Drilling Down

Drilling Down Into the Geothermal Heat Pump Industry

This hyper-efficient technology is poised for growth and wants to take contractors along for the ride

By Doug Dougherty

The amount of energy in the Earth is mind-boggling. Geothermal heat pump tech­nology taps into that energy and uses it to provide reliable, incredibly efficient heat­ing and cooling in both residential and commercial buildings. Geothermal heating and cooling is a win-win-win. It’s a win for HVAC contractors because it allows you to provide your cus­tomers with state-of-the-art, environmentally friendly tech­nology. It’s a win for their customers because it reduces their utility costs. And it’s a win for the environment.

Geothermal heat pumps are the most efficient way to heat and cool a building. The thermal load of a building can be satisfied very efficiently with a geothermal heat pump, and the technology continues to improve. And the industry is not resting on its laurels: new equipment coming into the marketplace is super-efficient, with energy efficiency ratios (EERs) exceeding 40, and coefficients of performance (COPs) greater than 5.

In addition, the geothermal industry is a job creator. In­stallation of a geothermal system requires skilled people equipped with both knowledge and drilling rigs. Add to that the service industry for those drilling rigs, pipe manufactur­ers, and grout manufacturers, and there are thousands of jobs unique to our industry that are being created by this technology.

Challenges and Solutions

The geothermal heat pump industry is poised for growth and we encourage HVAC dealers to get involved with it. There are several challenges that are often perceived as obstacles to entry, but they are generally either misconcep­tions or can be easily overcome. They include:

• Consumers aren’t aware of geothermal. This chal­lenge can be directly addressed by HVAC dealers. The dealer network for geothermal technology nationally basi­cally creates the market — the larger the network, the larger the market. Any HVAC dealer that has geothermal heat pumps in its portfolio and knows how to express the ben­efits of that technology expands the market. Encouraging HVAC contractors to get involved in geothermal technology is a key to consumer awareness efforts.
• Geothermal systems have a high first cost. We at the Geothermal Exchange Organization were successful in getting an ongoing 30% federal income tax credit applied to geothermal technology, and we are working across the country on adopting public policies that will encourage electric utilities to offer financial incentives to home and building owners who opt for a geothermal heat pump.

The combination of the 30% federal income tax credit, financial incentives from the electric utility industry, and favorable tax code changes to depreciation, makes choosing geothermal almost a “no-brainer,” because those incentives remove much of the cost differential between geothermal and conventional HVAC technology.

• Geothermal requires highly trained personnel. The industry has made great strides in dealer training and certification to help ensure that dealers are designing and installing systems correctly. We’re able to train dealers on the entire process — loop design and installation, and equipment design and installation — so the education and training concern is rapidly evaporating.

It’s true that geothermal systems require specially trained and certified designers and installers. A geothermal loop field heat exchange is not a chiller boiler, and designers and installers must know what they’re doing. We work con­tinually with ASHRAE and the International Ground Source Heat Pump Association on training curriculums, and we work throughout the industry to en­sure that training is widely available.

• Energy-saving technology isn’t valued by lenders. At the federal level, a bill (S. 1737 or the SAVE Act) has been introduced in the Senate that would require mortgage lend­ing companies to include the energy-efficiency of a building in their loan analysis. That would be a huge boon for the geothermal industry.

In the meantime, we’re constantly in talks with builders about how much sense it makes to put a very efficient hating and cooling system into a home at basically no cost to the hom­eowner. If you take the cost differential between a geothermal system and a traditional system and have the hom­eowners put that into a 30-year mort­gage, the energy savings are greater than the debt service on the added mortgage. Therefore, homeowners ac­tually will experience a positive cash flow from their geothermal system ev­ery day they own the home.

The challenge is changing the mindset of how people view the tech­nology and trying to overcome their reluctance because of the first cost. And we’re trying to convince lend­ers that same thing. When a builder is working with a homeowner and put­ting in geothermal, the homeowner must be able to articulate to the mort­gage lender, and the mortgage lender must appreciate, that having a geo­thermal heat pump in a home means the family living there will have more disposable income on a monthly ba­sis. This increases the chances of the family making their mortgage pay­ment.

For example, every Habitat for Hu­manity home that’s built in Oklahoma is equipped with a geothermal heat pump and a solar photovoltaic system. The average daily energy cost for these Habitat for Humanity homes is $1. So for somewhere less than $400 per year, that family can heat, cool, and pro­vide hot water for their needs. The dif­ference between that and the energy costs for a traditional HVAC air-source central air conditioning unit and a fur­nace can mean hundreds of dollars in a low-income person’s pocket on a monthly basis. That’s called breaking the cycle of poverty through energy efficiency.

Scalable, Practical, and Poised to Expand

Geothermal heating and cooling technology is scalable: the utility sav­ings are there both residentially and commercially. We can show benefit to a low-income person living in a Habi­tat for Humanity home, all the way up to the IKEA building that was built in Denver using geothermal heat pump technology. In both cases the num­bers are indisputable about how ef­ficient this equipment is.

It’s also practical. Many contrac­tors think it’s difficult if not impos­sible to retrofit a home or building with a geothermal system, especially on a small city lot. However, 200-ft. vertical bore holes can punched in one day, so if some one is having a driveway re-done, for example, it can be easy to put a geothermal system into place. Commercial buildings in downtown areas typically employ a water-to-water configuration. There are large commercial buildings in New York City that are being retrofitted on an open-loop access. If there’s a standing column well, very little space is required to access it. There are drill­ing rigs that can be assembled in the basement of a building to drill down far enough to put a loop in. So we can pretty much overcome any property restriction, thanks to today’s technol­ogy.

What is the key need for geother­mal moving forward? All we really need is for the economy to come back strong. That, combined with the grow­ing acceptance of this technology, will create a “snowball” effect, and geo­thermal’s marketshare will increase significantly over time. Our industry is tied at the hip to the economy of this country. If we want to make a big comeback, our economy has to make a big comeback. I think the economy is poised to expand and we’re right there with it.

Doug Dougerty is president and CEO of the Geothermal Exchange Organization. He can be reached at 217/414-0341 or by email at doug@geo­exchange.org.