GEO 2012 Legislative Issues

During the Geothermal Exchange Organization (GEO) Second Annual Legislative Fly In to Washington, DC, the GEO Board of Directors, members, staff, and lobbyists pursued the following five key issues for the U.S. geothermal heat pump industry:

1) Ensure that GHPs Qualify Under Federal Renewable Purchase Requirement

In 2005, the Energy Policy Act required that a certain percentage of electricity used by the federal government come from renewable sources. For fiscal years 2007-2009, the Act required at least 3 percent of electricity used by the government to come from renewable sources. The requirement increased to 5 percent for fiscal year 2010, and will increase to 7.5 percent for fiscal year 2013.

Unfortunately, the way “renewable energy” is defined excludes geothermal heat pumps. The Act defines renewable energy as “electrical energy generated from solar, wind, biomass, landfill gas, ocean, geothermal, municipal solid waste, or new hydroelectric generation capacity…”

Geothermal heat pumps (GHPs) do not qualify under the Energy Policy Act because they technically do not generate electricity—even though they can reduce energy use by as much as 40-70 percent in a typical building. GEO believes that the thermal energy avoided with the installation of geothermal heat pumps should count toward the law’s renewable energy purchase requirement.

GEO Request

Senate GEO supports legislation introduced by Senators Jeanne Shaheen (D-NH) and Rob Portman (R-OH)—the Energy Savings and Industrial Competitiveness Act (S. 1000)—to improve the energy efficiency of buildings. However, GEO encourages the Senate to adopt an amendment to the legislation that will ensure federal agencies can receive credit under the renewable purchase requirement for the energy saved by installing GHPs. S. 1000 already includes a provision to clarify that thermal energy produced can count toward the renewable purchase requirement, but the language needs to be amended to also count thermal energy avoided by technologies such as GHPs.

House GEO also supports efficiency legislation—the Smart Energy Act (H.R. 4017)—introduced in the House by Representatives Charles Bass (R-NH) and Jim Matheson (D-UT). As the legislation moves forward, GEO encourages its language also be amended to clarify that the thermal energy avoided by GHPs counts against the federal renewable energy purchase requirement.

2) Include GHPs in Clean Energy Standard (CES) Legislation

A Clean Energy Standard (CES) is a policy that requires covered electricity retailers to supply a specified share of their electricity sales from qualifying clean energy resources. Geothermal heat pumps (GHPs) should be included in any CES. This technology captures a distributed, thermal form of renewable energy that can be measured, metered, and verified.

GHPs effectively address one of the biggest consumers of U.S. energy —buildings. Buildings account for more than 70 percent of the nation’s electricity usage, and GHPs have the potential to reduce energy use by as much as 40-70 percent in a typical building. GHPs are a 50-state technology that use the only renewable energy resource that is available on demand at the point of use and cannot be depleted.

Ensuring that utilities get credit under a CES for the thermal energy avoided by GHPs will create an incentive for utilities to actively promote this efficient renewable energy technology. Every electric utility in the country can improve its load factor, mitigate the need for price increases, lessen the strain on the transmission grid, forestall future generation needs, reduce carbon emissions, and provide consumers with improved conditioned space by promoting GHPs. In fact, a review of existing studies done by the U.S. Department of Energy (DOE) national laboratories suggests that GHPs could avoid 137.6 billion kilowatt-hours of retail electricity sales by 2035.

Measurement and verification of the GHP contribution can be accomplished in a relatively straightforward manner. DOE and the national labs have already identified ways to measure and verify their thermal energy savings. Alternatively, measurement could be achieved by requiring installation of a relatively inexpensive meter.

GEO Request

Senator Jeff Bingaman (D-NM) has introduced legislation to implement a federal CES (see article, page 8). GEO asked legislators to encourage the senator to ensure that utilities can get credit under the legislation for the thermal energy avoided by installing GHPs.

3) Encourage Greater Effort by U.S. Department of Energy to Promote GHPs

Despite the potential of geothermal heat pumps (GHPs), the industry lacks a home at the U.S. Department of Energy (DOE). The Department needs dedicated staff to promote the technology and provide technical assistance to other federal agencies that are pursuing GHP projects.

