Even under the best of circumstances, geothermal heat pumps (GHPs) can be a tough sell. In many parts of the country, consumers have never heard of the technology, and, once they’re informed, they’re often put off by costly installation prices. And, with existing federal tax credits set to expire at the end of the year, geothermal systems are expected to become even more expensive.
Add to that the relatively cheap cost of natural gas and its growing availability in many communities, and it’s easy to see why GHPs may not be a consumer’s first choice for heating and cooling. But, many contractors remain dedicated to the technology, and they’re still finding consumers who want GHPs — even in areas where their benefits are not known as well.
EDUCATION AND COST
Lack of awareness is the main reason consumers do not purchase GHPs, said Selma Lower, owner of Total Energy Concepts Inc. in Vancouver, Washington. “We’ve been doing home shows for 25 years, and I can’t count the number of people who’ve come up to us and said they didn’t know about geothermal. We’ve run radio ads, TV commercials, and print advertising, and we still find people who say they are unaware geothermal existed.”
The local utility does not promote geothermal, and, as one of the few geothermal contractors in the area, Lower must expend a lot of energy educating potential customers about the benefits of the technology. For example, she was recently approached to provide a quote for a geothermal system for a new 5,000-square-foot home. The homeowner had already obtained a quote for an air-source heat pump but wanted to see the return on investment for a geothermal system.
“The air-source heat pump bid was $35,000, and the geothermal heat pump bid was $53,000. Because of the 30 percent federal tax credit, as well as the lower energy bills, we found that the geothermal system would pay for itself in two years. It was a no-brainer,” said Lower. “Not only that, but the geothermal heat pump will last 25-30 years, and your best air-source heat pump likely has a lifespan of 11 or 12 years.”
But, getting in front of the customer to deliver that message can be a challenge, said Lower, especially when other contractors in the area are not enthusiastic about geothermal systems. “Our competition will say things like, ‘Geothermal is four times more expensive than an air-source system, and customers will never get their money back.’ After that, some people won’t even look at geothermal, even though it can often pay for itself in two or three years. A lot of contractors are more concerned about closing sales rather than doing what’s best for customers.”
High costs associated with drilling and a lack of competition have also kept geothermal systems from becoming very popular in many parts of the West, said Cary Smith, president of Sound Geothermal Corp. in Sandy, Utah. “We’re in the Rocky Mountains, and drilling here is a little tougher. In Oklahoma, drilling costs maybe $6 or $8 per foot, because it’s clay all the way to the bottom. Here, it costs twice that much. We also have fewer geothermal companies here, so there is little competition to bring the prices down.”
In addition, the hot, dry climates of many regions of the western U.S. make geothermal a tougher sell, noted Smith, because the loop field usually needs to be larger to ensure proper heat transfer. “The geothermal loop field for a house in Salt Lake City is about half the size of an equivalent home in Las Vegas. In those hot, dry climates, you usually have to couple a geothermal system with an evaporative technology, like a 5-ton cooling tower or a swamp cooler, in order for the system to heat and cool 100 percent of the time.”
It’s a little easier to sell geothermal for commercial buildings in hot, dry climates because owners and managers are used to having cooling towers, said Smith. “It’s not a big stretch for a commercial building owner in Phoenix to say, ‘With a geothermal system, I can get rid of my gas bill, the system will handle 60 percent of my cooling in the shoulder months, and, then, for a couple of months a year, I have to run a cooling tower.’ That’s a heck of a deal.”
GAS AND WATER
The recent availability of natural gas in the area is influencing geothermal installations. Randy Arndt, owner of AK GeoEnergy in Homer, Alaska, said he installs about three geothermal systems a year. “While interest in geothermal is increasing, we’re battling the recent arrival of natural gas. The cost for gas has been kept artificially low, because the city council charged $3,500 for every piece of land in town to build the gas line, whether or not the owner was hooked up to it. That saved those who hooked up about $7,000, which really steamed those of us who install GHPs.”
It’s difficult to compete with natural gas, agreed Lower, because the gas equipment is a lot less expensive than geothermal, and the operating costs are pretty low right now. “For customers who decide to go geothermal, they have told us that if they build a house that is a mile from the closest gas line, the gas company will put in the line for about $30,000. That’s good for us, because then it makes perfect sense to install geo. But, if there’s a new subdivision being built, the gas company will usually run a line to it for nothing, because they can recoup their money pretty fast from all those new customers.”
Besides the low cost of natural gas, water security issues have caused a few challenges for geothermal, as well. “We happen to be in one of the major recharge zones for the Salt Lake Valley, and we’re two blocks from a very large water well,” said Smith. “If I were to drill, I would penetrate that aquifer, which the government believes is equivalent to dumping nuclear waste. So, the bottom line is, we can’t drill in this area. Which is ironic, because geothermal technology used in commercial and industrial applications actually saves water.”
The expiration of the federal tax credits at the end of the year really does not concern Smith, who believes the technology will be able to stand on its own. “We need to see more innovations in financing. Some utilities are offering to finance geothermal systems and put them on the electric bill, while other places are passing publicly assessed clean energy [PACE] legislation, which basically goes on the tax bill as a loan for renewables. Both models make a lot of sense.”
Lower is not too concerned about the expiration of the tax credits, either. “We existed before the tax credits, and we’ll exist after they expire. We might initially drop a little bit in business, but we’ll overcome that by doing more advertising. I’m not too worried.”
Publication date: 2/15/2016