Transcript State Renewable Energy Initiatives

The Geothermal Heat Pump
Loop Tariff
IGSHPA Technical Conference
October 1-2, 2008
Paul Bony
Director of Residential Market Development
The Ground Loop “Utility”
 The new energy “crisis”:
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Fossil fuel price shocks
Climate change
Energy independence
Consumer and government focus on renewable
energy, energy efficiency and CO2 reduction
– Fuel switching from propane/fuel oil/natural gas to
electric resistance heating (plug-in and installed)
• Placing pressure on electric utilities & rates by increasing
demand for new generation and distribution
– Consumer & government resistance to new
generation (especially coal)
The Ground Loop “Utility”
Fertile ground for new efficiency products
and services
Utilities can be key players and leaders!
Or not?
If not traditional utilities, then who?
The GSHP “Market”
 The national residential market for HVAC is 6.4
million “units” per year
– Geo sales are a small component of this market
 New home starts are down (a lot)
 Retrofits are the market drivers
– $3,000 annual propane bills hurt, a lot. Fuel oil hurts
more.
– Natural gas prices are increasing
 Retrofit customers are cash limited
The Ground Loop “Utility”
Mass market approach for geothermal heat pumps
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
– Electric utilities get 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
The Ground Loop “Utility”
The Ground Loop “Utility”
The Ground Loop “Utility”
DMEA / Customer
interface
The Ground Loop “Utility”
DMEA Objectives
– Reduce first cost barrier for GHPs
– Provide members with a net positive cash flow
from their GHP investment
– Encourage builders & developers to use
GeoExchange in new homes.
– Build load factor
The Ground Loop “Utility”
Average margin from GeoExchange
members
 = $91.05/month (from AMR analysis)
Average margin for all members
= $56.83/month
Incremental margin ($91.05- $56.83)
= $34.22/mo
The Ground Loop “Utility”
Sample of Electric Utility Value
 Installed loop cost $6,000 (retail).
= Premium over high end gas equipment with AC.
 Generates $410.64 in annual net margins.
– $12,319 total revenue over 30 years.
– An IRR of 5.45%.
 Co-Op return on poles & wires.
– ROI 3.8%.
 Investor owned utility return on equity
– 10-11%
The Ground Loop “Utility”
Value to Utilities
 They can recover the cost of the loop, interest expense,
program costs and earn more than their cost of funds
through a loop fee.
 And gain earnings from incremental electric sales.
 And improve load factor w/o load control (even more
with it!)
 And help customers lower their total energy bill.
 And reducing carbon emissions.
The Ground Loop “Utility”
Value to Utility Customers
 Piece of mind
– Less volatile heating & cooling costs
– Utility grade customer service
 Annual energy savings of $250 to $2,000 +
– Reduced or no up-front investment (using
supplemental financing)
– Immediate positive cash flow
 They are doing their part for the environment
The Ground Loop “Utility”
70 degree heating and cooling
Electric Resistance
$2640
(100% radiant/convector zoned system with 13 SEER A/C)
Propane
$2474
(91% condensing system with 13 SEER A/C)
Natural Gas
$1021
(91% ignitor condensing system with 13 SEER A/C)
GeoExchange
$724
(350% efficient system with horizontal ground loop)
Assumes:
• Typical 2,000 sq foot home (48,000 Btu/hr heating load & 20,000 Btu/hr cooling load)
• Average temperature design data for Montrose, CO
• Energy costs: Electricity@ $.093/kWh; Propane @ $1.96/gallon; Natural Gas @ $.76/therm
DMEA member value
The Ground Loop “Utility”
 Lease (lawyer said it looked like a loan)
 Loan (banks are better at it than utilities are)
 Tariff
 Investment will be recovered through the loop tariff
and the incremental electric revenue generated
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”
The Ground Loop “Utility”
 The USDA/RUS can now provide 35 year loan
funds for GHP loops (new in the Farm Bill)
– The GHP 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 utility playing field with natural gas
 Establishes a model for Investor Owned,
Municipal, and other utilities
The Ground Loop “Utility”
Requirements
– Loop Tariff
• Rate hearing for start-up and subsequent changes
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Loop Policy
Member contract
Member easement
Third party GHP equipment installer contract
(FUTURE)
The Ground Loop “Utility”
 Applicable to residential and small commercial
consumers currently receiving service from
DMEA, for 2 to 6 ton systems.
 DMEA must approve site, structures, & system
design and installation specifications.
