[Greenbuilding] Air Source versus Geo-Exchange Heat Pumps (Yet Again)

[Paul Eldridge]

I have an upcoming meeting with an electrical utility that is currently 
evaluating various DSM initiatives, including air source and 
geo-exchange heat pumps.  As some of you know, I tend to believe high 
efficiency air source heat pumps offer better overall value, at least in 
our milder Maritime climate, but before I offer my opinion, I need to 
better understand how the numbers fall (my primary strength is C&I 
lighting and my understanding of residential heating and cooling is 
sketchy at best, hence my solicitation for advice).

As a starting point, I've pulled the past ten years of hourly weather 
data for Halifax and built a spreadsheet to test various scenarios; it's 
673 pages long, but you can find the first two pages in PDF format here: 
http://www.datafilehost.com/download.php?file=d4474884.  According to 
the Nova Scotia Department of Energy, the spacing heating demands of a 
conventional new home in our climate is approximately 50 million BTUs.  
In the standard scenario, I've assumed internal heat gains from 
lighting, appliances, passive solar, occupants, etc. would be sufficient 
to maintain indoor temperatures until outside temperatures fall below 
15C/59F.  I've also assumed heat loss below this point averages 
200-watts per degree C (I appreciate heat loss is not linear and other 
factors such as wind play a large role but that level of detail goes 
well beyond my abilities to model here).

A Fujitu 12RLQ and 15RLQ were selected as our air source units, with an 
installed cost of $3,500.00 and $4,000.00 respectively (an amount 
roughly double their wholesale cost).

The ten-year average space heating  requirements of our reference home 
is 15,024 kWh/year.  If the results are valid, the smaller of the two 
units can supply roughly 76 per cent of overall demand and the larger, 
79% -- this assumes heat can be adequately distributed throughout the 
home, which is unlikely, but we'll ignore this for now.  Backup heat, as 
provided by existing baseboard electric heaters, is estimated to be 
3,602 and 3,126 kWh/year respectively.

The financials, as I would expect, seem strong, with annual savings in 
our base year of roughly $840.00 for the 12RLQ and $880.00 for the 
15RLQ.  This puts the simple pay back at under four years for the former 
and five years for the latter, assuming a modest 6% escalation in 
electricity costs.  The internal rates of return are 26 and 23 per cent 
and the corresponding 10-year NPV values are $4,6465.00 and $4,504.00, 
assuming a cash discount rate of 5%.  Overall, a pretty solid investment.

The numbers for the geo-exchange system, however, are not so good and 
I'm wondering if I've made some poor assumptions or if my calculations 
are incorrect.  I've assumed a capital cost of $18,000.00, which 
includes the installation of ductwork, an average COP of 4.0 and that 
the heat pump can supply 100 per cent of the home's space heating and 
domestic hot water needs.  The combined annual savings in our standard 
scenario are $1,482.00.  This provides us with a pay back of just under 
ten years (with a 6% escalation in utility rates), an internal rate of 
return of 1.4% and a ten-year NPV *loss* of just over $3,100.00.  I 
would have thought the inclusion of the DHW component would help 
minimize any gap between these two systems but that's not the case.  Am 
I missing something something obvious or are the numbers mentioned here 
unrealistic?  I don't want to unfairly criticize a technology that can 
help utility customers save money (nor, for purely selfish reasons, do I 
want to embarrass myself in the process), so any insight would be 
greatly appreciated.

Best regards,
Paul