Solar vs. Geothermal - Which is a better payback?
Updated: Nov 14
Both solar & geothermal are considered renewable energies and they both work very well together. When it comes to renewable energy, we believe in an all of the above approach and should utilize all forms when possible. However, geothermal HVAC systems have quite a bit more market share here in Southern Indiana than solar energy systems. Grid-tied solar energy systems are still relatively new to the area and generally misunderstood as far as how they work and return on investment. In reality, the two technologies work great together and can sometimes allow homeowners to operate in 'off-grid' mode when coupled with solar & backup batteries such as the Tesla Powerwall. However, we would like to take an unbiased look at the two technologies and compare them from a cost and engineering standpoint when considering either one or both for your home. We will attempt to do this with engineering formula's for BTU's and KWH's generated by each system, and by considering cost and design factors for each of the two technologies.
This is a geothermal HVAC system that is powered by a grid-tied solar energy system in Evansville, Indiana.
Unfortunately, not all homes are suitable for geothermal and/or solar energy systems. For example, homes that are located in subdivisions generally don't have enough land area to install the geothermal loops. Additionally, homes that are too shaded may not have enough sunlight to efficiently generate electricity from solar. So, there are limitations to both technologies that must be acknowledged and considered. Many homes in newer subdivisions which lack mature trees have suitable rooftop for some solar panels. But, as solar energy demand continues to grow, geothermal systems still outnumber solar by a wide margin across the wide spectrum of residential customers in SW Indiana.
Case Study: Deacon Dave Seibert has a 4-ton Water Furnace geothermal system for his home in Boonville, Indiana. His solar system consists of 9KW of solar generating capacity and 26KWH of energy storage. The two Tesla Powerwall's can deliver 40 amps at 240 volts continuous and surge to 80 amps for motor starting. And, Dave can take his entire house and barn 'off-grid' by pressing a button on his Tesla app if he chooses to do so.
How do geothermal systems work and how much do they cost?
Geothermal systems work by capturing and transferring heat (btu's) from the constant soil temperatures of the earth. They are able to do this by installing tubes either vertically into the ground, or spread out linearly at about a 4-6 foot depth. And, if a lake or body of water is present, the tubes can be installed there. As fluid is circulated through the tubes, heat is either transferred from the home to the ground for cooling purposes, or transferred from the ground to home for heating purposes. According to Energy.gov, an average geothermal installation for a 2000 sq. ft home can range from $20,000-$35,000. For the purposes of this article, we will use a cost of $30,000 for a 3 ton unit as the basis of our calculations.
How does a grid-tied solar energy system work?
A grid-tied solar energy system works by generating electricity as the sun passes across the sky over the top of the solar panels. As the direction of the sun faces more perpendicular the solar panels, the power output increases accordingly. Generally, the power output curve of a solar energy resembles a bell curve with the peak of production occurring around noon when the sun is at it's highest point. Although the amount of sunlight we get varies on a daily basis, the amount we get over the course of a year is very consistent. For the purposes of this article, we will use a cost of $30,000 for a 10KW solar energy system unshaded and facing south which will produce 14,000 KWH's per year.
3-Ton geothermal system by the numbers...
Cost: $30,000 30% Tax Credit: $9,000 Realized Cost: $22,000
Est. Savings off Heating Costs (US EPA): 30-70% (we will use 70%)
Est. Annual Savings off Cooling Costs (US EPA): 20-50% (we will use 50%)
Ave. Yearly Cost of Heating a Home (US EIA): $1191 (Indiana)
Ave. Yearly Cost of Cooling a Home (US EIA): $591 (Indiana)
Yearly Geo. Heating Savings = $1191 x 0.7 = $833
Yearly Geo. Cooling Savings = $591 x 0.5 = $295
Total Yearly Savings = $1128
Years to payback ($22,000) w/4% annual inflation = 14 years
10KW solar energy system by the numbers...
Cost: $30,000 30% Tax Credit: $9,000 Realized Cost: $22,000
Estimated Yearly Production (SW Indiana): 14,000 KWH's (facing south)
Estimated Yearly EDG Revenue (30%): $378 (EDG rate = $0.09/kwh)
Estimated Yearly Retail Rate Revenue (70%): $1568 (retail rate = $0.16/kwh)
Total Yearly Savings = $1946
Years to payback ($22,000) w/4% annual inflation = 9 years
Tesla recommends at least two Powerwall's for emergency backup of a 200A Panelboard. The Tesla Gateway is a 200A smart transfer switch that controls and monitors the power flow from the solar, batteries, grid, and home.
Geothermal and solar are both renewable energies and they work great together. Since geothermal system require electricity to operate their pumps, solar can provide the power to operate the circulation pumps. And, geothermal systems are efficient enough to be operated in off-grid mode when powered by solar/battery combination. We have installed many solar energy systems on homes that already had geothermal systems installed and they work absolutely wonderful together. In fact, homes that already had geothermal required smaller solar energy systems to get the home to net-zero energy.
But, the main reason we wanted to perform this exercise is to educate the public about how solar energy works and the benefits it can provide to the home owner. We also want to change the perspective of solar energy from a politically divided topic, to a mainstream energy source that will be the most widely used and accepted form of renewable energy and that will give our planet a better chance of survival.