A new term 'Derating Factor' is devised for evaluating deterioration in thermal performance of Earth Air Tunnel Heat Exchanger (EATHE) under transient operating conditions in predominantly hot and dry climate of Ajmer (India) using experimental and computational fluid dynamics modeling with FLUENT software. Maximum air temperature drop obtained using steady state approach for EATHE of pipe length 100 m, pipe diameter 0.2 m and at air velocity of 5 m s(-1) is 18.4 degrees C, 18.7 degrees C and 18.4 degrees C for soil thermal conductivity of 0.52, 2.0 and 4.0 W m(-1) K-1 respectively. However, the maximum air temperature drop obtained using transient approach during 24 h of operation vary between 18.3 degrees C and 14.0 degrees C, 18.3 degrees C and 17.2 degrees C and 18.6 degrees C and 18.0 degrees C for soil thermal conductivity of 0.52, 2.0 and 4.0 W m(-1) K-1 respectively. The derating factor is found to be a function of thermal conductivity of soil, duration of continuous operation of EATHE and length of pipe. The analyzed cases have shown the range of derating to be as minimal as 0.2% to as high as 68%, which if ignored while designing may lead to poor performance of earth air heat exchangers. Maximum value of derating factor is observed after continuous operation of EATHE for 24 h. (c) 2012 Elsevier Ltd. All rights reserved.