Daniel Ellis President ClimateMaster, Inc. Oklahoma City. Geothermal Heat Pump Legislative Status Report

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1 Daniel Ellis President ClimateMaster, Inc. Oklahoma City Geothermal Heat Pump Legislative Status Report

2 Geothermal Heat Pump Legislative History : Federal tax credits for solar, wind, geothermal enacted Accidentally launches fledgling GHP industry 1981 IRS ruling excludes GHPs by defining geothermal as 100 C minimum 1988: Earth Energy Association formed to lobby in Washington DC Membership limited to several GHP manufacturers 1992: Congress appropriates funding for GHP market transformation program Carried by momentum of Clinton/Gore climate change intiative Result of lobbying originated by EEA combined with industry grass roots efforts GHPC formed to replace EEA and as channel for initial funding that lasted 5-plus years GHPC structured as a utility funded and utility dominated organization : GHPC struggles Federal funding dries up Utility membership and interest dwindles as DSM is overshadowed by deregulation 2005: EPACT passes first Federal energy tax incentives since 1982 GHPC lobbying effort was extremely weak GHPs are effectively left out GHPC closed down operations in Washington DC as a result 2007: Change of control in Congress opens doors to new policy effort

3 Geothermal Heat Pump Current Political Drivers Why the Time is Now and Receptivity is High Rising Energy Costs Energy Security Concerns Climate Change Concerns Electric Grid Capacity This Convergence of Issues has been Dubbed a Perfect Storm Driving Energy Policy

4 Geothermal Heat Pump Recent Industry Legislative Actions ClimateMaster launched a unilateral all-out Federal effort in April 2007 Engaged a coalition of top-tier DC lobby firms Nearly $1 million invested to date Joined allied trade organizations with DC presence Committed its president to deliver the message We received vital support from: Alliance to Save Energy American Council for an Energy Efficient Economy Geothermal Heat Pump Consortium Geothermal National & International Initiative Inc. International Ground Source Heat Pump Association National Ground Water Association Geothermal Energy Association National Rural Electric Cooperative Association And crucial grass-roots support and local information from many of you!

5 Geothermal Heat Pump Legislative Message

6 Geothermal Heat Pumps: Harnessing On-Site Renewable Energy to Meet Energy-Efficiency and Climate Change Goals

7 Buildings Dominate U.S. Energy Use and Carbon Emissions with Heating, Cooling, and Water Heating being the Largest Contributors 43% of U.S. Carbon Emissions Industry 377 MMTC (25%) 39% of U.S. Primary Energy Consumption Buildings 658 MMTC (43%) Transportation 482 MMTC (32%) 71% of U.S. Electricity Global Pressures 53% of U.S. Natural Gas (Exxon Mobile Projection)

8 Our Domestic Energy Supplies are not Meeting our Needs

9 Geothermal Heat Pump Systems are the most energy-efficient, environmentally clean, and cost-effective space-conditioning system produce the lowest carbon dioxide emissions, including all source effects, of all available space-conditioning technologies (EPA, 1993) Geothermal Heat Pumps are one of the Most Effective Ways to the Reduce Energy Consumption and Environmental Footprint of our Building Stock

10 Geothermal Heat Pump Basic Principles

11 Earth is a Vast Solar Collector 100% 17% reflected by clouds. 6% reflected by surface. 19% absorbed by water vapor, dust 4% absorbed by clouds. 46% absorbed by ground Earth Solar energy maintains a nearly constant temperature throughout the year just below ground

12 U.S. Underground Temperatures

13 The Earth is a Source of Heat in Winter 72 F Outdoor air design temperature: -5 F 50 F Geothermal heat pumps transfer underground heat into buildings to provide heating

14 and an Efficient Place to Reject Heat in Summer 74 F Outdoor air design temperature: 95 F 50 F Geothermal heat pumps transfer heat from buildings into the ground to provide cooling

15 using Heat Pump Technology Geothermal heat pumps circulate water through a sealed underground piping loop where it is naturally warmed (or cooled) by the Earth

16 Geothermal Heat Pumps Transfer Heat Efficiently 1 kwh of energy from the grid Yields: 4-6 kwh of energy for the building Plus: 3-5 kwh of energy from the earth % Efficient

