Utilities Encourage Geothermal Investment
Utilities Reduce Installation Costs to Encourage Use of GHPs
All across the country, utilities are straining to keep up with rising power demands from customers, which is why many are looking at ways to encourage consumers to conserve energy. Most utilities promote conservation by offering rebates for the installation of high-efficiency heating and cooling equipment and solar energy systems, but several are starting to think outside the box.
For example, a few utilities are encouraging the use of geothermal heat pumps (GHPs) by offering to pay the often high costs associated with installing the loop field and then charging homeowners a monthly service fee, based on the capacity of the system installed. Many see this as a win-win proposition, as energy-efficient GHPs reduce peak electric demand for the utility, and more homeowners can afford the initial cost of a highly efficient HVAC system.
Contracting Firm Forms Utility
At 8 years old, Orca Energy, Redmond, Wash., is one of the first geothermal utilities in the U.S. It came about as a result of the leadership of Geotility Systems Corp., Redmond, Wash., a then-15-year-old geothermal engineering, design, and installation company trying to identify what prevented consumers from purchasing GHP systems.
Through the use of focus groups, they found that the major barrier was the $8,000 to $10,000 that it cost to install the exterior loop portion of the GHP system. “However, people liked the technology because it’s more energy efficient, has a low carbon footprint and a longer life cycle, and requires less maintenance and repairs,” said Jim Leask, president, Geotility Systems Corp., “So we thought it made sense to utilitize the infrastructure, no differently than what the gas or electric company does. They pay for the infrastructure, bring it to a meter at the side of your home, and you connect to that meter and pay an infrastructure charge, as well as an energy charge. We decided that concept could apply to geothermal, so we created Orca Energy.”
Orca Energy typically partners with developers of new subdivisions, as opposed to single homeowners. Under its business model, Orca pays to design, install, operate, maintain, repair, and replace all the exterior infrastructure — essentially the loop field — to a demarcation point at the wall of the home. A prequalified contractor then installs the interior heat pump and distribution system (e.g., forced air, radiant), but Orca oversees the design and installation of the equipment, since the loop field needs to match the load profile of the home.
Just like any other utility, Orca has covenants and easements placed on a home’s title, which are transferred to new owners when a house is sold. Each subdivision has its own rate schedule, with monthly utility charges ranging from $30 per month for a small home or condo to more than $100 a month for a large single-family custom home, said Leask. “The monthly utility charge is fixed and cannot be increased more than the consumer price index (CPI), which averages 1-2 percent a year. Compare this to natural gas, which can have some fairly substantial energy cost fluctuations from the fossil fuel provider. With Orca Energy, if your utility rate is $50 per month, it’s registered on your title that we cannot increase that by anything more than the CPI, so it stabilizes your energy costs.”
Orca Energy currently has almost 6,000 homes under contract in the Pacific Northwest and Canada, and it plans to expand into other markets across the country as well, taking into consideration areas that are best suited for the technology, as well as geological conditions, market maturity, climate, utility rates, etc. To that end, the company has identified pockets in the U.S. that have stronger market absorption of the technology, as well as better state incentives.
As Leask noted, “The wonderful thing about this business model is that it’s knocking down the obstacle, which is the loop cost, versus trying to go over or around it. Geothermal lasts twice as long as other technologies; requires less maintenance; and its carbon footprint, sustainability, and efficiency are double that of other technologies. It’s a no-brainer once you take that loop cost out of the equation. And that’s what this business model will do.”
More Utilities Come Online
Rural electric cooperatives are also playing a big role in this effort to lower the first-cost barrier for homeowners. Will Lange, director of utility development, WaterFurnace Intl. Inc., points to a major effort in Oklahoma through Western Farmers Electric Co-op and its members, which aims to transform Oklahoma by removing more than 100 MW of peak load from its grid with GHPs.
“This can probably be achieved with as few as 25,000 conversions of older air-source systems,” said Lange. “Other utilities in Colorado, Minnesota, Vermont, and elsewhere are being successful with different versions of this approach. From a financial standpoint, a ground loop is one of the best investments you can make delivering double-digit return on investment in many parts of the country.”
Another example is Wyandotte Municipal Services, Wyandotte, Mich., which became a geothermal utility in 2011 as a result of state and federal energy-efficiency funding that allowed for the drilling of loop wells in utility easements for several homes. The utility covered the cost of drilling a vertical well — about $10,000 per home — while a local contracting firm, Cappy Heating and Air Conditioning Inc., Livonia, Mich., installed the GHPs in the homes and connected them to the wells.
“Our scope of work was to pick up the system from the well and bring piping from the field into the home and out again, making the connections inside the house, and performing all the sheet metal and geothermal work inside the home,” explained Jeff Caplan, owner, Cappy Heating & Air Conditioning Inc.
Homeowners who install the GHPs pay them off through monthly surcharges on their electric bills. The utility estimates that it will take about 30 years to recoup the cost of the installation, which is similar to a water main project.
Wyandotte Municipal Services plans to grow its geothermal program over the next few years to include 25 new residential installations, 19 retrofit residential installations, three commercial installations, and one new 20-unit multifamily development.
Caplan is happy to be affiliated with the Wyandotte geothermal project. “The benefits to individual homeowners and the community in general make this an exciting project. And by approaching installations in this way, working with the city, people who are interested in being efficient in their heating and cooling can install a geothermal system without incurring the upfront costs associated with drilling. Coupled with the tax credit, it provides an incentive that is hard to ignore.”
PanTerra Energy LLC, Denver, which designs, builds, and installs GHP systems, is also set to become a geothermal utility, having recently received a Public Utilities Commission (PUC) registration. This is the first step in allowing the company to apply for a permit to act as a sole utility — leasing and selling direct access to a geothermal loop field without additional third-party involvement.
“Acquiring the PUC license is the initial proof-point, as now we’re able to make geothermal technology available to a wider audience at a lower cost,” said Mike Ryan, cofounder, PanTerra. The company will offer thermal purchase agreements that provide a no-cost option to retrofit residential, commercial, and municipal homes or buildings with GHP systems.
“More than any single factor, the added costs of the loop field are suppressing the widespread adoption of GHPs. If you view the loop field as an infrastructure component of a heating and cooling system, it makes a lot of sense to treat it as a thermal utility, which is the concept that PanTerra is pioneering,” said Ben Northcutt, executive director, Colorado Geo Energy and Heat Pump Association. “If you can provide users with a straightforward monthly cost for their heating and cooling, without the added financial burden of buying the loop field infrastructure, then GHPs can quickly become a mainstream technology.”
Publication date: 7/29/2013