How Will Installing a Home Geothermal System Impact Your Electric Bill?

The key to saving money on home heating and cooling is energy efficiency. Simply put, the more efficient your HVAC system is, the more bang you’ll get for your buck. You might be curious to know: is a conventional furnace or a geothermal heat pump more efficient?

Some energy is always lost in the process of generating heat, and ALL of the energy delivered with a combustion-based furnace comes from the consumption of a fuel source, whether it’s natural gas, propane, or heating oil. 

Geothermal heat pumps don’t generate heat — they just transfer it from the ground into your home. For every 1 unit of energy used to power your geothermal system, on average 4 units of heat energy are supplied. Only about one-third to one-fourth of the energy delivered in heating with a geothermal system comes from electricity consumption — the rest is extracted from the ground.

Given that geothermal heat pumps are more efficient than furnaces, why do they consume more electricity (and how that will affect your monthly bill)?

In this blog post, we’ll cover:

1. Why geothermal heat pumps use more electricity than furnaces (but less than conventional air conditioners)
2. How much electricity a home geothermal system can expect to use
3. What factors can impact your electric bill after installing geothermal

Why Geothermal Heat Pumps Use More Electricity For Heating Than Furnaces

The fundamental difference between furnaces and geothermal heat pumps is the heat source used to warm the home. A typical furnace creates heat by burning oil or gas in its combustion chamber, whereas a geothermal heat pump simply moves heat from the ground that already exists.

A furnace consumes a very small amount of electricity to power the fan, and other minor electrical components, but most of the heat is generated through combustion.

A geothermal heat pump uses electricity to power the compressor, fan, and circulating pumps. These important components help the heat pump move heat from the ground and bring it into the home through the vapor compression/refrigeration cycle. 

Why Geothermal Heat Pumps Use Less Electricity For Cooling Than Conventional Air Conditioners

Geothermal heat pumps are more efficient and use less electricity for cooling than even hyper-efficient central AC systems. That’s because standard AC units remove hot air from your home and release it into the hot outdoors, while geothermal heat pumps move the hot air into the 50 degree ground where it’s more easily accepted.

A typical central AC has a SEER rating of 14-16, while a geothermal heat pump system has an average EER rating of 20-30. Because of this increased efficiency, homeowners with window units, wall units, or traditional central AC prior to installing geothermal usually see their electric usage decrease in the summer. 

How will your electric usage change if you had NO air conditioning prior to installing geothermal?

Homeowners who previously used no air conditioning prior to installing geothermal may notice a moderate increase in their electric bills. 

How Much Electricity Will a Home Geothermal System Use?

Electric usage will vary based on climate and seasonality. In a heating dominant climate (like upstate New York), about 50% of the additional electric usage attributed to your geothermal system will be consumed in just 3 months: December, January, and February.

In fact, it’s normal if your December electric usage with geothermal is four times greater than what you used the previous December heating with an oil furnace.

For example, if your December 2019 electric usage was 500 kWh, it might be 2,000 kWh in December 2020 after upgrading to geothermal. However, without spending any money on oil or propane, your overall heating expenses for the year will be much lower. 

That might sound jarring, but it’s important to consider a few things holistically about your geothermal system.

1. Your electric usage will increase with geothermal, but that additional cost won’t be divided equally throughout the year. Your electric bill will likely be lower in the summer than you paid previously.
2. You’ll be spending less money overall than when heating with oil or propane – even with an increased electric bill.
3. Heating costs and the savings associated with a geothermal system are relative to energy prices. As the prices of natural gas, propane, and heating oil increase with respect to the price of electricity, the savings associated with getting geothermal increase too.
4. Historically, the rise in electricity prices has been slow but steady while natural gas, propane, and heating oil prices tend to be more volatile. For example, it’s not unusual to see articles on rising oil prices during political or economic disturbances.

