I sent a price signal: replacing natural gas with a ground source heat pump.

Snowy Sunrise, trees, clouds, snow.

TL;DR:

Excavator digging a trench through the yard, installer standing in the trench, shorter than the sides.

· What: 6-ton Water Furnace Series 5 heat pump with horizontal ground loop system at 4.99 COP

· Annual Savings: 9 tons CO2, $1,500 from Natural Gas and at least $500 annually from Electricity savings — still TBD as we’ve only had warm months of service so far. About twice the carbon savings as I could expect from swapping an existing ICE car for an EV at about the same price.

· Payback: 17 years with tax credit, faster if one prices in the avoided CO2 emissions, slower if one includes the major yard renovation that cleaned up the mess. Annual costs are lower, but the capital investment up front is significant.

I had been looking into ground loop heat pumps or even more robust geothermal systems since I moved into my current home 6 years ago. With a 30+ year old house sporting a 25+ year old natural gas furnace, hot water heater, and an undersized AC, I knew I was looking at a big replacement cycle in my near future and wanted to get off gas for environmental reasons. There are a number of challenges for anyone pursing this course of action today:

1) Consumer rebates, supply chains, and incentives are aligned to the fossil fuel services

2) The capital expense is quite large for large and high-quality systems

3) Residential systems are priced for ‘average’ homes, but only the wealthy can afford the systems today and their homes are often much larger.

4) There are few installers for the good systems — and they are cross-pressured

I went through several rounds of making calls and looking for suppliers, doing research, and shelving it for another season. All while the existing furnace, hot-water, and AC continued to show signs of age or outright fail. After a couple days of no heat in a cold house, followed a few months later with an iced over AC that only worked every other day, the time to stop putting things off and replace had come. I went all in with the intent to send a price signal that ground loop heat pumps were a real thing consumers wanted. I sourced a commercial HVAC supplier and put in a system that all-in ran around $48k and will take around 15 years to pay back. It wasn’t easy to get to yes here, it isn’t easy for others to replicate, and remains novel and different rather than common place. But, 4 months after the installation I’m super happy with my system, both in the 99% reduction in natural gas consumption and in the fact the system we installed fits my home better than the old, aging, systems ever did — holding out for a commercial grade system instead of a residential unit was the right call here. I can see in my consumption data the day, April 19th, when we took the old gas furnace (21 years old and rated at 80% efficient) and hot water heater (26 years old and somehow unstoppable) offline and swapped in electric alternatives. With the removal of the overworked AC we get more even temperature and reduced overall electricity consumption. The replacement of the gas water heater makes the changeover for the furnace + AC more difficult to tease out, I’d have to plug into their individual data ports and track their consumption directly rather than resort to my power bill, but I pay my power bill so that’s the one that makes it all concrete.

There was snow on the ground when the installation started in March, and we just hit 115 F in my yard back in June — even in the mild Seattle area weather extremes are becoming more common. Through the recent heat wave the system performed admirably, keeping the home cool despite the heat outside and the demand for home cooked cakes and cookies on the inside (June being a big birthday month around here). 115 F outside and we were baking cookies, the ground loop heat pump just didn’t care.

The first thing everyone asks is “when does it payback?” That’s both easy and hard to compute. Electricity is more expensive than natural gas (when we discard the carbon cost) and while the systems are far more efficient it isn’t clear how the hot water heater factors in. Previously the hot water heater was a natural gas unit, installed in 1995. Now hot water comes from the heat pump super heater and the hybrid electric heat pump I’ve installed. One needs a tank even with hot water service on the heat pump, heat pumps are a slow and steady operator and hot water demand is spikey. So, savings from the AC, more expense from the hot water heater — probably, more expensive ‘fuel’ for the heater but 7x the efficiency probably leads to lower costs on cold days as well. The transition months in the spring and fall are probably going to be more expensive, but the bulk of the year will be cheaper as the previous systems hit their extreme performance limits all the time and the new system rarely works hard, much less struggles.

