Tax incentives can dominate the conversation about the geothermal market. However, HVAC contractors who consider offering geothermal services have to consider other factors first and, if they make the move, must be prepared to sell geothermal to new customers regardless of any incentives.
Several experienced geothermal contractors and professionals at the International Ground Source Heat Pump Association have weighed in recently on key non-tax questions surrounding the “if” and “how” of successful geothermal contracting.
Location and Loads
For potential residential geothermal contractors, the map matters. Kortney Lull is IGSHPA board chairwoman and vice president of business development for Midwest Geothermal. Jason Cullum is an IGSHPA board member and vice president with Ground Loop Heating and Air. They bring considerable experience from their own companies but speak collectively on behalf of IGSHPA in this article unless otherwise noted.
In their estimation, Southern geothermal markets may be underserved compared to others. However, on the commercial and institutional sides, they add that enterprising engineers in the 1990s sold a lot of geothermal systems to school districts. Condominiums along the coast also have embraced water-source heat pumps in decent numbers.
That represents an above-average level of general consumer awareness and a more mature market for ongoing system maintenance or replacement.
No matter the location, IGSHPA advises a contractor to get to know their local utility and likewise put the business on the utility’s radar for references.
The association strongly encourages taking the time to locate an IGSHPA-certified loop installer for contractors who may want to outsource that part of the work.
The current labor shortage can reflect in driller availability, prices, and types of drilling they are willing to do. This varies considerably from place to place, sometimes partially because of the type of earth or rock that must be displaced.
For those with a background elsewhere in HVAC, proper load calculation is also no less important in the geothermal sector.
“Geothermal is not like a furnace,” said Cullum and Lull. “Once a geothermal loop is sized, there is a limit to how much heat it can provide.” Not accounting for things like insulation, wall materials, and window condition can make for bad outcomes.
They note that pairing a high-output furnace with a smaller air conditioner may be a traditional move with other equipment, but “when sizing geothermal, you are sizing both heating and cooling with the same system, and you cannot put an 180,000 Btu geothermal system in a 2,000-square-foot residential home.”
DIG IT: Vertical or horizontal loop, type of earth, and driller availability can affect the cost of a job. (Courtesy of IGSHPA, click to enlarge.)
What’s The Rush?
At a recent IGSHPA webinar, moderator and geothermal distributor Darrin Beller asked contractors their single biggest obstacle for selling geothermal systems.
“Payback is probably the first,” said Rob Derksen of Michigan Energy Services.
“They tend not to say ‘no,’ but to say ‘not right now,’” he explained. Maybe the existing furnace isn’t old enough, or maybe natural gas prices locally reduce a sense of urgency.
One other approach can make inroads against a customer’s impulse to not dig into geothermal quite yet.
Derksen does bring up that there can be a cost to waiting. One customer decided to wait but then wound up with no air conditioning. Making matters worse, they had already replaced their driveway in the meantime, instead of installing a loop and redoing the driveway.
So while they had looked at geothermal as the best long-term decision — eventually — now “they had to go with their second choice (of a heat pump system) and also get through six weeks of heat.
“Don’t sacrifice your long-term goals with a short-term decision,” he tells customers. Don’t risk creating unnecessary discomfort “and sometimes even the technology you wanted because you put yourself in an emergency,” he said.
Look Past Payback
For those with payback and initial cost concerns, Derksen said it is past time to embrace an established tool rather than keep preaching to the same small target market with more disposable income.
“We need to move toward financing along with the rest of the industry,” he said. Derksen pointed to multiple resources “to expand the potential customer base and offer geo to more people without making assumptions about who can afford it. We need to offer affordability options.”
Cullum said that the biggest thing his companies does is point out that “you have to spend money to replace what you have,” so the decision about geothermal or not comes down to its first cost but also the difference over that amount and the payment.
If the customer’s willing to see it from that point of view, Cullum said, that drastically changes the idea of “payback” and the decision process. IGSHPA also points out that this will naturally require some discussion of how long the customer plans to own the building or home.
Mark Sakry of Northern GroundSource Inc. shows customers the 30-year cost of ownership and annual savings in order to illustrate that the “extra” cost is not as much as they might think, especially after any rebates or breaks.
“What they like is to hear that they’re able to convert their own property into an endless thermal resource that will cover roughly 70% [of their heating/cooling/water needs] forever,” he said.
Derksen would like contractors to get away from “payback” altogether and embrace the focus on lifecycle costs. In that scenario, “geo wins every time, even when you factor in natural gas costs and before you even talk about tax credit.”
