Geothermal Heat Pumps A - Z
Session 2
Utility GHP Programs
Political and Regulatory Issues &
Driving Consumer Participation
2012 Illinois Geothermal Conference
Peoria, IL
February 28, 2012
1
Paul Bony
Director Of Residential Market Development
ClimateMaster
ClimateMaster
Federal Policies
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Carbon Reduction
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2
Energy Efficiency
Renewable Energy
Energy Independence
Jobs
US Department of Energy
US Environmental Protection Agency
National Labs
ClimateMaster
Federal Policies
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US DOE
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US DOE Strategic Plan 2011
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3
Lower carbon future
Clean energy essential to economic competitiveness
By 2035, 80% of America’s electricity will come from
clean energy sources
Deploy the technologies we have: drive energy
efficiency to reduce demand growth
http://www.doe.gov/sites/prod/files/2011_DOE_Strategic
_Plan_.pdf
ClimateMaster
Federal Policies
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4
US DOE Strategic Plan 2011
“There is compelling evidence that carbon-dioxide emissions
from human activities are adversely affecting the climate. Any
path close to “business as usual” will imperil future generations
with dangerous and unacceptable economic, social, and
environmental risks. The conventional use of fossil fuels is a
major source of these emissions. In particular, our excessive
dependence on oil is taking us down an increasingly costly,
insecure, and environmentally dangerous path. As part of
prudent risk management, our responsibility to future
generations is to eliminate most of our carbon emissions and
transition to a sustainable energy future.”
ClimateMaster
Federal Policies
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US DOE/NREL
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5
Geothermal Heat Pump Road Map
Sets goal of installing 1 million units/yr
ClimateMaster
Federal Policies
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Geo as a renewable resource
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Most states currently do not address this issue
State PUCs and state energy offices need to allow
geo heat pumps as
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6
US DOE considers geothermal heat pumps a renewable
energy technology
Energy efficiency measure
Peak demand reduction measure
Load management measure
Renewable energy resource
ClimateMaster
Federal Policies

US EPA
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7
Climate Change policies
Energy Star programs
ClimateMaster
Federal Policies

US EPA
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8
”Geothermal heat pumps (GHPs) are among the
most efficient and comfortable heating and
cooling technologies currently available, because
they use the earth’s natural heat to provide
heating, cooling, and often, water heating.”
ENERGY STAR qualified geothermal heat
pumps are over 45 percent more energy efficient
than standard options.”
ClimateMaster
Federal Policies
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US EPA
Energy Star Appliances
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9
http://www.energystar.gov/index.cfm?fuseaction=find
_a_product.showProductGroup&pgw_code=HP
ClimateMaster
Federal Policies
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ORNL
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2010 Report
Found geothermal heat pumps would:
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10
Reduce energy consumed for H/C/DW by 45%
Reduce peak energy demand for H/C/DW by 56%
Reduce consumer’s bills for H/C/DW by 48%
Reduce CO2 emissions for H/C/DW by 45%
ClimateMaster
State Policies—Illinois
Public Act 095-0481
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11
The General Assembly finds and declares:
(1) The health, welfare, and prosperity of all
Illinois citizens require the provision of
adequate, reliable, affordable, efficient, and
environmentally sustainable electric service
at the lowest total cost over time, taking into
account any benefits of price stability.
ClimateMaster
State Policies—Illinois
Public Act 095-0481
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Including cost-effective renewable resources will
reduce long-term direct and indirect costs to
consumers by decreasing environmental impacts
and by avoiding or delaying the need for new
generation, transmission, and distribution
infrastructure.
Energy efficiency, demand-response measures,
and renewable energy are resources currently
underused
ClimateMaster
State Policies—Illinois
Public Act 095-0481
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"Demand-response" means measures that
decrease peak electricity demand or shift
demand from peak to off-peak periods.
"Energy efficiency" means measures that
reduce the amount of electricity required
to achieve a given end use.
Vs. Reduce the amount of energy
(measured in Btus)
ClimateMaster
State Policies—Illinois
Public Act 095-0481
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14
Investor owned Electric utilities shall implement costeffective energy efficiency measures that save:
– 1% of energy delivered commencing June1, 2012
– 1.4% of energy delivered commencing June 1, 2013
– 1.8% of energy delivered commencing June 1, 2014
– 2% of energy delivered commencing June1, 2015 and
each year thereafter.
Electric utilities shall implement measures to reduce peak
demand by 0.1% over the prior year commencing June 1,
2008 and continuing for 10 years.
ClimateMaster
State Policies—Talking Points
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1. Geo improves energy efficiency
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2. Geo reduces peak demand
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Winter (?)
Summer
Significant $$ savings for utility
3. Geo is a renewable energy technology
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Significant contribution toward state’s adopted goals
Helps meet state’s adopted goals
4. Geo reduces consumers’ bills
5. Geo reduces carbon footprint
ClimateMaster
State Policies
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Geo needs to be fully recognized for the value it
provides
Need to work with your Legislature & state PUC
staff/commissioners
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16
Awareness
Education
Policy adoption/modification
The National GeoExchange Organization
may be able to help.
ClimateMaster
New Public Energy Policy