The Consolidated Appropriations Act of 2012 (H.R. 2055), which was signed into law on Dec. 23, 2011, directs DOE to produce a strategic plan for developing innovative GHP technologies and promoting them in residential and commercial applications. Below is the text of the report language requesting the study:

The Committee is concerned that the Office of Energy Efficiency and Renewable Energy does not have a coherent program to conduct research, development, and demonstration of geothermal heat pumps. The Committee directs the Department to consider and develop a strategic plan to develop innovative geothermal heat pump technologies; promote their use in both residential and commercial applications; advise the Assistant Secretary on policy matters that affect consumers and manufacturers of geothermal heat pumps; receive, analyze, collect, and disseminate publicly available data and information; and carry out other applicable responsibilities. The Department is to report back within 180 days of enactment of this Act on its progress.

GEO Request

GEO asked for help to ensure that DOE completes and ultimately implements the plan. GEO urged legislators to contact DOE to inquire about the status of the strategic plan and to encourage them to do more to promote this effective and proven technology.

4) Support On-Bill Financing Programs

Despite the well-documented efficiency of geothermal heat pumps (GHPs), the industry is still relatively small, with less than 5-percent market penetration for new construction. The principle barrier to expanding the industry is high initial installation cost, primarily due to the added cost of installing the underground loop.

Innovative financing programs, such on-bill financing, have significant potential to address the upfront cost barrier. By financing the installation on the utility bill, the installation costs are converted into a small monthly payment that is more than offset by the monthly energy savings realized by the project. Programs like on-bill financing will allow the GHP industry to rapidly expand, generating sub-stantial energy savings for consumers and reductions in carbon emissions. Expanding the industry will also create thousands of new jobs. These are U.S.-based jobs—from manufacturing to drilling to installation. GEO estimates that one new job will be created in this country for every 18 heat pump installations—and that is a conservative estimate.

Although some states have implemented on-bill financing programs, many utilities are reluctant to participate because of concerns about default risk and the added complexity of administering the financing. GEO supports efforts at the federal and state level to create loan-loss funds to help minimize financial risk to utilities.

GEO strongly supported a provision added to the Consolidated Appropriations Act of 2012 (H.R. 2055), signed into law on Dec. 23, 2011, that directs the Economic Development Administration to use $1 million of its existing funds to support innovative, on-bill financing programs for small businesses. GEO encourages the EDA to use the resources to set up a loan-loss fund that will help utilities minimize the risk of loan defaults. Since defaults on energy efficiency loans are very low, this approach would allow EDA to leverage limited resources to create a more robust program to help small businesses save energy costs and free up capital for expanding and hiring additional workers.

GEO Request

GEO encouraged legislators to seek ways to expand this effort, and to eventually ensure that all consumers have access to on-bill financing options.

5) Cosponsor the Geothermal Exploration and Technology Act (S. 1142)

GEO strongly supports the Geothermal Exploration and Technology Act (S. 1142), which was introduced by Senators Jon Tester (D-MT) and Lisa Murkowski (R-AK). The legislation directs the Secretary of Energy to implement a research program to help make geothermal heat pumps (GHPs) more affordable and further demonstrate the efficiency of the technology in large-scale projects. The legislation also includes provisions for exploration and development of high-temperature “hot rock” geothermal resources..

Despite the well-documented efficiency of GHPs, the industry is still relatively small, with less than 5-percent market penetration for new construction. The principle barrier to expanding the industry remains high initial installation cost, primarily due to the added cost of installing the underground loop. S. 1142 authorizes a new grant program that will help drive down the cost of this proven technology. The legislation, among other things, would direct research at:

  • Improving ground loop efficiency through more efficient heat transfer fluids and thermal grouts, better loop design, and improved variable pumping rates;
  • Reducing ground loop installation cost through improved drilling techniques and equipment;
  • Exploring innovative uses of wastewater and mine water for geothermal systems;
  • Demonstrating the viability of large-scale commercial and residential neighborhood projects; and
  • Integrating geothermal with solar systems to balance loads and to store energy.

GEO Request

GEO encouraged Senators to cosponsor the Geothermal Exploration and Technology Act (S. 1142), explaining that the legislation will drive down the cost of installing geothermal heat pumps, and will fuel a U.S.-based industry that generates thousands of jobs.