In practice that works out to a projected $1,500 in natural gas annually and $500 in electricity spread around the year. But this isn’t a steady or smooth relationship, when the AC works hard I save money, when the hot water heater and heat pump work harder I spend more. When the power goes out I get the full view, as my backup power is a natural gas generator. A recent 3-hour outage looks like this:

Chart showing daily temperature fluctuations, Natural Gas consumed per day (baseline of zero consumption) with a giant spike for the 3 hours the power was out and generator was running.
Chart showing daily temperature fluctuations, Natural Gas consumed per day (baseline of zero consumption) with a giant spike for the 3 hours the power was out and generator was running.

And that means I’m spending $1 and creating 12lbs of carbon dioxide every hour the main power is down. That’s a very high consumption, but also the ceiling as the (22kW) generator runs the whole house. I replaced the generator 5 years ago; I’d have gone with a battery backup system if I had to replace it today. From this you can also see the four levels of 0 therms consumption for the house now, that’s the meter trying to record the gas consumed by the cooktop. More than 99% of my annual consumption went into the furnace and hot water heater, and if not for reaching the limit of my electrical panel (and the embodied carbon of the retrofit) we’d swap over and drop gas completely.

Chart showing the natural gas consumption alongside daily temperature through the transition from natural gas heat to electrical heat — showing 99% reduction in natural gas consumption for my account.
Chart showing the natural gas consumption alongside daily temperature through the transition from natural gas heat to electrical heat — showing 99% reduction in natural gas consumption for my account.

Here is the natural gas consumption chart from my power bill, the switch-off date is pretty stark.

Chart showing Year over Year electricity charge for the month from mid-July to mid-August in 2020 ($194) vs. 2021 ($135).
Chart showing Year over Year electricity charge for the month from mid-July to mid-August in 2020 ($194) vs. 2021 ($135).

Year over Year changes are a mixed bag so far. 99% reduction in natural gas, sure, but the electricity consumption goes up or down against last year depending on how extreme the weather is — with savings at extreme temps and costs at modest temps. The electric consumption has a higher floor level, but is less sensitive to weather swings, leaving its total consumption lower throughout the year despite being about the same or even higher in many months.

Ok, so it cuts down on CO2 emissions and pays back over a pretty long-time horizon for a real person. How did all this come to pass and why is it so hard?

We touched a little on how the incentives are all pushing for natural gas replacement of appliances. Folks are willing to go to the mattress for their gas stoves so the cartel indoctrination is working (in the model of DeBeers and Diamonds). The utility gives incentives for gas but not electrical swaps, the installers know how to pull the incentives for natural gas and have more familiarity there due to higher volumes. Finding an electrician with heat pump experience isn’t necessary, but definitely is rare. And, the units are sized for smaller homes, like average homes of 2,300 sq ft. Some of my neighbors have 10,000 sq ft homes with 4 or more furnaces, they can afford the up-front expense to do the install. Folks in ‘starter homes’ at 2,300 sq ft probably cannot — and won’t have the space for the horizontal loop, meaning a more expensive installation. My home is just under 3,700 sq ft and 5 of us live here, so it is big but not crazy big and I can afford to send a price signal so again this isn’t an every-person process yet. So now we’ve touched on challenges #2 and #3. That all comes together when we get to the stage of finding someone who can do the work.

Wrapping up the ground loop install, note the three trenches coming together and two layers of coil along each trench. On the right we see the how much of my acre lot was impacted by the work.
Wrapping up the ground loop install, note the three trenches coming together and two layers of coil along each trench. On the right we see the how much of my acre lot was impacted by the work.

Doing the work

In March, over the course of a week, six 600’ coils were buried in two layers (1m and 2m deep). It went quick, and that’s even counting the time spent patching up the pipe to the drain field when we accidentally hit the septic line. After it was done, my “small side-yard job” looked like it covered half an acre, a bit of a bigger deal than I anticipated. We’d also broken through the clay layer that kept the water from draining and supports the local wetlands. Churning up the clay massively degraded the soil quality, hurt drainage, destroyed the sprinkler system, and the dirt scar disrupted our serviceable field of moss — we ended up renovating the entire lot to catch up with 30 years of yard compaction and moss development. The yard work doubled the project cost, so this is a big consideration and a vote in favor of doing the installation when the home is originally built as the retrofit is quite disruptive. With a service lifetime in excess of 20 years for the heat pump and 50–100 for the ground loop, this is truly a one and done solution.

