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

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1 Geothermal Heat Pumps: Harnessing On-Site Renewable Energy to Meet Energy-Efficiency and Climate Change Goals Southwest Renewable Energy Conference September 10 th Paul Bony Director of Residential Market Development ClimateMaster, Inc. Oklahoma City

2 What s New The new energy market: Climate change is the issue (Co2) Coal generation under attack (dead?) Existing or pending mandates for renewable (more expensive?) electric generation

3 What s New Consumers fuel switching from propane/natural gas to electric resistance heaters

4 What s New Resulting in rising electric rates driven by the demand for more electricity and rising generation (fuel and alternative energy) costs!

5 What s New A new administration focused on a low carbon, green collar economy Unprecedented funding for renewable energy and energy efficiency Window of opportunity for utility ground source heat pump programs

6 What s New The American Recovery and Reinvestment Act of 2009 (ARRA) Includes DOE funding for... $400,000,000 for geothermal activities and projects. The funding level for the advancement of the groundsource heat pump industry is $50,000,000 ARRA funding opportunity announcements (FOAs) were due August 6 th and will be announced in the next 4-8 weeks.

7 What s New Draft - American Clean Energy and Security Act of 2009 (ACES) create millions of new clean energy jobs save consumers hundreds of billions of dollars in energy costs enhance America s energy independence cut global warming pollution (carbon emissions)

8 What s New for Utilities TITLE I CLEAN ENERGY Requires retail electricity suppliers to meet a percentage of their load with electricity generated from renewable resources (wind, biomass, solar, and geothermal) The renewable electricity requirement begins at 6% in 2012 and gradually rises to 25% in The governor of any state may choose to meet one fifth of this requirement with energy efficiency measures.

9 What s New for Utilities TITLE II ENERGY EFFICIENCY Promotes new building energy efficiency. Authorizes funding for retrofitting existing commercial and residential buildings to improve their energy efficiency. Utilities Energy Efficiency. Establishes a new energy efficiency resource standard to enlist electricity and natural gas distribution companies in the effort to make the nation more energy efficient.

10 What s New for Utilities Utilities Energy Efficiency Each distribution company must demonstrate that its customers have achieved a required level of cumulative electricity or natural gas savings relative to business-as-usual projections. The efficiency standard starts with a 1% electricity savings and 0.75% natural gas savings in 2012 and gradually increases to a 15% cumulative electricity savings and a 10% cumulative natural gas savings by 2020.

11 What s New for Utilities TITLE III REDUCING GLOBAL WARMING POLLUTION reduces the number of available allowances issued each year to ensure that aggregate emissions from the covered entities are reduced by 3% below 2005 levels in 2012, 20% below 2005 levels in 2020, 42% below 2005 levels in 2030, and 83% below 2005 levels in 2050.

12 What s New for Utilities Offsets. The draft allows covered entities to increase their emissions above their allowances if they can obtain offsetting reductions at lower cost from other sources Allocates a portion of the carbon credits to smaller distribution utilities and limits the carbon credits going to auction (15%?)

13 What s New for Utilities Fertile ground for new efficient electric products and services Utilities will be set up to be key players and leaders Or carbon credit markets will generate new players in the efficiency market

14 Geo for Utilities Ground source heat pumps are a utility resource that can: Improve system load factor Optimize DSM, peak-time pricing and direct load control programs Reducing pressure on rates by increasing margins Make consumers happy by reducing energy bills Meet efficiency/carbon reducing program requirements

15 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 39% of U.S. Primary Energy Consumption Industry 377 MMTC (25%) Transportation 482 MMTC (32%) Buildings 658 MMTC (43%) 71% of U.S. Electricity Global Pressures 53% of U.S. Natural Gas (Exxon Mobile Projection)

16 Time for Geo Mass market direct use geothermal technology

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

18 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

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

20 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

21 Geothermal Heat Pumps Transfer Heat Efficiently Purchased: 1 kwh of energy from the grid to operate the system Yields: 4-6 kwh of energy for the building Free: 3-5 kwh of energy absorbed from the earth % Efficient

22 Heat Pumps Are All Around Us Air conditioners and air-source heat pumps transfer heat from inside houses to the air outside HEAT HEAT B BB Refrigerators transfer heat from food into the kitchen

23 Geothermal Heat Pumps Are self-contained heating, cooling and water heating units that operate with standard thermostats, in-floor and ducted systems, in any climate.