We need to take a new approach to
Renewable / Efficiency Portfolio Standards
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If the goal is to save emissions
“RPS/EPS” requirements need to be based
on Btu’s saved not just kWh
Carbon lives in the combined electric and
hydrocarbon fuel stream.
This concept is gaining traction in DC
ClimateMaster
New Public Energy Policy

ProPublica, Jan. 25, 2011
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18
Natural gas advocates assert that it produces 50 percent less
greenhouse gases than coal, based on emissions from the
furnace or generator exhaust. They don’t account for the
methane emitted when gas is extracted and piped to power
plants and other customers.
The EPA has doubled its previous estimates for the amount
of methane gas that leaks from gas wells to end use. Some
gas-field emissions estimates have jumped by several
hundred percent with Methane emissions from the
hydraulic fracturing of shale gas now 9,000 times higher
than previously reported.
ClimateMaster
New Public Energy Policy
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19
When all these emissions are counted, gas
may be as little as 25 percent cleaner than
coal, or perhaps even less.
ClimateMaster
New Public Energy Policy
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New Concept – Clean Energy Standards
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20
Allow electric utilities to meet their clean energy %
requirement by counting the production of GHP
thermal energy as a “clean” source.
A good CES policy allows all sources including
efficiency to compete in an open market based on
the cost of the energy saved or produced.
This will level the playing field for efficiency vs. high
cost solar/wind and keep electric rates lower
ClimateMaster
State Policies

"Renewable energy resources" includes energy and its
associated renewable energy credit or renewable energy
credits from wind, solar thermal energy, photovoltaic cells
and panels, biodiesel, crops and untreated and
unadulterated organic waste biomass, trees and tree
trimmings, hydropower that does not involve new
construction or significant expansion of hydropower
dams, and other alternative sources of environmentally
preferable energy.
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21
Just need to add “including Geothermal Heat
ClimateMaster
Pumps”
Why Should Utilities Support GHPs?
‘Cause somebody has to carry the load
22
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Vision
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Patience To Develop A
Market
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Economic Incentives
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Strong Consumer &
Contractor Relationship
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Industry Experience In
Geothermal Programs
ClimateMaster
Utility Risk Considerations
High first-cost of GHP systems
Lack of:
1. Customer and regulator knowledge and/or trust in benefits
2. GHP design infrastructure
3. GHP installation infrastructure
23
ClimateMaster
(Progressive)Utility Energy Vision
Driving Factors
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Public Relations
Special Interest groups
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Environmental
Economic Development
Utility Economics – Lost Revenue
Energy Efficiency is a “no regrets” strategy
NRECA, APPA, IOUs
24
ClimateMaster
(Progressive)Utility Energy Vision
In utility terms we need to:

