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Transcript Paul_Bony_Short_utility_course_session_2

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

Paul Bony Director Of Residential Market Development ClimateMaster ClimateMaster

Federal Policies

 Carbon Reduction – Energy Efficiency – Renewable Energy  Energy Independence  Jobs  US Department of Energy  US Environmental Protection Agency  National Labs ClimateMaster

Federal Policies

 US DOE – US DOE Strategic Plan 2011  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

 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

 US DOE/NREL – Geothermal Heat Pump Road Map – Sets goal of installing 1 million units/yr ClimateMaster

Federal Policies

   Geo as a renewable resource – US DOE considers geothermal heat pumps a renewable energy technology Most states currently do not address this issue State PUCs and state energy offices need to allow geo heat pumps as – – – – Energy efficiency measure Peak demand reduction measure Load management measure Renewable energy resource ClimateMaster

Federal Policies

 US EPA – Climate Change policies – Energy Star programs ClimateMaster

Federal Policies

 US EPA – ”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

 US EPA  Energy Star Appliances – http://www.energystar.gov/index.cfm?fuseaction=find _a_product.showProductGroup&pgw_code=HP ClimateMaster

Federal Policies

 ORNL – 2010 Report – Found geothermal heat pumps would:  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

 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 12

 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 13

 "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 14

  Investor owned Electric utilities shall implement cost effective

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

     1. Geo improves energy efficiency – Significant contribution toward state’s adopted goals 2. Geo reduces peak demand – – – Winter (?)

Summer

Significant $$ savings for utility 3. Geo is a renewable energy technology – Helps meet state’s adopted goals 4. Geo reduces consumers’ bills 5. Geo reduces carbon footprint ClimateMaster

State Policies

  Geo needs to be fully recognized for the value it provides Need to work with your Legislature & state PUC staff/commissioners – – – 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  – 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  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

 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

 New Concept – Clean Energy Standards – – – 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 .

Just need to add “ including Geothermal Heat Pumps ” ClimateMaster

Why Should Utilities Support GHPs?

‘Cause somebody has to carry the load



Vision



Patience To Develop A Market



Economic Incentives



Strong Consumer & Contractor Relationship 22



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 ClimateMaster

(Progressive)Utility

Energy

Vision

Driving Factors

 Public Relations  Special Interest groups – Environmental   – Economic Development Utility Economics – Lost Revenue Energy Efficiency is a “no regrets” strategy NRECA, APPA, IOUs ClimateMaster

(Progressive)Utility

Energy

Vision

   

In utility terms we need to:

Use electric technologies to reduce wholesale energy costs – Manage our Power Bills Use electric technologies to increase revenues/margins from energy sales & other services – Increase sales of positive margin kWh Use electric technologies to build our “Brand” – Increase customer loyalty Get credit for total system emission savings ClimateMaster

(Progressive)Utility

Energy

Vision

26 Range of Utility Activities/Responsibilities

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

    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) 

No Viable Long Term Financing

–

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:



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 28 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 before 2017

ClimateMaster

Geothermal Market Barriers

      GeoExchange 4 Windows Attic Insulation Marathon Water Heater Air Sealing 10 CFLs Total    

Annual Savings Simple Payback

Net cash flow (30 yr./6%) $28/mo.

Comfort Beyond imagination

$2,255 11.8 years

$23,100 $ 1,600 $ 900 $ 700 $ 250 $ 45

$26,595 Before tax credits!

ClimateMaster

Geothermal Market Barriers

 Consumers are suffering from “cash separation anxiety” ClimateMaster

Geothermal Market Barriers

 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 32

$0 $5,000 $10,000 $15,000 $20,000 $25,000 Natural gas system 60 month financing of geo loop Before tax credits!

$30,000 $35,000 $40,000 $45,000 360 month financing of geothermal loop Cash purchase of geothermal loop $50,000 ClimateMaster

The Geothermal Market

ClimateMaster

Why Pennsylvania?

   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?

   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 – 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: – 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%. – 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

ClimateMaster

Utility Case Histories

          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

 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

ClimateMaster 42

0,46 0,45 0,44 0,43 0,42 0,41 0,40

OMPA and Member Load Factors

Load Factors Four Largest Cities and OMPA 3-yr Rolling Averages

2006 2 007 Oklahoma Comfort Program

OMPA

2 008 ClimateMaster 43

WISE Program Objectives

 Reduce summer peaks – Delay acquisition of new power resources  Improve load factor – Reduce cost of power for OMPA’s member cities  Geothermal heat pumps help do both – Lower summer peaks – Add winter electric load Oklahoma Comfort Program ClimateMaster 44

Oklahoma Comfort Program

     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

    Electric utility customers of OMPA member cities Owner-occupied single-family residences qualify – Restrictions apply and special approval is needed for other types of buildings and for installations 5.5 tons and larger (until July 2012) SHPO review/approval required for all work starts – sites Much easier for properties less than 45 years old before 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

ClimateMaster

Oklahoma Comfort Program (OCP)

A step-by-step description for customers 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      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

 CO2 Reduction  Peak Load Reduction  Jobs – with emphasis on OK jobs

 Carbon Footprint Oklahoma Comfort Program ClimateMaster 49

CO2 Reduction Metric

 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 50

Peak Load Reduction Metric

  New or retrofit?

