ACHRNEWS

Geothermal Sales Up Significantly in 2010

July 26, 2010

Sales of goods in the United States are still inching their way back up to prerecession numbers, including many HVACR products. In contrast, geothermal unit sales have jumped in recent years. Manufacturers of geothermal products have growing public awareness and tax incentives to thank for this windfall. Residential geothermal products are especially benefitting from these factors, though commercial products also are profiting from these as well.

FARING WELL

Despite the bad economy, geothermal product manufacturers have had sales success and predict it will continue for some time.

John Bailey Jr., senior vice president, ClimateMaster, commented that the company is “encouraged by the increase in residential geothermal heat pump new orders, which so far are 33 percent higher than last year. We look forward to a rebound in residential new construction during 2010 based on McGraw-Hill’s forecast of a 29 percent increase of residential contract awards this year, followed by increases of 50 percent in 2011 and 42 percent in 2012.”

Michael Albertson, senior vice president of sales and marketing, WaterFurnace International, stated that the company “saw sales grow roughly 80 percent between 2005 and 2009. We’re doing well compared to last year and are cautiously optimistic. The outlook for 2010 will be heavily dependent upon the U.S. government’s continued support of renewable energy and will be strongly influenced by the overall health of the economy.”

Lou Rasmussen, vice president, sales, Heat Controller Inc., also replied that sales are decidedly on the uptick. “While this year’s sales volume has declined on the commercial side (mainly due to economic conditions), the residential business continues to grow nicely - it is up 300 percent over four years ago. With tax credits in place, sales could double over the next two years, depending on the economic recovery.”

Shawn Melton, VP of sales, Enertech Manufacturing, says the company’s sales growth not only has increased, but will continue to do so. “Sales have increased 41 percent, as compared to the same period in 2009. The five-year forecast is 300 percent growth.”

THE SECTOR'S POPULARITY

According to Bailey, “a growing number of states and local utilities are offering incentives for geothermal heat pumps. This is helping to increase the awareness of the technology and drive sales by removing much of the increased upfront cost of the system.”

Rasmussen and Albertson concur that consumer awareness of the products plays a part in geothermal sales. “The residential business is growing due to expanding consumer awareness that is driven by the federal tax credits, advertising, and overall energy-efficiency consciousness. The Internet also provides a wealth of information such that consumers are out ahead of the market.”

He added, “Constantly rising utility costs and the demand for environmentally friendly products drove the market through 2008. The federal tax credits initiated in 2009 (30 percent on the entire installation with no cap) have added more dealer interest in the product line.” Other factors affecting sales, he stated, are consumer awareness, distributor training programs, and product application software.

CHALLENGES

Consumer education on geothermal isn’t done, according to Albertson. “Although geothermal is growing, the industry faces some key challenges that must be addressed to really break through into general public awareness,” said Albertson. “Knowledge and education on geothermal heat pumps is growing but is hampered by misconceptions. GEO, a new industry trade group will provide help with education, training, and as an advocate in Washington, D.C.”

It’s not only consumers that need more education on geothermal; contractors, too, need to be made more aware about geothermal and that it isn’t just for new construction, but can be used for retrofits as well, said Steve Smith, president/CEO, Enertech Manufacturing.

He continued, “There is only a small percentage of HVAC contractors that introduce a geothermal system to their (potential) customer, especially retrofit. The contractors that do offer a geothermal system on each and every prime opportunity find themselves busy in a down economy. Geothermal is not just for the big new houses, it makes economic and ecological sense in most all new construction and 75 percent of retrofit opportunities.”

Another challenge geothermal product manufacturers are facing is new players joining the game.

Melton said, “More competitors have entered the market. The rate of additional competition has outpaced the growth of the overall market, which means the pieces of the pie are getting smaller. Geothermal is more widely accepted as mainstream, therefore some HVAC majors are getting involved. Also, there has been a recent trend of fossil fuel suppliers to direct market against the benefits of geothermal installations.”

Publication date: 07/26/2010