The Ground Loop “Utility”
 Customer owns GeoExchange equipment,
furnace & ductwork
 DMEA owns the ground loop
 Customer pays a monthly tariff to use the ground
loop
 Customer can cancel loop service or purchase the
loop from DMEA at any time
 DMEA can disconnect loop for non-payment
The Ground Loop “Utility”
The property owner(s) grant the utility an
easement for the installation, removal,
maintenance, repair and/or replacement of
the ground loop.
The easement is recorded with the Clerk
and Recorder in the county where the
property is located.
– The property owner(s) must sign the easement
prior to the loop installation.
The Ground Loop “Utility”
 Customer agrees that no structures shall be
placed or built over the loop field without
expressed written permission from the utility.
 Customer must call for loop locates for all
construction/landscaping. If they do not call, and
the loop is damaged, they are liable for all loop
repair costs.
 If a customer calls the utility reporting that their
loop is not working and the problem is not the
ground loop, they are billed for a service call.
The Ground Loop “Utility”
 If an account is transferred to a new customer,
the are offered the Loop Tariff at sign-up.
– The new customer is given the option to sign a service
agreement confirming their acceptance of the terms of
the Geo Loop Tariff.
– They also have the option to purchase the loop.
 They can also terminate the loop service.
– DMEA will disconnect the loop and leave the service
idle until the member, or a future member, elects to
reconnect the loop.
The Ground Loop “Utility”
The member may purchase the loop at a
future date for the originally installed
allowance, plus a $400 processing fee.
Events which may require disconnection of
the loop:
– Failure by the member to stay current on their
loop tariff payment.
– Request by the consumer, with 30 days written
notice (one year rule applies).
The Ground Loop “Utility”
The loop investments are recorded as
utility plant and the associated income
from the tariff and the electric revenue
generated by the loop are recorded as
utility income.
The O&M and A&G costs associated with
providing the loop service are expensed as
utility operating expenses.
The Ground Loop “Utility”
The rate is subject to change at the
discretion of the DMEA Board of Directors
subject to DMEA’s rate change process,
procedures and bylaws.
Any Green Tags, Renewable Energy
Credits, Carbon Credits, or similar
incentives, if applicable now or in the
future, shall be retained by DMEA.
(more on this later)
The Ground Loop “Utility”
 Loop fees
– 2 ton to 6 ton loops only
– Horizontal loops
• $14.26 to $42.78 per month
– Drilled loops
• $29.56 to $88.68 per month
• DMEA will pay the entire cost (up to a loop “allowance”)
• If necessary, DMEA will require a one-time payment,
totaling any amount over the “allowance” for the loop.
The Ground Loop “Utility”
Horizontal
2 Ton Loop
3 Ton Loop
4 Ton Loop
5 Ton Loop
6 Ton Loop
Per Month
$
14.26
$
21.39
$
28.52
$
35.65
$
42.78
Allowance
$
3,754.00
$
5,247.00
$
6,819.00
$
8,315.00
$
9,795.00
Vertical
2 Ton Loop
3 Ton Loop
4 Ton Loop
5 Ton Loop
6 Ton Loop
Per Month
$
29.56
$
44.34
$
59.12
$
73.90
$
88.68
Allowance
$
7,300.00
$ 10,420.00
$ 13,665.00
$ 16,835.00
$ 19,995.00
The Ground Loop “Utility”
Annual kWh through loop
Total revenue
Average cost of power
kWh sales Margin (annual)
kWh sales Margin (monthly)
9,780
$948.95
67.38%
$309.55
$ 25.79
The Ground Loop “Utility”
Average loop is a 4 ton horizontal
– Loop value (retail)
– Cost of funds
• (100% debt)
$6,800.00
5.00%
The Ground Loop “Utility”
kWh sales margin (monthly)
Member tariff payment
– Total monthly income
Simple payback
Monthly debt service
– (35 years at 5%)
$25.79
$28.52
$54.31
10 years
$16.33
The Ground Loop “Utility”
A loop Tariff eliminates the “higher sales
price” barrier for home builders, as they
can build “GeoExchange” homes, for little
or no premium versus a quality gas furnace
and air conditioner.
Eliminates “what if I sell in a few years”
first cost barrier for home buyers.
