Adapting to geothermal: Contractor changes direction and does it boldly

August 15, 2000
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IOWA PARK, Texas — Sometimes circumstances force business owners to change direction. The owner dies unexpectedly. A family of talented technicians decide to open their own company. Things happen.

Gene James Air Conditioning & Heating faced such a change and acted boldly.

Gene James founded the company with wife Ruth and sons Mike and Greg in 1979. Greg James recalled, “We have always worked in the high end of the market.”

Gene James added, “These customers are willing to pay more when they can see the value.”

In this arid climate, the company sold mostly air-cooled units, Trane and Janitrol products. The Trane XV-1500 was one of James AC’s best sellers.

“It’s a true variable-speed unit with a variable-speed compressor and variable-speed fans,” said Greg. “That was our premier unit, considered 15 SEER because of the variable-speed technology. Our customers liked it because it was extraordinarily efficient.”

Then, in the spring of 1994, the line was discontinued.

Forced change

Members of the family knew they had to make a decision soon. Then fate stepped in.

“About that time, WaterFurnace was looking for a contractor,” Greg said. “They had sold a 48-ton job here — the Agape Church. The electric company linked us up with WaterFurnace, who did provide training.”

Greg had already been interested in learning more about the technology.

“From that time, the geothermal business just exploded for us. We were putting in 15 to 20 variable-speed units a year. The first year we were certified in geothermal, we put in 18 systems.”

The contractor’s second big geothermal job was a coal-powered generating plant at Oklaunton, Texas. “We actually ‘geothermaled’ the entire Central Southwest plant,” said Greg. (See sidebar article, page 26.)

Word spreads, business grows

Other geothermal projects, residential and commercial, kept the small crew busy.

Word of the new technology and lower cost of operation got around Iowa Park and nearby Wichita Falls (population: 104,000).

The telephone was ringing. Last year, James AC installed more than 200 geothermal units.

“We can’t keep up with the work,” Greg said. “It just keeps increasing on us.” Moreover, “When we’re buying 200 to 300 units a year, it’s hard for others to compete.”

The company’s staff has grown from four to 30 people. “In the last 12 months, we’ve bought one drilling rig and leased another,” he added. “Now we’re doing all our own loops.

“For three years we’ve owned backhoes and directional boring equipment. We have evolved.”

Projects abound

In progress now for James AC is a 90-plus-unit project operated by the Housing Authority (HA) of Wichita Falls, part of more than 640 previously non-air conditioned apartments for low-income residents.

Last year the company installed systems in 86 HA units which were built in the 1960s. The housing authority plans to continue upgrading about 90 units a year until the project is complete.

A Texas Utilities (TU) electric representative encouraged HA director Richard Snyder to consider geothermal. He was excited about the technology for two reasons.

For one, he was concerned about cost of operation. Taxpayers were picking up utility bills.

For another, the original installation included gas appliances, and the Texas Railroad Commission was about to require the replacement of aging gas piping. Switching to electric water heaters and ranges would eliminate the need to replace gas piping, and installing geothermal would reduce the cost of electricity.

Housing authorities have their own utilities. They buy and distribute electricity from the power company to the units; gas was handled the same way.

On the first job, space- and water-heating appliances were replaced for less than it would have cost to replace the gas lines. Cost of operation — now with air conditioning — has increased minimally (in the $2,000 range, about $50 per building for the 86 units monthly.)

When Snyder saw that operating the geothermal system cost little more than the electrical cost for operating the gas furnaces, he dedicated himself to seeing geothermal units installed throughout the project.

There is usually a three- to five-year payback for this kind of commercial application. Anticipated for this project: a five-year payback.

Geothermal is heating up

James AC is not necessarily a shoe-in for any additional work here. The contractor will have to bid on the HA project every year.

“Competition is getting a little tighter every year because other contractors are watching us,” said Greg. “There’s always the possibility we won’t get the next job.”