Use electric technologies to reduce wholesale
energy costs
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Use electric technologies to increase
revenues/margins from energy sales & other
services
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Increase sales of positive margin kWh
Use electric technologies to build our “Brand”
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Manage our Power Bills
Increase customer loyalty
Get credit for total system emission savings
ClimateMaster
(Progressive)Utility Energy Vision
Range of Utility Activities/Responsibilities
26
Maximum
Own the technology
Install units
Install loops
Ongoing rate incentives
Unit financing (leasing)
Cash incentives (rebates)
Dealer/builder marketing
Active consumer marketing
Passive consumer education
Minimum
ClimateMaster
Geothermal Market Barriers
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High(er) Cost of Installation (almost gone)
Lack of HVAC Dealer Interest (going fast)
Lack of HVAC Dealer Expertise (easy fix)
Limited Consumer Education (getting better)
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No Viable Long Term Financing
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Even though Geo systems provide
consumers with significant positive cash
flows in today’s market….they cost (a lot)
more than CFL light bulbs.
ClimateMaster
Geothermal Heat Pump
Residential Tax Incentives
Federal Income Tax Credit:
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30% of total GHP system cost
No cap on maximum credit
Can be used to offset AMT tax
Can be combined with other tax credits
Can be used in more than one year
Eligibility:
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Home must be located in the U.S.
Includes houses, cooperatives, condos & mobile homes
Does not have to be your main home
GHP must meet Energy Star requirements
Placed in service before 2017
ClimateMaster
Geothermal Market Barriers
 GeoExchange
 4 Windows
 Attic Insulation
 Marathon Water Heater
 Air Sealing
 10 CFLs
Total
 Annual Savings
$2,255
 Simple Payback
11.8 years
 Net cash flow (30 yr./6%) $28/mo.
 Comfort Beyond imagination
29
$23,100
$ 1,600
$ 900
$ 700
$ 250
$
45
$26,595
Before tax
credits!
ClimateMaster
Geothermal Market Barriers
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30
Consumers are suffering from “cash
separation anxiety”
ClimateMaster
Geothermal Market Barriers
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31
Unlike consumer goods financing, efficiency
financing must (and can) provide the
borrower with a positive cash flow from
energy savings after the monthly payments.
ClimateMaster
Aggregate 30 Year System Operating Cost Comparison of
Heat Pump Operating and GeoLoop System Financing Costs versus
Natural Gas/AC Operating Cost
Source USDA RUS
$47,100
$27,637
$24,516
$24,000
$0
32
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
Natural gas system
360 month financing of geothermal loop
60 month financing of geo loop
Cash purchase of geothermal loop
Before tax credits!
ClimateMaster
$50,000
The Geothermal Market
33
ClimateMaster
Why Pennsylvania?
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34
House Bill 2200 (2008) requires utilities to reduce
consumer electric consumption by at least 3
percent and Peak demand by at least 4.5 percent
from June 2009 levels by May 2013,
HOUSE BILL No. 738 (2009) – Allows consumers to
deduct the retail purchase price of a geothermal
energy system for non-business from their annual
personal income tax, up to 10% or $2,500.
HOUSE BILL No. 2109 (2009) - Prevents
geothermal heating systems from being taxed as
property value for ten years.
ClimateMaster
Why Pennsylvania?
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HOUSE BILL No. 790 (2009) – Provided home
purchase grant of up to $5,000 for energy and water
conservation including Geo systems.
HOUSE BILL No. 2291 (2010) - Allocated funds for
installing geothermal systems in numerous public
facilities.
HOUSE BILL No. 2457 (2010) - Exempts
Geothermal Heat Pumps from sales tax.
ClimateMaster
Why Pennsylvania?

Keystone HELP energy efficiency loans for
GHPS
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2 Loan options for up to 100% of the costs of
equipment and installation of Closed Loop
Geothermal Heat Pump Systems that meet
Energy Star Tier 2 qualification standards.
ClimateMaster
Why Pennsylvania?

Qualifying Geo financing Option 1:
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4.99% Unsecured Keystone HELP Loan for up to
$15,000 with a term of up to ten years.
Plus an optional additional Tax Credit Anticipation
Loan in an amount equal to their expected 30%
tax credit, maximum, $10,000. Keystone HELP
will make the first 12 monthly payments on this
optional additional Tax Credit Anticipation Loan
ClimateMaster
Why Pennsylvania?