24 HVAC Energy Use Comparisons Geothermal HVAC - Home Conventional HVAC - Home

25 Geothermal Heat Pumps Geothermal heat pumps are the most efficient way to use green power for carbon free heating, cooling & water heating

26 Geothermal Heat Pump Political Drivers 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

27 New Assistant Secretary for Renewable Energy and Efficiency at DOE

28 Time for Geo Geothermal Heat Pumps are one of the Most Effective and Deployable technologies producing the lowest carbon dioxide emissions, including all source effects, of all available spaceconditioning technologies (EPA, 1993)

29 Time for Geo

30 Time for Geo U.S. was once the world leader in GHP technology and market development Today domestic markets absorb ~60,000 units/yr 50-60% residential (new exceeding retrofit 3 to 1) 40-50% commercial U.S. still has the largest installed base Per capita, many European countries are ahead European markets are now 2-3 times the U.S. ~135,000 to 190,000 units/yr Growth rates in Europe, parts of Asia (China, S. Korea), and Canada exceed U.S.

31 Time for Geo GHPs were installed in 1 out of 38 new US homes in 2008 (2.6% share)

32 Historical N.A. Geothermal Industry Shipments Single Family Residential - 63% of Total New Homes 75% Existing Homes 25% Commercial 37% of Total Schools and Universities Public and Government Religious Buildings Multi-family Housing Office Buildings Retail

33 Time for Geo. Primary energy savings by to 3.9 quads annually (buildings today consume about 40 quads) Residential about 60% Of that ~20% new, ~80% retrofit Commercial about 40% Of that ~33% new, 67% retrofit 35-40% of savings needed to keep buildings in 2030 at 2008 energy use level (per EIA projections) Based on previous analyses by others for existing building retrofits, updated using current data, and supplemented with new construction savings estimate

34 Time for Geo Deferred electric generation capacity to 105 GW 42-48% of net new capacity additions by 2030 (per EIA projections) Utility bill reductions in 2030 $33 to 38 billion/yr (assuming rates in 2030 = rates in 2006)

35 Time for Geo Tier 1 High first-cost of GHP systems to consumers Tier 2 Lack of consumer knowledge and/or trust in benefits Lack of policymaker/regulator knowledge and/or trust in benefits GHP design and business model infrastructure limitations GHP installation infrastructure limitations Tier 3 Lack of new technologies and techniques to improve GHP system cost/performance Based on the sense of a group of GHP industry experts.

36 Time for Geo GHP infrastructure is the outside-the-building part of the GHP system Can be half or more of the overall GHP system cost Rest of system about the same cost as conventional Could be less in volume production GHP infrastructure is like utility plant It moves energy It outlives the building and many generations of heat pumps

37 Time for Geo Why do we expect building owners to finance GHP infrastructure on their own credit? When we bring central station renewable energy to market the transmission lines will not be financed on building owner credit Instead, as consumers of 72% of the nation s electricity, building owners will pay for these transmission lines in their utility bills

38 Time for Geo Another form of utility plant for delivering renewable energy supplies to the load 1 kwh of energy from the grid Plus: 3-5 kwh of energy from the earth Yields: 4-6 kwh of energy for the building

39 Time for Geo Actions To Accelerate Market Adoption of GHPs Tier 2 Streamline/deploy Rural Electric Co-Op programs to provide GHP infrastructure Universal access to GHP infrastructure via loop-leasing Develop data, models, tools enabling lowest Life Cycle Cost GHP infrastructure

40 Geo for Cooperatives ric/engineering/2006/en-in- 06.pdf

41 Geo for Cooperatives JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE TITLE VI RURAL DEVELOPMENT (51) Energy Efficiency Programs The Senate amendment amends sections 2(a) and 4 in the REA by authorizing the Secretary to extend loans to energy efficiency programs. (Section 6101) The House bill contains no comparable provision. The Conference substitute adopts the Senate provision. (Section 6101) The Managers note that assistance is authorized under this section for renewable energy, including geo-thermal ground loops, under sections 2 and 4 of the REA as amended. The Managers expect that applications for such assistance will be properly considered and when meritorious, that they should be funded.

42 Geo for Cooperatives The USDA/RUS can now provide 35 year loan funds for GSHP loops (in the last Farm Bill) The GSHP loops become utility plant Instant first cost savings for co-op members Drives positive cash flow cash flow New margin opportunity Long term utility relationship and member satisfaction Levels the electric efficiency playing field with natural gas Establishes a model for Investor Owned and Municipal utilities

43 Geo for Utilities Each residential heat pump linked to geothermal system can reduce peak loads in Summer by 1 2 KW Winter by 4 8 KW Residential (Electric Program) Over 10 million residential consumers Assume just 1 KW reduction per installation 10,000 MW demand reduction

44 Geo for Utilities Free up peak transmission and generation capacity for other purposes. Better use of existing capacity. Leverages electricity produced from renewable sources. Leverages clean coal technologies. Reduce the use of natural gas as a heating fuel, freeing its use for electric generation with renewable fuels. Reduced water consumption by power plants.