Tax credits are the last part of the conversation for Derksen.
“Instead of leading with it, it kind of seals the deal.”
Michigan Energy Services uses a consultative selling model in an effort to help the customer make the best long-term decisions.
“A lot of times, they may not be asking about geo up front,” Derksen said, “but we’re offering a geo solution based on what they’re telling us.”
“People make purchasing decisions based on what matters to them, no to us,” IGSHPA advised. “So it’s important to ask questions. It may be as simple as them telling you that they don’t want to have any outdoor HVAC equipment.
“By asking questions, you will uncover geothermal sales that you never would have expected.”
Moreover, whether the setting is residential or nonresidential, “when people purchase a product with higher up-front costs, they expect more,” IGSHPA said.
Writing a check for double, triple, or quadruple the cost of a more familiar HVAC system translates to high expectations for not only the result but the process.
“Cleanlines, professionalism, customer service … this principle also applies in the commercial or industrial setting” in IGSHPA’s experience.
“How Does Geo Work?”
There’s another question contractors must be prepared for. The details again vary from location to location, but Cullum shared his answer.
“The ground’s 55°, you’re trying to keep it 70° up in the house. It doesn’t take a lot of energy to go from 55° to 70°” is often good enough for the sales process.
Or, he said, “forget about temperature and think of it as there’s heat in the ground, you need to move it out of the ground and put it in the house, or vice versa.”
Especially when considering extreme temperatures, he said, people can intuitively understand that it is easier to do that with a ground-source system than with an air source. Ground source brings the benefit of not trying to dump heat into hot outdoor air.
Sakry acknowledged that sometimes he successfully avoids getting into the deep particulars another way.
“I prefer not to explain to people how it works,” he said. Instead, he will say, “Do you know how the computer on your car works? But you still drive the car.”
Hal Smith of Halco Energy in Phelps, New York, frames geothermal as “just moving heat.” He points to how a refrigerator works by removing heat as a familiar comparison.
Ultimately, Derksen said, “if they’re calling us, they’ve done some research.”
So he asks people to talk to him about the research they have done. Then, “we simply validate their level of knowledge or correct it where they’re misinformed.”
This active listening approach keeps the conversation on a laymen’s level, Derksen said, and sets the table to move forward with the conversation from a common point of reference.
But long before any kitchen table conversations, contractors might note what Smith did to plan the seeds of success.
Halco Energy’s team went to any town halls and similar gatherings to promote clean energy wherever they could, and “eight or nine years later, we’re almost overloaded with leads.”
These days, adapting that strategy means “doing a lot of Zoom meetings” in addition to traditional advertising options like postcard mailings and/or radio. “It took time to develop, but we’re seeing the results,” he said.
Resources for Rookies
HVAC contractors looking at expanding into geothermal can do it many ways, but nobody has to do it alone. Kortney Lull and Jason Cullum of IGSHPA direct contractors to three good sources of support.
The first resource they mentioned was their own association. IGSHPA has a track record of leadership regarding both training and standards for the geothermal community, and it provides numerous training and accreditations across the country.
Professionals can achieve IGSHPA certification as Accredited Installer, Certified GeoExchange Designer, and Certified Geothermal Inspector.
IGSHPA also offers frequent town hall discussions open to all members to discuss everything from residential sales best practices to design of commercial systems to financing. Additional ground (no pun intended) covered includes drilling vertical loops and grouting, and on to heat pump installation.
Speaking directly to potential contractors, Cullum and Lull also make these recommendations on IGSHPA’s behalf, and the framework may be reassuringly familiar to existing HVAC contractors.
“The second resource is the distributor of equipment and or geothermal pipe. Most pipe distributors offer training in fusion and installation techniques.
“Finding a distributor or manufacturer that doesn’t just “sell or offer” geothermal but truly supports the HVAC contractor is worth the search. They should have a geothermal champion at their distributorship, or a skilled sales and application and design team. These type of support people will help provide the local connections to the utility, loop installer, and help you design a high-quality system to ensure a successful installation. Distributors and manufacturers should also be bringing you and your team training opportunities to further your team’s knowledge and confidence.
“By spending time finding the right partner for you, it will open up new revenue opportunities and separate you from many of your competitors.
“Third are the equipment manufacturers. They can be a wealth of knowledge; this is where you will find manufacturer-specific training on wiring, sizing, and best practices. Finding a good manufacturer/distributor who offers great training and knowledge should be one of the main factors when selecting a product to offer.”