Instead of doing it right 33 years ago, the builder did the safe and socially encouraged thing: natural gas furnace and water heater. Both were replaced quite quickly, the water heater after 6 years and the furnace after only 10 years. Both replacements were tagged with early Energy Star ratings, but mid-90s Energy Star still allowed a 7x efficiency improvement with the new kit. All that said, that A.O. Smith water heater lasted 26+ years without issue or complaint so I went with them again for the replacement and installed their Hybrid Electric Heat Pump.

Finding a contractor

A pair of EarthHeat vans in the driveway during the inside installation work.
A pair of EarthHeat vans in the driveway during the inside installation work.

There are many fewer HVAC installers with heat pump experience than natural gas, and most of those are air source heat pumps. You might get a 2–3 COP from an air source unit. My ground loop is at 4.99 installed and less sensitive to variation in air temperature. The 80% efficient 21-year-old gas furnace would have put out 0.8 BTUs for 1.0 BTU of burned gas when it was new in the factory, so they’d all be vast improvements to be sure. But I wanted the ground loop and to push efficiency limits. That narrowed my search down to folks who were selling WaterFurnace in the residential space. Even working with those installers I got quote after quote with two systems, a 5T Waterfurnace and a 3T natural gas system was the most popular recommendation. Why is that? Only one suggested the natural gas backup was necessary for reliability — they obviously had no idea what they were talking about. The main challenge was that 5T units were the largest sold in the residential product lines. My home needed 6T of service. I am a functioning human who can search the internet and could see that heat pumps come in all manner of sizes and brands, but those much larger units were all commercial units and the residential installers didn’t want anything to do with them. So, I found a commercial installer to do my home. My installer was invited to bid on the Microsoft district heating system, but passed on the option because the job constraints made it impossible for him to complete that much work on the aggressive timeline and the penalty for missing the date was too real and severe. In the commercial space my job was a small job and the crew snuck it in between other jobs — the ground work took a week and then we stalled out waiting on an electrician. Electricians are in high demand now, many laid off their crews at the start of the pandemic or otherwise lost their tradespeople. But once the electrical was done the furnace swap and startup was a 3-day deal and we’ve been running ever since.

The new heat pump and hybrid heat pump hot water heater, installed and running.
The new heat pump and hybrid heat pump hot water heater, installed and running.

· Electrical: $7k

· Hybrid Heat Pump Hot Water Heater: $3k

· Ground Loop Heat Pump and Install: $38k

It took a long time: to find someone to do the work, to finish the work, and to pay back the up-front capital expense. For heat pumps, and especially ground source heat pumps, to become ubiquitous we need to change incentives for local utilities and make it easier or even a requirement for new construction to leverage efficient deployments of district heating. Every new housing development or tower should have a district heating system instead of individual system — it can even fit into the local utility’s current incentive structure as additional capacity build out. Larger systems are more efficient and share setup costs, but the frequent model in the US is to have the utilities bring fuels instead of the outcome of consuming the fuel, e.g. we don’t tend to turn the product into a service offering when it is heating and cooling but we could and in the past we did.

There are innovations in drilling (Dandelion and their smaller diameter bore) and in finance that are making it easier for home owners to leverage these better, but more expensive, systems and this will help ease adoption. In terms of the hardware units themselves, I wouldn’t expect a lot of cost reduction in scale out. Even if the hardware costs dropped 10x the overall cost is largely labor and the fact you have to fight through layers of resistance to go down this road. In my own install, the material costs were only 20% of the total and a third of that was the hot water heater available at a big box retailer. Fundamentally, these units are just blowers and heat exchangers, it doesn’t go anywhere, burn anything, and aside from the impellers there are few moving parts. The different fluid loops are all closed so there isn’t a lot that can go wrong once it is working.

But the core blocker is disrupting the utility’s current preference for natural gas supplied heating (or local favored fossil fuel). Bringing utilities into the financing and community operations of district heating when appropriate seems like the step required to move from fringe adoption to mainline deployments. California is trying to force the issue through their building codes, that’s a great option but puts the costs on the wrong party, the utilities are already a state regulated monopoly so they should be put to work to align with what are clearly the objectives to move off fossil fuels.

Former thermoelectrics and fuel cell scientist; current software product manager. He/Him.