45 Comparison of Primary Energy Input versus Energy Output as delivered by Various HVAC Technologies KWh thermal Primary Thermal Energy Consumed Thermal Energy Delivered Air Source Heat Pump Gas/Electric HVAC System Ground Source Heat Pump

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47 Geo for Municipal Utilities New funding tool that supports efficiency efforts Energy Improvement and Extension Act of 2008 created a new bond: Qualified Energy Conservation Bonds ( QECBs ) Complement the renewable energy and resource incentives provided to taxable entities

48 New Tool for Municipal Utilities QECBs No interest bonds for efficiency efforts $3 billion set aside Allocated by State Energy Offices CREBs for Geo? Developing opportunity several Municipal Power Associations are investigating

49 Geo for Municipal Utilities Qualified Energy Conservation Bonds ( QECBs ) Available project proceeds = sales proceeds less financed costs of issuance (not to exceed 2%) plus earnings thereon

50 Geo for Municipal Utilities QECB s Capital expenditures for: Reducing energy consumption in publicly-owned buildings by at least 20% Implementing green community programs Mass community facilities to reduce energy consumption Public education campaigns to provide energy efficiency

51 Geo for Municipal Utilities Ground source heat pumps qualify Loop Equipment Weatherization Program costs and administration

52 Geo for Municipal Utilities The Berkley First Program Innovative city financing tool for solar PV using revenue bonds Based on a sustainable energy financing district Property owners opt in to borrow from the district for 20 years and repay the loan through their property tax

53 Geo for Municipal Utilities The Berkley First Program Has established the template for a Municipal Utility Geo heat pump retrofit program Combined with efficiency retrofits/repairs Plus on-site renewable generation

54 Geothermal Heat Pumps Are a Scalable Technology

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

56 Geothermal Heat Pumps Habitat for Humanity Average of 16 Homes - Total Site Energy Use in % Site Energy Savings kwh per M Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Geothermal Gas Furnace w A/C

57 Geothermal Heat Pumps Statue of Liberty Gift Shop ASHRAE Headquarters - Atlanta, GA Galt House Hotel - Louisville, KY Black Point Inn - Prouts Neck, ME Alta Condos, Washington DC Harvard Library Cambridge, MA French Laundry Rest.- Napa, CA Whistler Village - BC, Canada Yale Art Bld. New Haven, CT Gaillardia Offices Okla. City California University of PA Hirschfeld Towers Denver, CO Commercial Buildings

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

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

60 Garrett Office Buildings Monthly Peak Demand % Peak Demand Reduction 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

61 Geothermal Heat Pumps Since their introduction in the 1980 s, over 1 million geothermal heat pumps have been installed in the united states

62 Industry-Trained Geothermal Installers IGSHPA now claims over 5,000 members and has added well over one thousand new accredited installers just this year (June 2009). This does not include the new installers that have recently been through the Driller s course in Pennsylvania and Utah

63 Geothermal Heat Pump Legislative Talking Points 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 This cannot be imported from China Local skilled job creation

64 Geothermal Heat Pump Legislative Talking Points Why we requested tax incentives Creates consumer awareness and pull demand Improves purchase economics Foundation for investment in industry capacity increase Drilling rigs are expensive and trained operators scarce Contractors need to see that market will have sustained growth to commit resources

65 Geothermal Heat Pump Current Residential Tax Incentives (Enacted in October 2008 and updated in February 2009) Federal Income Tax Credit: 30% of total GHP system cost Credit capped at $2000 for 2008 Credit unlimited for 2009 thru 2016 Can be used to offset AMT tax Can be combined with solar and wind tax credits Can be used in more than one year Eligibility: 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 between 1/1/2008 and 12/31/2016

66 Geothermal Heat Pump Current Business Tax Incentives (Enacted in October 2008 and updated in February 2009) Federal Income Tax Credit or Grant: 10% of total GHP system cost Direct 10% grant available for businesses unable to utilize tax credits Maximum credit or grant is not limited 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 Eligible for bonus depreciation in 2009 (50% write-off in first year) Eligibility: Building located in the U.S. Original use begins with taxpayer Installed between 10/3/2008 and 12/31/2016 Can be used by utilities

67 Thank You For Your Attention! If you ever need a hand you can reach me at: Paul Bony paulsbony@yahoo.com