efficiency systems as
of 2015. With such a significant decrease in electricity bills that these systems offer, why dont
more home owners take advantage of this energy source? The answer is, the cost of purchase
and installation. Energy Environmental (2016) states, On average, a typical home of 2500
square feet, with a heating load of 60,000 BTU and a cooling load of 60,000 BTU will cost
between $20,000 to $25,000 to install. This is around double the purchase and installation cost
of a conventional heating and cooling system (www.energyhomes.org). According to the Energy
Information Administration (2014), the average electric bill across the United States is $114.09
per month (eia.gov). That calculates to an average of $1,369.08 annually. If the geothermal

Introduction to Environmental Science: Investigation 1

system is expected to reduce electricity costs by 40% to 60%, thats a savings of $547.63 to
$821.45 annually. However, because the upfront costs of installation are so high, it would take
approximately 24 to 36 years for the system that cost $20,000 to repay for itself. This might be
too long of a turnaround for most homeowners.
In addition to the monthly savings on gas and electricity, there are other ways that
homeowners can cash in on their costly investment. According to the U.S. Department of
Energy (2016), there is currently a federal tax credit which will rebate 30% of the purchase and
installation costs (energy.gov). That would calculate to $6,000 for a $20,000 system. However,
unless this tax credit is extended, its set to expire at the end of 2016. Another way that these
systems could assist in repaying for themselves is an increase in property value. Self, Reddy,
and Rosen (2012) stated, GHPs tend to increase property value, which allows for high return on
investment in the building and land and promotes more desirable mortgage assessments (p.
346). According to Nevin, Bender, and Gazan (1999), home value increases by about $20 for
every $1 reduction in annual utility bills (p. 454). Using the estimated annual savings from
above of $547.63 to $821.45, there would be an average estimated increase in property value of
$10,956.60 to $16,429. Lastly, there would be an additional return on the investment by the
long lifespan of the geothermal system which includes low costs of servicing. According to
GeoComfort (2016), a geothermal system dealer, The average life expectancy of a geothermal
system is nearly 25 years compared to the 13 year average life expectancy of conventional
systems. Geothermal systems have less maintenance costs. This is primarily due to geothermal
equipment being indoors and not exposed to the elements. Geothermal systems also have fewer
moving parts, which makes for less opportunity for malfunction (residential.geocomfort.com).
Given that this information is coming from a dealer, the credibility of this source is questionable.

Introduction to Environmental Science: Investigation 1

There are many variables that could make each system different from home to home. In
order to get an understanding of how installing a geothermal heating and cooling system to a
residential property could potentially result, Ill create an example combining all of the
previously discussed topics to show the financial impact as a whole. Ill also try to calculate
both the low and high ranges to create more of a window of possible benefit, rather than an exact
number which could represent a false sense of absolute accuracy. Lets start with a 2500 square
foot home with a value and purchase price of $250,000. For this example, well assume the
homeowner will keep this home for a period of 15 years, before selling. As stated above, for a
home this size, a homeowner could expect to spend $20,000 on a geothermal system. That
would bring their total current investment of their property to $270,000. Lets assume that this
home would have the average utility bill of $1,369.08 annually without the geothermal system.
This home would expect to have a reduction in utilities by 40% to 60%, and a savings of $547.63
to $821.45 annually. After 15 years, that calculates to a savings of $8,214.45 to $12,321.75.
Another assumption will be that either this home was purchased prior to the expiration of the
federal tax credit or that the federal tax credit was extended to future expiration. For this
homebuyer, receiving the credit of 30% would calculate to $6,000. There would also be the
increase in property value of $10,956.60 to $16,429 for this property. Given that the there are
many competing brands of conventional heating and cooling systems of different sizes and
prices, I will use the information from the sources that the geothermal system is about double the
price but lasts twice as long. However, replacing the above ground portion of the system is
significantly less than the initial installation cost, as would be replacing a conventional heating
and cooling system. If the homeowner is selling the property after 15 years, the geothermal
system still has an expectancy remaining of 10 years, and would therefore be saving an estimated

Introduction to Environmental Science: Investigation 1

$5,000 as the expectancy of conventional systems average 13 years. Ill also use an assumed
property value increase based off the market of $50,000 after 15 years. Excluding any taxes and
interest, focusing only on principle and directly related expenses, the home with the geothermal
system would have a profit of $34,634.25 to $44,214.25. If this homeowner decided not to
install the geothermal system and only went with a conventional system, at the end of the same
15-year period, the profit would be $11,963.80.
Heating and Cooling System

Geothermal (High End)

Geothermal (Low End)

Conventional (Average)

Original Property Value

250,000.00

250,000.00

250,000.00

System Installation

20,000.00

20,000.00

12,500.00

15 YR Utilities

8,214.45

12,321.75

20,536.20

Federal Tax Credit

(6,000.00)

(6,000.00)

System Replacement Cost at 15 YR

5,000.00

272,214.45

276,321.75

288,036.20

Original Property Value

Total Expenses

250,000.00

250,000.00

250,000.00

Market Based Property Value Increase

50,000.00

50,000.00

50,000.00

Property Value Increase From Efficiency

16,429.00

10,956.00

316,429.00

310,956.00

300,000.00

(272,214.45)

(276,321.75)

(288,036.20)

44,214.55

34,634.25

11,963.80

New Property Value

Subtract Total Expenses
15 YR Profit of Geothermal vs Convention

Homeowners should take all of this information into account to decide if a geothermal
heating and cooling system would be right for them. Given the length of time for the return on
their investment, the upfront costs, and the potential outcomes of different systems, it seems that
this is an investment that would be beneficial in the long term. Residential geothermal heating
and cooling systems in homes could play a significant role in reducing both the financial costs of
electricity and natural gas, and harmful costs to the environment from the emissions that are
released from the generation and use of these energy sources.
Works Cited:

Introduction to Environmental Science: Investigation 1

Withgott, J., Laposata, M. (2014). Environment: the science behind the stories (5th ed.).
Glenview, IL: Pearson Education, Inc.
United States Department of Energy. (2016). Geothermal heat pumps. Retrieved from
http://energy.gov/energysaver/geothermal-heat-pumps
United States Census Bureau. (2015). Housing units, July 1, 2015. (V2015) [Data file].
Retrieved from https://www.census.gov/quickfacts/table/HSG010215/00
Energy Environmental. (2016). Installation. Retrieved from
http://www.energyhomes.org/renewable%20technology/geoinstallation.html
Energy Information Administration. (2014). 2014 average monthly bill-residential [Data file].
Retrieved from http://www.eia.gov/electricity/sales_revenue_price/pdf/table5_a.pdf
United States Department of Energy. (2016). Residential renewable energy tax credit. Retrieved
from http://energy.gov/savings/residential-renewable-energy-tax-credit
Self, S. J., Reddy, B. V., & Rosen, M. A. (2012). Geothermal heat pump systems: Status review
and comparison with other heating options. Applied Energy. 101. 341-348. Retrieved
from http://www.sciencedirect.com.ezproxy.lib.usf.edu/science/article/pii/S03062619120
00542
Nevin, R., Bender, C., & Gazan, H. (1999). More evidence of rational market values for home
energy efficiency. The Appraisal Journal. 4. 454-460. Retrieved from https://mpra.ub.uni
-muenchen.de/35344/
GeoComfort. (2016). Costs. Retrieved from http://residential.geocomfort.com/resources/costs