17 Geothermal Heat Pumps Self-contained heating, cooling and hot water that operates with standard thermostat and duct system

18 Residential Site Energy Conventional System Over 70% of the energy consumed by a typical home is used to meet thermal loads

19 Total site energy consumption is cut in half Residential Site Energy Geothermal Heat Pump System

20 Geothermal Heat Pumps are the Most Efficient way to convert Green Energy into Heating, Cooling and Water Heating Making the most effective use of this precious resource

21 Geothermal Heat Pump Installation Methods

22 Vertical Closed-Loop Installation Drilling Pipe Loop Insertion Heat Fusing Inside Connection

23 Geothermal Heat Pumps Are a Scalable Technology

24 Geothermal Heat Pumps 1300 Sq. Ft. Low Energy Habitat for Humanity Homes

25 Habitat for Humanity Low Energy Home Construction Details Geothermal Heat Pump / Foam Insulation / Low-E Glass / CFL Lighting / Energy Star Appliances

26 Habitat for Humanity Site Energy Consumption by End Use Std and Low Energy Homes Std Home - GAS Std Home - GHP LE Home - GHP LE Home - GHP + PV 80 55% to 80% Reduction in Total Energy Use 60 MMBtu / year Total Heating Cooling Hot Water Lighting Appliance Solar PV

27 Habitat for Humanity Total Energy Consumption and Carbon Emissions ,000 16% to 61% Reduction in Carbon Emissions 25,460 Site Energy Source Energy Carbon Emissions , ,432 MMBtu / year ,562 9,825 18,000 12,000 CO 2 Emissions lbs / year , Std Home - GAS Std Home - GHP LE Home - GHP LE Home - GHP + PV 0

28 Geothermal Heat Pumps Commercial Buildings

29 The Oklahoma State Capitol uses over 600 geothermal heat pumps

30 Garrett Office Buildings Edmond, Oklahoma One is Geothermal and the Other is Conventional VAV

31 Garrett Office Buildings Actual Metered Annual Energy Use % Site Energy Savings kbtu per Square Foot Total Electricity Gas VAV System Geothermal

32 Garrett Office Buildings Annual CO 2 Emissions % Carbon Emissions Reduction 45 Lbs. CO 2 Equivalent per Square Foot Gas Electricity VAV System Geothermal

33 Garrett Office Buildings Monthly Peak Demand % Peak Demand Reduction 5.0 Watts per Square Foot VAV System Geothermal Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07

34 The Potential of Geothermal Heat Pumps in Existing Housing An Example

35 Existing Housing Stock Gas 5.3 million Electric 1.0 million Propane 800k Heat Pump 400k Oil 200k Other 200k Gas 13.1million Electric 1.3 million Propane 1.1 million Heat Pump 800k Oil 700k Other 700k Gas 5.7 million Electric 4.3 million Propane 800k Heat Pump 900k Other 400k EIA 2005 Residential Energy Consumption Survey

36 Geothermal Heat Pump Retrofits in Existing Homes Annual Energy and Carbon Savings Potential CO MMT Summer Peak 1.2 GW Winter Peak 0.8 GW Electric 6.3 Billion kwh Primary 0.12 quad Btu Geo Units 0.6 million Cost - $6 to $8 billion Savings - $1.6 billion / yr CO MMT Summer Peak 1.9 GW Winter Peak 0.3 GW Electric 6.8 Billion kwh Primary 0.14 quad Btu Geo Units 1.0 million Cost - $10 to $14 billion Savings - $2.7 billion / yr Assumed Segment Penetration: 25% of homes without access to natural gas CO MMT Summer Peak 3.1 GW Winter Peak 9.7 GW Electric 25.4 Billion kwh Primary 0.21 quad Btu Geo Units 1.5 million Cost - $15 to $21 billion Savings - $3.3 billion / yr

37 The Potential of Geothermal Heat Pumps in New Housing

38 New Housing Added in 2006 Gas 53,400 Electric 9,100 Propane 5,500 Heat Pump 14,400 Geothermal 7,928 Gas 149,000 Electric 4,600 Propane 26,100 Heat Pump 9,000 Oil 200 Geothermal 11,100 Gas 125,300 Electric 31,300 Propane 5,200 Heat Pump 67,300 US New Homes Census 2006 Geothermal 2,380