Or a secured Keystone HELP Loan for up to
$35,000 with rates as low as 2.875%.
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38
where the qualifying Geothermal Heat Pump
System is installed as part of a comprehensive
"Whole House" improvement project with
additional improvements recommended by a
Certified BPI/RESNET Energy Audit
ClimateMaster
State Efficiency Financing
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Keystone HELP energy efficiency loans for
GHPS
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39
2 Loan options for up to 100% of the costs of
equipment and installation of Closed Loop
Geothermal Heat Pump Systems that meet
Energy Star Tier 2 qualification standards.
ClimateMaster
Utility Case Histories
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Rush Shelby Energy - $ 1000 per ton
Co-Mo REC - $ 850 per ton
New Hampshire Electric - $800 per ton
Connecticut L&P - $ 500 per ton plus CCEF
Minnesota Power - $ 250 per ton
Yellowstone Valley Electric - $ 200 per ton
City Utilities - $ 200 per ton
Consumers Power - $ 2400
Puget Sound Energy - $ 1500
Northeastern REMC - Up to $ 1000
Rebates
ClimateMaster
Unique Case History Examples
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Oklahoma Municipal Power Authority
Oklahoma Gas and Electric
Midwest Energy
Plumas Sierra Rural Electric Cooperative
Delta Montrose Electric Association
ClimateMaster
Oklahoma Comfort Program (OCP)
A Joint Project
42
ClimateMaster
42
OMPA and Member Load Factors
Load Factors
Four Largest Cities and OMPA
3-yr Rolling Averages
0.46
0.45
0.44
0.43
0.42
OMPA
0.41
0.40
2006
43
2,007
Oklahoma Comfort Program
2,008
ClimateMaster
43
WISE Program Objectives
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Reduce summer peaks
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Improve load factor
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Reduce cost of power for OMPA’s member cities
Geothermal heat pumps help do both
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Delay acquisition of new power resources
Lower summer peaks
Add winter electric load
Oklahoma Comfort Program
ClimateMaster
44
Oklahoma Comfort Program
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Proposal submitted by OMPA (with ClimateMaster and
GRC), approved by OK Dept. of Commerce (ODOC)
Funded from OKSEP $ from ARRA
Provides energy audits, training for contractors/installers, &
additional $1,000/ton rebates for geothermal heat pumps in
addition to WISE rebates in participating cities
Contract signed with OK DOC March 31, 2010
LOAs signed with UFC and ClimateMaster in April 2010
Oklahoma Comfort Program
ClimateMaster
45
Oklahoma Comfort Program (OCP)
Qualifying Home/Building/Customer Criteria
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Electric utility customers of OMPA member cities
Owner-occupied single-family residences qualify
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SHPO review/approval required for all sites before
work starts
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46
Restrictions apply and special approval is needed for other
types of buildings and for installations 5.5 tons and larger
(until July 2012)
Much easier for properties less than 45 years old
No aquariums, zoos, golf courses, swimming pools,
casinos or other gambling establishments, …….
Oklahoma Comfort Program
ClimateMaster
46
OCP & WISE Combination
Incentives
Rebates
OCP – up to $1,000 per ton
WISE – $800 per ton*
Total Rebate - $1,800/ton
*for customers in participating OMPA
cities
47
ClimateMaster
Oklahoma Comfort Program (OCP)
A step-by-step description for customers
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48
Get an energy audit
Provide information
required for SHPO
review, and get approval
Make energy
improvements
Get quotes from qualified
GHP contractors
Prequalify for rebates
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Get system designed
Get system installed
Get all required
paperwork from
contractor
Get system
inspected/verified by city
staff
Submit application
through city
Oklahoma Comfort Program
ClimateMaster
48
OK Comfort Program Metrics which
helped get the OMPA proposal awarded and which are tracked
during program implementation
49
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CO2 Reduction
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Peak Load Reduction
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Jobs – with emphasis on OK jobs
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Carbon Footprint
Oklahoma Comfort Program
ClimateMaster
49
CO2 Reduction Metric
50
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A typical 3-ton (10.5kW) residential GHP system
produces an average of about one pound less CO2
per hour of use than a conventional system

100,000 homes converted to GHPs would reduce
annual CO2 emissions by 125,000 tons per year

1.25 tons/yr per home – OCP reduced the metric to 1
ton/yr
Oklahoma Comfort Program
ClimateMaster
http://www.nd.gov/dcs/energy/pubs/renewable/geoben.pdf
50
Peak Load Reduction Metric
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New or retrofit?
– Assume most systems will be retrofitted, replacing 13-SEER
air conditioners.
Under what conditions does OMPA set peaks?
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51
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ASHRAE’s 1% design dry-bulb temperature for
Oklahoma locations is 100 to 102 ° F.
Manufacturer’s data is typically for 10° F
increments – closest is typically 105 ° F
At 105 ° F a 13-SEER AC uses about 1.3 kW/ton
and GHP uses about 0.8 kW/ton
Delta is 0.5 kW/ton in favor of GHP
ClimateMaster
Oklahoma Comfort Program (OCP)
Geothermal Heat Pump (GHP) Installation Criteria (cont.)

