Crunching the Numbers: The Not So Hidden Costs of Traditional Heating Systems

By The Shannon Household

Hello, Live Net Zero followers. I have to confess – when we first looked at even applying for this competition, it was the heating and cooling challenge I was most looking forward to. I’m sure you all learning a lot from us and our competitors for the everyday and simple things you can do at home to improve your home envelope, reduce emissions in your commute and just sustainable maintenance. When I first started my interest in DIY and sustainability improvements, I ate those tidbits up faster than my Capn’ Crunch in the morning.

But after five years of the little things that have all added up to tremendous savings and improved comfort of our home, we had exhausted many of those measures. We were excited by this week’s challenge because we were now ready for the giant leaps towards net zero. We were biting the bullet and updating mechanicals!

 Your HVAC system will be the heartbeat and the arteries of any home – but in Alberta where we get to -17 a week before Halloween (RUDE), we have a different appreciation for that heating system than maybe our more moderate climate neighbours. So we invested BIG in disconnecting from the Natural Gas line, but as much as the price tag was staggering – the amount of research was more, and I’m going to give you the study guide right here!

Our choice by the dollar!

I’m cheap. Some people like to put it as frugal or money-wise – no, I wear my self-proclaimed “cheap” badge with honour. I grew up below the poverty line for a lot of my adolescence. I always had a comfortable roof over my head, and my belly was never empty, but my amazing parents worked multiple jobs each to keep me that way. (Yes, Dad had three jobs, and Momma always had at least two throughout my high school years). You learn the value of a dollar a whole lot differently when you have to make it stretch. You either have to make more money or use less, and utilities are one of those things I HATE having to work harder for to pay. So, using less is my motto.

So, in the first home that my husband and I ever bought together – when our home inspection came back and said our furnace was getting old, we rushed out to get a new one before it broke. I did my due diligence, called no less than 3 different suppliers, and got multiple bids. We bought the highest efficiency natural gas furnace available, and then I waited for the energy savings to roll in on the next utility bill.


Nothing. It didn’t make a difference at all. Even though the technology was newer and more efficient, our bill didn’t noticeably change. Mainly because the “usage” part of our natural gas bill was only a fraction of the total cost of our heating, it was infuriating to have just spent several thousand dollars on efficiency with no return on investment. As resentful as it was, I vowed never to replace a furnace again unless it was broken.

We moved into this home in 2018. The whole house was a project. ¼ of the house didn’t even have power for some odd reason. There was a long project list, and all of it needed money – but replacing the 1980s original natural gas furnace or the secondary one in the detached garage was not anywhere near the top of the list. We did our yearly maintenance, cleaned the ducts, and changed the filters regularly, but otherwise, I wasn’t investing anything into it until they failed.

For the next five years, we got better and better at adjusting our lifestyle to use less. We turned off the pilot lights and closed the gas line every summer; we used smart thermostats only to heat the house when needed.

I knew the day was coming when the furnace would finally kick the bucket. I had struggled to find a company selling me an air Source Heat pump here in my area. There was a host of excuses, from they don’t carry them, they don’t like to offer them because of their limitations in our climates, it would be best to increase our insulation first. It wasn’t looking like the best option. Then I started work on a TELUS STORYHIVE documentary called “No Demo Net Zero,” where a building scientist attempts to retrofit her home to net zero and carbon neutrality without sending many building materials to landfills. Amelie’s approach was to use a geothermal heat exchange system.

But no one looks at an oil rig parked in your backyard drilling down 400 ft and thinks, oh, that’s the cheapest option! It’s not, I assure you. But geothermal heat pumps have quadruple if not more efficiency than most other market heat systems and would not require us to use natural gas anymore.

 So when our furnace blew in February of 2023, this is how geothermal made sense for us:

  • A new natural gas furnace = $6,000-$8,000
  • A new natural gas hot water tank = $3,500
  • A new heating method for the garage = $1000-$7000
  • Total = $15,000

Yearly operating costs =  $1438 but rising by about 5% yearly for the last five years. That’s not even including that our locked-in Natural gas rate expires in 2024, and our usage rate would double.

This wouldn’t be eligible for a greener homes loan or grant. So we would have to finance it out of pocket or, in our case, a loan (and interest fees)

So, with some calculations, the total cost for ten years with upfront costs, interest rates, electricity AND natural gas =  $ 69,177.43

*Yes, I included our hot water tank and the furnace in our garage in these calculations to make it ‘even’ to best compare having a whole new system one way or another.

With Geothermal, we could recoup 75% of what we had been spending on Natural Gas bills right away because we would no longer need to have that delivery fee, admin fees, etc. Our usage price might increase for electricity, but we were curious to check out the numbers.