The Ground Loop “Utility”
New Construction - Natural Gas
Average Installed Cost, including ductwork $22,000 (4-ton Horizontal)
Example: 2,000 sq ft home, forced air, $0.81/ccf natural gas
Equipment/Installation Premium
4 Ton Horizontal Loop Tariff
Total equipment costs
$00.00/month
$28.52/month
$28.52/month
Monthly savings over natural gas
Total savings over natural gas
$32.00/month
$3.48/month
The Ground Loop “Utility”
New Construction - Propane
Average Installed Cost, including ductwork $22,000 (4-ton Horizontal)
(Example: 2,000 sq ft home, forced air, $2.30/gallon propane)
Equipment/Installation Premium
4 Ton Horizontal Loop Tariff
Total equipment costs
$00.00/month
$28.52/month
$28.52/month
Monthly savings over propane
Total savings over propane
$177.00/month
$148.48/month
The Ground Loop “Utility”
Retrofit Homes
Outdoor Split
The Ground Loop “Utility”
Propane Retrofit Price $14,000 (4-ton Horizontal)
on an existing forced-air furnace
(Example: 2,000 sq ft home, forced air, $2.30/gallon propane)
Equip./installation $7,181.00 for 30 years @ 7.5%
4 Ton Loop Tariff (Allowance $6,819.00)
Total monthly cost
$50.21/month
$28.52/month
$78.73/month
Monthly savings vs. propane
Total savings over propane
$177.00/month
$ 98.27/month
Propane @ $1.21/gallon would result in a “break-even”
scenario
The Ground Loop “Utility”
Natural Gas Retrofit Price $14,000 (4-ton Horizontal)
on an existing forced-air furnace
(Example: 2000 sq ft home, forced air, $0.81/ccf natural gas)
Equip./installation $7,181.00 for 30 years @ 7.5%
4 Ton Horizontal Loop Tariff
Total equipment costs
$50.21/month
$28.52/month
$78.73/month
Monthly natural gas savings
Total savings over natural gas
$32.00/month
-$46.73/month
* Natural Gas @ $1.35/ccf would result in a “break-even”
scenario
The Ground Loop “Utility”
DOE is working to officially designate
GSHPs as a renewable energy resource.
Utilities will be able to obtain credit for
CO2 savings from GSHP programs.
The Ground Loop “Utility”
Geothermal heat pumps produce the lowest
carbon dioxide emissions, including all
source effects, of all available spaceconditioning technologies
(EPA, 1993).
 A GeoExchange systems saves CO2 on par with
an equivalent investment in solar PV.
– Based on DMEA’s electric energy carbon load and
weather data.
– Your results will vary (and will probably be better).
The Ground Loop “Utility”
Geothermal Heat Pumps are the Most Efficient way to use
Green Electricity for Heating, Cooling & Water Heating
The Ground Loop “Utility”
In Montrose, Colorado, an average
residential ground source heat pump will
save 10 Tonnes of CO2 per year using all
green power when replacing conventional
gas/propane heating & cooling.
How much is an annual ton of CO2 worth?
– $35/ton would cover the loop cost
The Ground Loop “Utility”
A nnual CO2 savi ngs i n T onnes
12
Annual Tonnes of CO2 (equivalent) savings
10
8
6
4
A Geothermal heat pump saves 43%
more CO2 than an equivalent
investment in solar PV (OPT Colorado
kWh carbon load and Montrose
weather data.)
2
0
1 bl ock gr een power
1 kw P V syst em
4 T on GX vs Fossi l F
gr een 4 t GX vs FF avg
The Ground Loop “Utility”
What if electric utilities are not interested?
Natural gas utilities?
– Joint Statement of the American Gas
Association and the Natural Resources
Defense Council Submitted to the National
Association of Regulatory Utility
Commissioners July 2004
The Ground Loop “Utility”
 “traditional utility rate practices fail to align the interests
of utility shareholders with those of utility customers and
society as a whole. This need not be the case. Public
utility commissions should consider utility rate proposals
and other innovative programs that reward utilities for
encouraging conservation and managing customer bills
….”
 “We also support performance-based incentives designed
to allow utilities to share in independently verified
savings associated with cost-effective energy efficiency
programs”
The Ground Loop “Utility”
Business Offering:
REnU Bringing Solar to Your Home.
Citizenrē launches the pilot phase of its REnU Offering
for the residential sector.
 Packaged Approach
Utility Price Parity
Fixed-Rate
Performance Guarantee
No Investment Risk
The Ground Loop “Utility”
The renewable energy utility
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Builders
Loop installers
New opportunity companies
Anyone in this room?
The Ground Loop “Utility”
http://www.usda.gov/rus/elect
ric/engineering/2006/en-in06.pdf
Thank You For Your Attention!
Questions?
If you ever need a hand
you can reach me at:
Paul Bony
[email protected]
970-