Let’s take a look at a typical 2,500 square foot home in Cortlandt, NY which previously had a fuel oil furnace and central air conditioning before installing Dandelion Geothermal.

This home will use an additional 6,995 kWh of electricity annually while saving $1,581 or 47% of their total heating and cooling costs every year with geothermal heating and cooling.

In the below example, the 2,500 square foot home has an annual heating load of 94,664,410 BTUs and annual cooling load of 27,656,620 BTUs. 

Before getting geothermal, the furnace was 15 years old and operating at 75% efficiency due to age and wear & tear. The homeowners paid $3.30 per gallon of oil and continue to pay $0.188 per kWh of electricity. 

Oil Furnace Versus Dandelion Geothermal Monthly Heating Costs

Central AC Versus Dandelion Geothermal Monthly Cooling Costs

Oil Furnace and Central AC Versus Dandelion Geothermal Annual Operating Costs

What Factors Can Impact Your Electric Bill After Installing Geothermal?

Increasing and Decreasing The Thermostat

A geothermal system will run most efficiently when the thermostat is kept at a single temperature set point throughout the day. Many homeowners are accustomed to adjusting their thermostat, however, if they plan to be away from the house or asleep. This practice, known as thermostat setback, often saves money and energy when operating a fossil fuel furnace.

This practice is counterproductive when operating a geothermal system. Unlike a furnace, a geothermal system is carefully designed to meet a home’s precise heating and cooling needs. In order to recover from a setback period, the strained geothermal system will likely need assistance from a supplemental heat source like an electric resistance heater. As a result, thermostat setback forces the geothermal system to frequently rely on expensive supplemental systems, unintentionally increasing the average cost of operation.

Indoor Temperature

We recommend homeowners set their thermostats around the same temperature as their previous system. No matter the heat source—fuel or geothermal—it costs more to heat a home to 75°F than 70°F.

Auxiliary (AUX) Heat Usage

Dandelion Geothermal’s heat pump has different heating stages for different heating needs: part-load, full-load, and Auxiliary (AUX) Heat. AUX Heat will automatically turn on when the demand for heat is the highest, providing supplementary electric-resistance heat to keep your home comfortable.

AUX Heat is a normal part of heat pump systems and necessary at times, but it does use more electricity than the other heating stages. It most commonly activates intermittently in short runs when the outdoor temperature drops below 15°F.

To maximize geothermal savings, it’s important to minimize its usage.

Some other examples when AUX heat may activate:

1. Significant thermostat adjustments: Your thermostat was set to 60°F while you were on vacation. Now that you’re home, you adjust it back to a more comfortable 70°F. A change in thermostat settings greater than 5°F at a time can trigger AUX Heat.
2. Sudden weather changes: A cold front arrives, rapidly dropping the temperature outside and pulling more heat from your home. A sudden drop in air temperature returning to your heat pump may trigger AUX Heat.
3. Human error: Someone left the back door open (again). Now it’s 62°F inside and your thermostat is set to 70°F. Like the previous two examples, a difference between the air temperature and the thermostat setting greater than 5°F may trigger AUX Heat.

Electricity Rates

Electricity rates vary, which will impact payment amounts even when consumption remains relatively unchanged. Supply rates are affected by weather patterns, market factors, ESCO providers (if utilized), etc. It’s important to compare kWh prices (in addition to kWh consumption) when comparing past and current electric bills.

Estimated Electric Bills

Some utility companies only read your electric meter every other month, despite billing monthly. This means that – during months where the meter was not read – your consumption, and therefore your electric bill, is estimated. For customers making the switch to electric heating with geothermal, it is not uncommon for these utility companies to “under-estimate” electricity consumption during those winter months when the meter is not actually read.

This results in the appearance of unexpectedly high consumption in the month following, when the meter is read and the true-up occurs. Fortunately, the two-month average will still be accurate, and this is a short-term issue as utility company estimates will improve once they obtain better data on the new usage patterns.

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