Chairman’s Message: Geothermal Stands on Its Merits

By Steve Smith, GEO Chairman of the Board
President and CEO, Enertech Global

Steve Smith CROPThe Geothermal Exchange Organization (GEO) and the geothermal heat pump (GHP) industry welcome the New Year with optimism, especially after coming off a very strong 2014. Cold weather made for a slow start, but business picked up strongly for the rest of the year. Overall, 2014 saw a rising tide of geothermal heat pump sales in both the residential and commercial markets. And GEO Manufacturing Members beat their projections—significantly in some months.

Since the deep recession of 2008-09, we are still working toward recovery. We’re not back yet. But the economy has greatly improved. As the economy picks up, we are looking for another year of growth in 2015, with continuing new housing and building construction. Even though we may see a small bump in mortgage interest this year, rates remain low. More importantly, people are in tune with the cost of energy today and in the future.

During last winter’s “Polar Vortex” crisis, we saw propane prices double in one day. That’s still fresh in our minds. People remember the volatility of natural gas and propane prices. They know that not just gasoline, but fuel oil, natural gas and propane will eventually go up in price, and maybe dramatically.

The cost of crude is at an artificial low right now, and folks across the country know that it can’t be sustained. The threat of higher fossil-fuel prices still hangs over our heads. Long-term energy costs should be first and foremost on everyone’s minds, whether they are building a new home or replacing a heating and cooling system in an existing home.

GHP systems provide 50%+ energy savings and a level of comfort that exceeds equipment from our competition. And we produce hot water, which equals more savings. Our units are installed indoors, protected from the weather, and aesthetically out-of-sight, out-of-mind. And for now, we have federal tax credits (30% of residential and 10% of commercial systems costs), which make GHPs very competitive with conventional high-efficiency heating and cooling systems.

The tax credits started up at the right time back in 2008, when our economy was headed into total retreat. Their timing was perfect, and they have been a very good thing for the industry. Looking back on the collapse of the construction industry, we saw tremendous growth in the GHP retrofit market that was largely driven by the residential tax credit. And now the credits are helping us expand our market back into new construction as the economy moves forward.

GEO is shooting for an extension of the residential and commercial tax credits for GHP installations from the end of 2016 through 2020. And I think we have a good shot for success. We need to emphasize to our elected officials on both sides of the aisle that GHPs are still a small industry deserving of government support.

Owing to our efficiency and production of renewable energy, we offer a lot of bang for the buck for those credits—for the environment, energy costs, energy independence—and for our customers. GHPs should be recognized by federal and state governments as a renewable thermal energy source, and as a weapon in the battle against global climate change. With those messages, I believe we have a good opportunity to work with the new Congress to achieve our goals.

Beyond the Beltway, GEO’s work with state GHP organizations has been fantastic. We have seen a lot of positive outcomes, with changes to renewable and energy efficiency laws and regulations. GEO staff is doing a great job working with geothermal folks at the state and local levels, giving them the facts and information needed to help policy makers make the right decisions for the GHP industry. With that teamwork earning the industry the recognition that it deserves and a “place at the table” in government affairs, GEO and its allies have done more to help the industry than anyone in years.

Geothermal stands on its own merits. We have all the advantages of GHPs—the comfort, long equipment life, aesthetics and energy savings. And our equipment is getting more and more efficient every year because manufacturers are driven in a competitive market to produce more efficient units that cost even less to produce and install.

So, whatever happens with politics, I’m optimistic that as our economy grows, GHP systems will gain market share at a much faster pace than we have seen in the past 20 years. For the future, I believe that geothermal heating and cooling systems will have earned their place and be looked upon as the best heating and cooling option for homes and businesses.