Geothermal Heat Pumps A - Z Session 2

1. Geothermal Heat Pumps A - ZSession 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

2. Federal Policies • Carbon Reduction • Energy Efficiency • Renewable Energy • Energy Independence • Jobs • US Department of Energy • US Environmental Protection Agency • National Labs ClimateMaster

3. 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

4. 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

5. Federal Policies • US DOE/NREL • Geothermal Heat Pump Road Map • Sets goal of installing 1 million units/yr ClimateMaster

6. 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

7. Federal Policies • US EPA • Climate Change policies • Energy Star programs ClimateMaster

8. 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

9. Federal Policies • US EPA • Energy Star Appliances • http://www.energystar.gov/index.cfm?fuseaction=find_a_product.showProductGroup&pgw_code=HP ClimateMaster

10. 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

11. State Policies—IllinoisPublic 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

12. State Policies—IllinoisPublic Act 095-0481 • 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

13. State Policies—IllinoisPublic Act 095-0481 • "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

14. State Policies—IllinoisPublic Act 095-0481 • 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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 “includingGeothermal Heat Pumps” ClimateMaster

22. Why Should Utilities Support GHPs?‘Cause somebody has to carry the load Vision Patience To Develop A Market Economic Incentives Strong Consumer & Contractor Relationship Industry Experience In Geothermal Programs ClimateMaster

23. 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

24. (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

25. (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

26. (Progressive)Utility Energy Vision 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

27. 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

28. Geothermal Heat PumpResidential 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 • 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

29. Geothermal Market Barriers · GeoExchange $23,100 · 4 Windows $ 1,600 · Attic Insulation $ 900 · Marathon Water Heater $ 700 · Air Sealing $ 250 · 10 CFLs $ 45 Total $26,595 Annual Savings $2,255 Simple Payback 11.8 years Net cash flow (30 yr./6%) $28/mo. Comfort Beyond imagination Before tax credits! ClimateMaster

30. Geothermal Market Barriers Consumers are suffering from “cash separation anxiety” ClimateMaster

31. 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

32. Before tax credits! ClimateMaster

33. The Geothermal Market ClimateMaster

34. 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

35. 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

36. 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

37. 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

38. 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

39. State Efficiency Financing • 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

40. Utility Case Histories Rebates 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 ClimateMaster

41. Unique Case History Examples Oklahoma Municipal Power Authority Oklahoma Gas and Electric Midwest Energy Plumas Sierra Rural Electric Cooperative Delta Montrose Electric Association ClimateMaster

42. Oklahoma Comfort Program (OCP)A Joint Project ClimateMaster 42

43. OMPA and Member Load Factors ClimateMaster Oklahoma Comfort Program 43

44. 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 ClimateMaster Oklahoma Comfort Program 44

45. 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 ClimateMaster 45 Oklahoma Comfort Program

46. 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 sites before work starts • Much easier for properties less than 45 years old • No aquariums, zoos, golf courses, swimming pools, casinos or other gambling establishments, ……. ClimateMaster Oklahoma Comfort Program 46

47. 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

48. Oklahoma Comfort Program (OCP)A step-by-step description for customers • 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 ClimateMaster Oklahoma Comfort Program 48

49. 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 ClimateMaster Oklahoma Comfort Program 49

50. 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 http://www.nd.gov/dcs/energy/pubs/renewable/geoben.pdf ClimateMaster Oklahoma Comfort Program 50