ACHRNEWS

A Geothermal Deal That's Hard To Refuse

October 22, 2002
Depending on the application, geothermal technology can offer some obvious benefits over conventional heating and air conditioning systems. According to dealers and manufacturers of geothermal equipment, geothermal technology can dramatically reduce energy bills. Proponents of geothermal systems argue that they are safer, cleaner, and better for the environment than other options.

But geothermal is also an expensive investment. The cost of the loop field and installation can drive up the price for such projects. Although the equipment can save money in the long run, some consumers and builders may be reluctant to foot the bill for that initial cost.

Geothermal Air Conditioning, located in Humble, TX, has found a way to provide builders with a geothermal option and eliminate the burden of high front-end costs.

LOOKING AHEAD

Wayne Jones, CEO of Geothermal Air Conditioning, says that his business did not always focus primarily on geo-thermal applications. In fact, the company changed its name about a year ago after discovering that it could indeed supply customers with new geothermal options.

Jones said the company installed its first geothermal system at a Virginia paper plant, which used river water to power the system.

According to Robert Sparks, engineer and CFO of Geothermal Air Conditioning, “this really got us thinking out of the box.”

For the next few years, the company began to focus more on geo-thermal technology, including several residential projects and many custom homes. This experience provided the company with new ideas and new methods for providing geothermal to customers.

“This is the wave of the future,” said Sparks.

Sparks and Jones both believe that geothermal systems can save customers on energy costs down the road, but builders are reluctant to include the systems in their plans because of the high installation costs.

Geothermal Air Conditioning teamed up with Hardin Geotechnologies and came up with a loop field design and developed various financing options designed to eliminate trepidation about initial costs. According to Jones, the simplest option is to set up the loop field as a separate utility and charge the user a monthly fee for geo-water. Other options include leasing the loop field and/or equipment to the user.

HOTEL PROJECT

The company will try out the new plan when its crews break ground on a project for two hotels located in Irving, TX. The plan here, according to Jones, is to provide the hotels with a lease/purchase option that finances the total cost of the loop field and WaterFurnace equipment, eliminating the capital expenses for the HVAC system. Jones said that what makes the project work is the cost of financing and operating the system is still less than the cost of simply operating a conventional system. He asserts that the system will pay for itself out of monies that would have been paid in energy costs if a conventional system had been installed.

“When you add that fact to the cost of dollars you saved in capital expense,” said Jones, “you can see why it is hard for the hotels to say no.”

Both hotels, a Comfort Inn and a Hilton Gardens, are located right next to each other. The Comfort Inn has 105 rooms and is a retrofit project, while the Hilton Gardens is a new construction project with 200 rooms planned.

“We approached the architect, a design/build architect, and he loved the theory,” said Sparks.

SELLING THE IDEA

Jones said that using geothermal technology for hotels is not a new concept. He says that more hotels are beginning to realize the practical benefits associated with installing geothermal.

Sparks said that operating cost and comfort level are two major areas of concern for hotels that are looking to install new HVAC systems.

When it comes to operating cost, Sparks noted that a good geothermal system can outlive traditional systems by more than four times. He also says that geo-thermal can cut maintenance costs by two-thirds and cut energy use by 65% to 70%.

But PTACs are still the predominant system in most hotels because they are easy to install and relatively inexpensive. By reducing or eliminating the first cost of a geothermal system, Jones and Sparks believe they can make the application much more enticing for building owners and designers.

Jones said depending on the system, geothermal equipment costs about the same as traditional systems. What can double or triple the cost of the application is the loop field. By eliminating that as a first cost, Geothermal Air Conditioning says it can offer its customers the benefits of a geo-thermal system for the price of a conventional system.

“The cost for geothermal equipment in a hotel is 30% higher than putting in conventional PTAC equipment, but the hotel can recoup that difference in 11 months of operating expenses,” said Sparks.

The Hilton Gardens has already decided to take Geothermal Air Conditioning up on this option. The hotel will lease all the equipment and the loop field over a 15-year period. Sparks says that there are no capital expenses for the project, and after the hotel pays off the lease, there are no utility expenses for the geo-water, and all the energy savings stays in the pocket of the owner.

GUARANTEEING THE WORK

Sparks noted that although cost is a major concern with geo-thermal systems, another issue is proper installation.

When it comes to installing geothermal systems, Sparks noted “our industry has gotten a black eye from time to time.” He explained that some contractors fail to install the loop field correctly, which leads to improper water temperature. According to Sparks, when this happens, customers tend to blame the equipment or the field. This has tarnished the image of geothermal with some builders, he said. With the 15-year lease agreement, Sparks said that Geothermal Air Conditioning and Hardin Geotechnologies guarantees the service and maintenance on the system for the duration of the lease. He said that the average lifespan of geothermal equipment is about 22 years. So Sparks believes that the system will continue to provide benefits to the owner long after the lease is up.

Geothermal Air Conditioning is already negotiating with other designers and consumers about providing the same agreement.

“Geothermal costs more than traditional equipment, but we’ve eliminated that hurdle,” said Sparks.

For more information, visit www.geothermalair.com (website).

Publication date: 10/28/2002