GHPs must be certified by AHRI
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52
AHRI data will be used to determine EER and COP
(for qualification) and tonnage to be rebated. Tonnages
will be rounded to two decimal points
Contractor’s letter of equivalence are not accepted for
OCP rebates, and was phased out of the WISE rebate
program in January 2011
Oklahoma Comfort Program
ClimateMaster
52
GHP Capacity Benefits (to the utility)
Assumption – 1/2 kW per ton per home peak capacity
savings
Wholesale Capacity Cost - $ 10 per kW month
20 year system life
Net Present Value (NPV)/ton ??????????
53
ClimateMaster
GHP Capacity Benefits NPV
@ $5 per month/ton and three discount rates
54

5% - $ 748/ton
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3% - $ 893/ton
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7% - $ 635/ton
ClimateMaster
Total Energy Savings Metric
Hope Crossing Project 17 MM Btu per Ton
200
180
160
140
120
Site Energy
100
Source Energy
80
60
40
20
0
Conv
55
GHP
ClimateMaster
Oklahoma Comfort Program (OCP)
Geothermal Heat Pump (GHP) Installation Criteria (cont.)
56

If the home/building contains a water heater, at
least one GHP must include an operating
desuperheater (or hot water generator) that
provides energy for water heating

GHPs that are installed with gas (natural gas or
propane) backup heating will not qualify for OCP
rebates
Oklahoma Comfort Program
ClimateMaster
56
Oklahoma Comfort Program (OCP)
System Design Criteria

An ACCA Manual J calculation must be performed by the
installer/contractor

To provide proper equipment sizing, a design of the system
(including the loop) must be done using Geo Designer or
other manufacturer-supplied system design software
approved by OMPA. These calculations must show that
–
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57
Loop entering water temperature will not exceed 90.0 degrees F
System will meet 95% to 115% of the calculated sensible and
latent air conditioning load
For multi-stage equipment, the lowest stage of cooling may meet
the above requirements
Oklahoma Comfort Program
ClimateMaster
57
Oklahoma Comfort Program (OCP)
Initial Geothermal Heat Pump (GHP) Rebate Amounts
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58
ClimateMaster is providing training, marketing, and
other in-kind services to OCP
–
ClimateMaster is an in-state Oklahoma manufacturer,
and one of SEP’s and OCP’s objectives is to stimulate
the economy in Oklahoma
–
ClimateMaster partnered with OMPA and GRC in
preparing the proposal
Oklahoma Comfort Program
ClimateMaster
58
Oklahoma Comfort Program (OCP)
Documentation and warranties for customers
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Installers/manufacturers must provide customers with a standard
ten year parts/five year labor allowance warranty on the
installation(s)
Installers/manufacturers must offer customers an optional full ten
year warranty on the installation(s) at additional cost
In addition to the standard equipment documentation, contractors
must provide
– A loop site plan
– A continuous copper tracer wire installed with all horizontal loop
piping, with the end location shown on the loop plan
– Equipment start-up reports for each installation (ClimateMaster
Commissioning Worksheet or equivalent)
http://www.climatemaster.com/downloads/Unit_Start_Up_Form.pdf
59
Oklahoma Comfort Program
ClimateMaster
59
Oklahoma Comfort Program (OCP)
Installer/Contractor Criteria
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Contractors must have an active Mechanical Contractor License
issued by the OCIB and any other applicable local licenses
Contractors must obtain all applicable permits
At least one installer on each job must have current IGSHPA Installer
accreditation
At least one installer on each job must have training and certification
by their equipment manufacturer on their equipment
From January 1, 2011, contractors who install vertical closed loops for
GHP installations must have IGSHPA Vertical Loop Installer
accreditation
From January 1, 2011, all contractors must be listed on the OCP List
of Approved Contractors
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60
This list was drawn up based on the criteria listed above
Oklahoma Comfort Program
ClimateMaster
60
Major Changes In OCP
61