However, if the request for bid specifies two years of contractor experience, that could rule out other contractors.

“We didn’t go geothermal because we wanted our customers to have it. We found they demanded it,” Greg added. “In 1996 we were still about 90% air-to-air. The next year we expected to put in 24 geothermal units; we actually installed 36.”

Studies show that some 98% of residential customers would go geothermal again; 80% of the 98% would do it based on comfort alone.

Greg thought hard about why comfort scored so well. “The geothermal units do a better job of humidity removal,” he answered. “Also, they tend to maintain temperature because they are sized smaller than air-to-air units.”

Operational costs add to comfort level

Greg added that he believes considerable comfort results from those lower utility bills.

With concerns about costs reduced, people set the thermostat for comfort rather than economy.

For prospective customers, the cost of installation seems less critical than the cost of operation. For years, people have questioned the use of geothermal. “It doesn’t work; it’s different; it’s complicated; people don’t understand it; they don’t want to get into it,” Greg said. “So they keep doing what they have always done.”

What’s changed the picture is that today, many people know someone who has such a system. It’s not as complicated as they thought. Seeing it in action, so to speak, and hearing about the lower cost of operation changes their outlook.

Regional technology

One problem with early geothermal systems was caused by the use of PVC pipe.

“There’s a base loop size, but the size changes from area to area based on ground temperature and load on the structure,” Greg said.

“An Oklahoma City contractor was putting in 200 ft of loop per ton. Following that rule in south Texas, you’d get in trouble because you need more loop. Going north, you don’t need that much.

“Also, PVC is very rigid, so when you drop 200 ft down a well, it doesn’t take the expansion and contraction very well,” Greg said. “It starts pulling itself apart and breaking.”

Years ago, neither contractors nor customers knew any better. Now technology, education, and support are catching up.

Oklahoma State University has long had a heat pump authority that does a fine job of making sure geothermal systems are properly designed for the area.

In the future

What lies ahead for the small-town company with the big-city workload? More decisions, of course.

For one thing, founder Gene James has been working in Dallas. “We’ve been overwhelmed here in Wichita Falls, and some people are trying to get us to come into Dallas,” Greg explained.

“I took a couple of jobs over there when we can hardly take care of what we’ve got here. Now he’s put his foot down and said, no more Dallas work.”

Said Ruth James, secretary-treasurer, “Pretty soon we’ll have to decide how far we want to travel.”

But that’s life — decisions, always decisions.

Sidebar: Fewer techs available? Do less service work

You’d think a town the size of Iowa Park — 6,500 and growing — would be a ready source of talented, trainable workers. However, Greg James said he finds the labor situation pretty sad.

James AC’s rapid growth is part of the problem.

Like many of his peers, Greg expects to do training; often it’s simplified.

“We don’t do a lot of refrigeration work, so we don’t have to weld in condensers and charge them,” he said. “We can take carpenters and people like that and train them to put in units and hook up piping.”

Another bright spot in the picture: “Back when we started we had three service techs; we actually have fewer service techs now because we have fewer breakdowns.”

Of 30-plus staffers, two are technicians, 28 are installers, and four are in the office. The installer group includes drillers and helpers (two crews on drilling rigs and a few more on excavation).

Sidebar: A geothermal power plant

James AC’s second big job was a coal-powered generating plant at Oklaunton, Texas. “We actually geothermaled the entire Central Southwest plant,” Greg James said.

“If the utility feels it’s worth doing geothermal in their power plant while generating their own electricity, that’s a calling card for us.

“The engineers there were astounded by the low power consumption. They didn’t expect the units to cool the facility because they were so much smaller than the previous equipment.

“They had even said, ‘You sized the project all wrong.’ They put amp meters on the units and equipment room containing the air handlers.

“We took the power from the original air handlers — not the outside equipment — and hooked them up to our units,” James added. “They were surprised to find the units pulled less electricity than the original blower motors.

“The plant still has the excess power that was outside in the condensers.”

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