39 LEED Buildings: Leadership in Energy and Environmental Design The LEED green building rating system is the national benchmark for high performance green buildings from f the U.S. Green Building Council (USGBC) Geothermal systems can provide many of the required points to achieve LEED certification

40 Geothermal Heat Pump Market Perspective

41 Historical Geothermal Industry Shipments 50,000 45,000 Single Family Residential - 63% of Total New Homes 75% Existing Homes 25% 40,000 35,000 30,000 25,000 Commercial 37% of Total Schools and Universities Public and Government Religious Buildings Multi-family Housing Office Buildings Retail 20,000 15,000 10,000 5,

42 Geographic Geothermal Shipments

43 Industry-Trained Geothermal Installers

44 USA Geothermal Heat Pump

45 Geothermal Heat Pump Market Barriers Awareness First Cost Infrastructure Development No Builder Incentive to Invest in Energy Saving Realty, Lending, Appraisal Transformation Needed

46 Geothermal Heat Pump Legislative Talking Points This is NOT geothermal steam power generation Lots of confusion on this point 50 State technology Unlike solar, wind, and hot rocks geothermal Uniquely addresses one of the largest components of US energy consumption Thermal loads of heating, cooling, hot water in buildings Incremental cost is the underground loop Can t be imported from China Local skilled job creation Why we need tax incentives EPACT 2005 left GHPs off the list Creates consumer awareness and pull demand Improves purchase economics Foundation for investment in industry capacity increase Drilling rigs and trained operators are expensive Need to see that market will really grow to commit resources

47 Geothermal Heat Pump Federal Legislative Efforts since 4/07 Original GHP Bill Sponsorship Meetings with 9 members of Congress and 36 staffers Cosponsor Recruiting for GHP Bills Meetings with 25 members of Congress and 90 staffers General Support for GHP Technology Meeting with top staff leadership of HW and MC, SFC, JCT, SCCC Meetings with DOE, GSA, VA, EIA, Administration Staff In total 29 other meetings Top Level Meetings Senate Majority Leader Reid House Speaker Pelosi

48 Geothermal Heat Pump Federal Legislation Results HR 2990 S HR 6049 HR % of system cost homeowner investment tax credit - $2000 cap 10% of system cost business investment tax credit no cap 42 bipartisan cosponsors and list is growing Mirrors HR 2290 and adds accelerated depreciation 20 bipartisan cosponsors and list is growing Tax Extenders Bill Includes 8 years of HR 2990 provisions for geothermal heat pumps Passed 93-2 in Senate last week Tax Extenders Bill Includes 8 years of HR 2990 provisions for geothermal heat pumps Residential only at this point Passed in House last week

49 Geothermal Heat Pump Federal Legislation Status THIS WEEK Monday: The House refuses to take up HR 6049 over pay for issues The House stuns Wall Street by defeating HR 3997, the $700 billion bailout bill The Senate is unable to pass HR 7060 due to pay for issues Tuesday Night: Along Comes HR 1424, the aptly-titled Mental Health Parity Bill Will include HR 3997, the bailout bill Will include HR 6049 with 8 years of res. and comm. GHP tax credits Will include new FDIC insured limits of $250k Wednesday Night: HR 1424 widely expected to pass in the Senate Thursday: HR 1424 likely to pass in House Pressure to pass this is intense, but wheels could still fall off BUSH WILL SIGN THIS BILL!

50 Geothermal Heat Pump State Incentives 21 States have Financial Incentives for GHPs Many are new this year Sales tax and property tax exemptions, income tax credits, grants 10 States have tax credits or grants 31 States have Regulatory Incentives for GHPs Green public building requirements 29 States have Utility Incentives for GHPs Voluntary DSM Mandated RPS and EPS loans and rebates All 50 States now have some kind of GHP Incentive!

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54 Geothermal Heat Pump Other Drivers Building Codes HERS Home Energy Ratings Need to be involved or could be LEFT OUT LEED and other Green Certification Programs Need to be involved or could be LEFT OUT State Level Activities Incentives Utility Regulatory Other Federal Activities Remain Appropriations for market transformation and R&D Climate Change Legislation

55 Questions?