Maximum GHP System Size Raised in July
2011

Davis Bacon Act Requirements Lifted in July
2011
Oklahoma Comfort Program
ClimateMaster
61
Hope Crossing Project
Oklahoma Gas & Electric and ClimateMaster
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Administered by Habitat for Humanity, Int’l
Construction Started in 2004 1100 sq ft detached
GHP home construction began in 2006
Goal of an additional 240 homes with GHP
Goal is important to demonstrate cost savings on
a mass market scale
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62
Testing new loops & grouts this winter (lower cost?)
Goal to offer a monthly loop fee & equipment financing
ClimateMaster
Hope Crossing GHP Program
Design
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Break the GHP first cost barrier
Install one 400 ft loop under the foundation
Achieve the greatest cost-effective energy
efficiency level
Track energy use to establish baselines
Use the program for publicity purposes to:
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63
Make it the “default” case in future HFHI projects
Attract more donations to HFHI to create more projects
ClimateMaster
Hope Crossing Ave Metered
Energy Costs ($)
Energy Savings = $1606 - $1023 = $583/yr
250
200
150
Conv
GHP
100
50
0
Jan
64
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
ClimateMaster
Utility Program Evolution- $$
Energy Costs are rising,
what can I do? I don’t
want a 2nd mortgage…
65
But saving money every
month would be nice…
ClimateMaster
Geothermal Market Barriers

66
The trick in today’s economy is to tie
efficiency loans to the structure, not the
owner/occupant.
ClimateMaster
Utility Program Evolution- $$
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
On bill financing
Midwest Energy
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67
Hays Kansas co-op puts
up the efficiency funding
No up-front capital is required for qualifying investments.
Monthly How$mart® surcharge covers the cost of qualifying
improvements. The surcharge is always less than the
projected savings.
The How$mart® surcharge is tied to the location. If you
move or sell the property, the next customer pays the
surcharge.
ClimateMaster
Utility Program Evolution- $$

On bill “collection”
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–
–
–
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68
Clean Energy Works Portland pilot
surcharge is again tied to the location/meter. If the
customer moves or sells the property, the next customer
pays the surcharge.
Funding is supported by for profit and not-for-profit entities
looking for stable and secured returns
3 utility partners provide collection services for a small
administrative fee. They don’t have to be the banker.
Institutions love secured stable returns with an
environmental benefit.
ClimateMaster
Utility Program Evolution- $$
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69
Now expanded to Clean Energy Works Oregon
Have obtained an additional $20 million via ARRA
funding.
Goal of 6,000 home retrofits by 2011
Using utility partners for on-bill collection
ClimateMaster
Utility Program Evolution- $$

Electric Cooperatives of South Carolina in
partnership with the Environmental and
Energy Study Institute pilot effort
–
–
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70
On bill financing
Goal improve 225,000 homes by 2021 and Serve
as a model for the Rural Star Department of
Agriculture Rural Utility Service loan program
(now before congress)
Requires positive cash flow from the measures
installed
ClimateMaster
Oak Ridge National Labs – U.S.
DOE December 2008

71
The primary GHP market failure is the expectation
that building owners should finance the ‘GHP
infrastructure,’ or outside-the-building …ground heat
exchanger. GHP infrastructure will outlive the
building and many generations of heat pumps, and is
akin to utility infrastructure (poles and wires, and
underground natural gas piping).
ClimateMaster
Oak Ridge National Labs – U.S.
DOE December 2008

72
This begs the question: “Why do we expect
building owners to finance GHP
infrastructure on their own credit, but not
other utility infrastructure?”
ClimateMaster
The Ground Loop “Utility”
The Utility Loop Concept

Utility owns and recovers the cost of the loop, interest
expense, program costs, and profit or operating margin.
–
–
–

73
Utility installs or contracts out loop construction.
 Controls system design and installation quality
Utilities gets improved load factor & incremental kWh revenue.
 System load factor is even better with load control.
Future carbon credits may stay with the utility
Consumers Get:
–
–
–
Lower total energy bills.
Utility grade service and reliability
Reduced or no incremental cost for participating
ClimateMaster
The Ground Loop “Utility”


H.R.2419
Food and Energy Security Act of 2007
(Engrossed Amendment as Agreed to by
Senate)
–
–
74
SEC. 6108. ELECTRIC LOANS TO RURAL
ELECTRIC COOPERATIVES.
“The committee notes that assistance is
authorized for renewable energy including
geothermal ground loops”
ClimateMaster
The Ground Loop “Utility”

The RUS now includes GSHP loops into their
standard loan program.
–
–
The GSHP loops become utility plant.
Loops look like street lights for billing.

–
Instant first cost savings for your members.