– Assume most systems will be retrofitted, replacing 13-SEER air conditioners. Under what conditions does OMPA set peaks?

– 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.) 52

 GHPs must be certified by AHRI – – 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) 53

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 ??????????

ClimateMaster

GHP Capacity Benefits NPV

@ $5 per month/ton and three discount rates

 5% - $ 748/ton  3% - $ 893/ton  7% - $ 635/ton ClimateMaster

Total Energy Savings Metric

Hope Crossing Project 17 MM Btu per Ton 200 180 160 140 120 100 80 60 40 20 0 Site Energy Source Energy Conv 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 57

 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 – – – 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

 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 59

   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

Oklahoma Comfort Program ClimateMaster 59

Oklahoma Comfort Program (OCP)

Installer/Contractor Criteria 60

      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 – This list was drawn up based on the criteria listed above Oklahoma Comfort Program ClimateMaster 60

Major Changes In OCP

 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 62

 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 – Testing new loops & grouts this winter (lower cost?) – Goal to offer a monthly loop fee & equipment financing ClimateMaster

Hope Crossing GHP Program Design

 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: – 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 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ClimateMaster

Utility Program Evolution- $$

65 Energy Costs are rising, what can I do? I don’t want a 2 nd mortgage… But saving money every month would be nice…

ClimateMaster

Geothermal Market Barriers

 The trick in today’s economy is to tie efficiency loans to the structure, not the owner/occupant. ClimateMaster

Utility Program Evolution- $$

 On bill financing  Midwest Energy – 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” – – – – – 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- $$

    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 – – 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

 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

 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. – – – 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) – – 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.

 New margin opportunity (earnings on plant).

Instant first cost savings for your members.

  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

 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 – Colorado law allows Independent Loop Companies ClimateMaster

Delta Montrose

 Installation of all equipment  Utility Owned Loops ClimateMaster

79 Delta Montrose

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 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 – 10 to 15 years at 4.5% ClimateMaster

GHPs and Key Account Efforts

 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.

Original use begins with taxpayer Placed in service before 2017 Can be used by regulated utilities taxable )

Example Commercial GHP Economics

84 Geothermal HVAC Cost: Conventional HVAC Cost: Additional Cost: Income Tax Rate: Energy Credit: Utility Rebate Annual Energy Cost Savings: Energy Inflation: $ 300,000 $ 125,000 $ 175,000 50 tons at $6000 per ton 50 tons at $2500 per ton 35% 10% $ 15,000 50 tons $ 20,000 3% $1 per sq ft per year Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Added Cash Outlay $ (160,000) Energy Credit Tax Benefit $ 30,000

ClimateMaster

Depreciation Tax Benefit $ 52,369 $ 18,953 $ 11,372 $ 6,823 $ 5,456 $ 4,778 $ $ $ $ $ Energy Cost Saved $ 20,000 $ 20,600 $ 21,218 $ 21,855 $ 22,510 $ 23,185 $ 23,881 $ 24,597 $ 25,335 $ 26,095 $ 26,878 Annual Cash Flow $ (57,631) $ 39,553 $ 32,590 $ 28,677 $ 27,967 $ 27,964 $ 23,881 $ 24,597 $ 25,335 $ 26,095 $ 26,878 Cumulative Cash Flow $ (57,631) $ (18,079) $ 14,511 $ 43,188 $ 71,155 $ 99,118 $ 122,999 $ 147,597 $ 172,932 $ 199,028 $ 225,906 Simple Payback: IRR: 1.5 yr 57%

Example Commercial GHP Economics

Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Added Cash Outlay $ (160,000) Energy Credit Tax Benefit $ 30,000 Depreciation Tax Benefit $ 52,369 $ 18,953 $ 11,372 $ 6,823 $ 5,456 $ 4,778 $ $ $ $ $ Energy Cost Saved $ 20,000 $ 20,600 $ 21,218 $ 21,855 $ 22,510 $ 23,185 $ 23,881 $ 24,597 $ 25,335 $ 26,095 $ 26,878 Annual Cash Flow $ (57,631) $ 39,553 $ 32,590 $ 28,677 $ 27,967 $ 27,964 $ 23,881 $ 24,597 $ 25,335 $ 26,095 $ 26,878 Cumulative Cash Flow $ (57,631) $ (18,079) $ 14,511 $ 43,188 $ 71,155 $ 99,118 $ 122,999 $ 147,597 $ 172,932 $ 199,028 $ 225,906 Depreciation reduces 7 yr payback to 1.5 yrs!

85 Simple Payback: IRR: 1.5 yr 57%

Commercial Leasing

86 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

ClimateMaster

Commercial GHP Economics

  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 [email protected]

970-249-8476

ClimateMaster