This is the broad strokes of our quote:

  • Ductless Mini Split for the Garage = $6,300
  • Geothermal Heat Exchanger = 18,165.69
  • Hybrid ELECTRIC hot water tank = 3,360.00
  • Drilling, installation etc = $42,187.62
  • Total Cost = $70,013.31

Simple math = I’m paying 4x more upfront. OUCH.
We would also be spending a lot more on our “gas option” if we included a central air conditioning unit to get to the same comfort levels year round – but we didn’t factor that into our decision-making process.  

But what would It cost to run?

We didn’t have central air conditioning before – so that’s an added perk, even if it’s additional use. So, I made some assumptions from the data supplied by my building scientist and guessed we would use an additional 23500 KWH per year max. But it would only affect the variable/usage part of our bill because we have to pay the fixed rate charges to operate our lights, stove, computer etc.

So our electricity costs are usually about $1500 per year. Let’s assume that jumps to $3000 this year and rises by about 5% each year.

But when it comes to financing, things tip in our flavor:

$40,000 of the loan is 0% interest, thanks to our successful application with the Greener Homes Loan, as this is a sustainable replacement. Plus, we would max out all eligible grants, giving us back $5,600 immediately.

Then, because of the more extensive renovations, we also went to our mortgage lenders and pulled equity from our home to pay for this at a much more favorable interest rate. Given all of the improvements we have done and house prices rising, we had more than enough equity built up over just the past five years to fund this whole project (I’m only giving you the geothermal numbers now, though – stay tuned how we reinvested the rest of the equity back into our home). This allows us to have a lower interest rate but also amortized over a more extended period than a standard renovation loan, giving us more monthly liquidity.

So the math gets complicated with multiple funding sources, but this is what we ended up with.

Our anticipated ten-year costs looked like this:

Electric/Natural gas combo utilities + upfront capital costs = $69,177.43

Electric utilities + upfront capital costs = $107,345.72

So, we still pay a 30% premium right now (but alot less then 4x capital cost thanks to the incredible efficiency of this system). But this is all calculated on my current locked-in natural gas rate of 3.99 $/Gj. That expires next year. I could be paying anywhere from $5.89 $/GJ and up next year, or more if we have a utility crisis like the UK did last year, which saw utility prices jump by 300%. Also, I would always be at the mercy of any changes to admin and delivery fee changes that I can’t anticipate. Plus, my geothermal field is permanent (the actual underground pipes). That installation and drilling cost would never have to be paid again, and the life span is longer for the actual exchanger than a gas furnace. So it’s fair to say that I’ll be looking at retirement homes before I look at replacing it, not to mention the maintenance on it is nearly non-existent – especially with a washable filter vs a disposable one.

These are the other intangible bonus’:

·         I can make my own electricity with solar (which I am doing!). I can’t make my own natural gas! I am not only sustainable but relatively independently self-reliant.

·         Additional built-in equity to our home,

·         a more stable, comfortable temperature in our home year-round,

·         Air conditioning runs at 800%+ efficiency… when we never had air conditioning before!

·         reduced fire and carbon monoxide risks,

·         The anti-capitalist joy of knowing I’m paying MYSELF by essentially “owning” my heat and then “renting” my heat from my utility provider. (thanks to increased efficiency and powering my house with solar – but we will get to that).

·         and just the warm and fuzzy feeling of not polluting.

·         RESILIANCY – No more surprises in my utility bills!

·         We can accelerate our ROI by paying down our mortgage faster with prepayment privileges on our mortgage. I would never get any added benefit of “prepaying” my natural gas bill.

·         Already meeting the 2050 Climate action goals.

·         Being an “early” adopter of a “new technology” (Geothermal Exchange isn’t new, but not typical for residential use, especially in an urban setting)

Footnote – this is all just the math we did when deciding. BEFORE Our system was installed and operational, we were reasonably confident that our calculations were set as the WORST CASE SCENERIO. Although our break-even point was hard to guess before, we knew we would see one eventually and were okay with a premium because it satisfied many intangibles that added value to us.

Since then, we have had only our first utility bill since it’s been installed and running. As much as I reveled in not having to open the gas bill, I braced myself for the electrical bill.

Here’s the comparison of the damage:

The chart above is without solar generation (Our system wasn’t commissioned until mid-October).  We used only 57 more KWH, which SAVED us $64.02 overall and diverted 150 KG from our environment. I think our Payback window is MUCH smaller than we anticipated if this bill is the start of a trend.

Written by The Shannon Household

Read more of their stories as they vie with the other seven households to reduce their carbon footprint.

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