–
75
New margin opportunity (earnings on plant).
Drives positive cash flow cash flow for members.
Long term utility relationship and member satisfaction.
Levels the electric utility playing field with natural gas,
propane and oil heating.
ClimateMaster
Plumas Sierra



76
30 yr interest free loop lease
Free 85 gallon Marathon WH or
$ 500 bill credit or rebate in lieu of WH
ClimateMaster
The Ground Loop “Utility”



Delta-Montrose Electric Association was the first
utility to offer a loop “tariff”
The Wyandotte, Michigan City Council recently
approved the creation of a geothermal utility
Can be accomplished in any state with PUC or
legislative authority
–
77
Colorado law allows Independent Loop Companies
ClimateMaster
Delta Montrose
78

Installation of all equipment

Utility Owned Loops
ClimateMaster
Delta Montrose
79
ClimateMaster
Utility Program Evolution- $$

HR-4785 (Rural Star) introduced 3-10-10

This bill (now incorporated in the Climate Bill) will create a $4.9
billion consumer loan program administered by the nation's
rural electric cooperatives.
The cooperatives would borrow the funds at 0% interest
Then make the money available at no more than 3% for up to
10 years for energy efficiency upgrades.
Enabling the co-ops to combine 35 year loop financing with 10
year GSHP equipment retrofits and home efficiency
improvements
Consumers get a 30% tax credit on the GSHP Equipment




80
ClimateMaster
Utility Program Evolution- $$


If Rural Star becomes law, the USDA – RUS
will be able to make loans on GSHP for all
utilities
By the end of this year, RUS may have GHP
equipment loans available for co-ops
–
81
10 to 15 years at 4.5%
ClimateMaster
GHPs and Key Account Efforts
82

Federal tax credits can make commercial
GHP installations & retrofits the lowest
equipment first cost option.

This can be used to support key account
efforts & program results

Most commercial applications save both
peak demand and kWh
ClimateMaster
Geothermal Heat Pump
Business Tax Incentives
Federal Income Tax Credit:
 10% of total GHP system cost




No cap on maximum credit
Can be used to offset AMT tax
Can be used in combination with subsidized financing
Can be used in more than one year
Accelerated Depreciation:
 5 year MACR depreciation for entire GHP system
Eligibility:
 Building located in the U.S.
83




Original use begins with taxpayer
Placed in service before 2017
Can be used by regulated utilities
Must be claimed by the owner of the property
(effects nonClimateMaster
Example Commercial GHP
Economics
Geothermal HVAC Cost:
Conventional HVAC Cost:
Additional Cost:
Income Tax Rate:
Energy Credit:
Utility Rebate
Annual Energy Cost Savings:
Energy Inflation:
84
$
$
$
$
$
300,000 50 tons at $6000 per ton
125,000 50 tons at $2500 per ton
175,000
35%
10%
15,000 50 tons
20,000 $1 per sq ft per year
3%
ClimateMaster
Example Commercial GHP
Economics
Added Cash
Energy Credit
Depreciation
Energy
Annual
Cumulative
Outlay
Tax Benefit
Tax Benefit
Cost Saved
Cash Flow
Cash Flow
Year
2009
$
(160,000)
$
30,000
$
52,369
$
20,000
$
(57,631)
$
(57,631)
2010
$
18,953
$
20,600
$
39,553
$
(18,079)
2011
$
11,372
$
21,218
$
32,590
$
14,511
2012
$
6,823
$
21,855
$
28,677
$
43,188
2013
$
5,456
$
22,510
$
27,967
$
71,155
2014
$
4,778
$
23,185
$
27,964
$
99,118
2015
$
-
$
23,881
$
23,881
$
122,999
2016
$
-
$
24,597
$
24,597
$
147,597
2017
$
-
$
25,335
$
25,335
$
172,932
2018
$
-
$
26,095
$
26,095
$
199,028
2019
$
-
$
26,878
$
26,878
$
225,906
Depreciation reduces 7 yr payback to 1.5 yrs!
85
Simple Payback:
IRR:
1.5 yr
57%
Commercial Leasing
GEOSmart Financing Solutions – By the
Electric and Gas Industry Association
•Delivers Wide range of lease financing options
to meet Commercial energy efficiency needs
•Typically 12-72 months (However can be
longer under special conditions)
• Master lease agreements
• Flexible payment schedules
•Total solution financing - equipment, installation
and
services
86
ClimateMaster
Commercial GHP Economics


87
For not-for-profits and commercial building
owners with out a “tax appetite”, several
financing companies have come to the geo
market to finance either loops or loops and
equipment.
They can “harvest the tax credits and
depreciation.
ClimateMaster
Thank You For Your Attention!
Questions?
If you ever need a hand
you can reach me at:
Paul Bony
paulsbony@yahoo.com
88
970-249-8476
ClimateMaster