Geothermal: Building a unique niche in a crowded market

August 15, 2000
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How would you like to install heating and air conditioning systems in your projects that:

  • Save energy and slash bills;

  • Cut greenhouse and gas emissions;

  • Rid your homes and buildings of cooling towers and outdoor equipment;

  • Drastically reduce water heating costs;

  • Reduce maintenance costs; and

  • Improve year-round interior comfort?

Sound too good to be true? In fact, geothermal systems offer such a lengthy list of benefits that at first glance, they do seem too good to be true.

More than 250,000 of these systems are installed around the country, providing excellent space conditioning and slashing energy expenses for residential and commercial customers.

Today geothermal technology represents between 1/2% to 1% of the United State’s $64 billion hvac market. That market share is growing.

According to the Geothermal Heat Pump Consortium, a non-profit organization, the current growth trend is expected to result in the installation of 400,000 units by the year 2005, with more than seven million units by the year 2010.

Assessing the market

Energy efficiency, saving money, and preserving the environment are certainly hot topics. But is geothermal just a fad, a hot product of the moment?

Many factors seem to indicate that it’s not.

  • Utility companies preparing to operate in a deregulated environment have already recognized the profit potential in offering a variety of goods and services, including “green power” and cheaper fuels.

  • Over the next 20 years, the market for the replacement of outdated hvac equipment will be the industry’s most competitive segment. Environmental awareness, economic factors, and a more discriminating end-user will play roles in what type of new equipment is purchased.

  • In the light commercial and industrial markets (including schools, hospitals, hotels, prisons, life care facilities, retail space, and offices), the 4.6 million such buildings around the country will require routine or even substantial renovation in the next 20 years. Retrofitting hvac systems will figure prominently in that trend.

The Department of Energy continues to characterize geothermal as an important tool in the energy market.

Not just a fad

While costs for residential geothermal systems are higher than more conventional systems, the lower long-term cost resulting from reduced energy bills, minimal maintenance, and long product life make a geothermal system more cost-effective overall to the end-user.

In fact, the owner of a home with 1,500 sq ft of space can expect to pay from $30 to $50 monthly to heat and cool with geothermal in most U.S. climates.

In commercial markets, the end-user stands to gain even more benefits because of reduced initial costs (often reducing boiler room space needed in the building, thus freeing up more leasable space), as well as monthly operating cost savings and maintenance savings.

Finally, longer equipment lifecycles in both residential and commercial installations provide excellent motivation for end-users.

Contractor skills

Assuming that the technology is not a fad and will indeed continue to increase in importance as a viable hvac system, how realistic is it for contractors to develop the skills and contacts needed to install geothermal?

Hvac contractors continue to face stiff competition from consolidators, large national contractors, and increased growth in the industry. Many of the most successful geothermal contractors have found the technology to be a true differentiator for them, allowing them to offer their customers several levels of choices, as well as a product that is not available with every company.

In turn, geothermal offers contractors an opportunity to grow their business and ultimately, their profits. The initial investment of time and training is often intimidating to contractors, but that investment can quickly turn into added profit and sales.

Just as builders and suppliers who offer a unique product in a market can capitalize on that niche, so can geothermal contractors.

Furthermore, the upscale and growth levels of the end-users for this product allow contractors to build a business on word-of-mouth and repeat business.

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