What the Geothermal Heat Pump Industry Can Learn From the Solar Pros
While geothermal is the most efficient HVAC system to operate, it’s a reliable and proven technology, provides solid financial returns, and directly decreases our country’s use of imported oil, the solar photovoltaic industry has succeeded in being the fastest growing industry in the USA, according to SEIA, the solar energy industries association. Last year the solar industry grew by 67% compared to 30% for geothermal heat pump industry. The geothermal industry needs take its rightful place and make the investment and critical decisions needed to further increase growth of the industry.
Why Focus on Geothermal?
Geothermal can produce between 50% and 80% (you can find quotes in the whole range) lower heating and cooling costs for a building over the next 30 years. Although solar does provide solid returns, if you look at the energy it displaces, it will rarely lower the electricity consumption of a building by more then 25% because the energy density of the panels is so low. Why does this matter? Geothermal can provide a solid return by utilizing only federal tax credits (the 30% ITC) and accelerated depreciation for businesses. Solar on the other hand MUST utilize federal and state incentives. This shows that the majority of the returns geothermal provides are by replacing the use of fossil fuels while solar tends to provide solid returns by utilizing government incentives.
Why does this matter? If you analyze each technology and look at dollars invested versus energy reduction or CO2 emissions displaced, geothermal is a better investment. This means it is better able to reduce our dependence on fossil fuels and is more applicable because it can be applied through the whole country as it’s not restricted to state policy.
So why then, are geothermal heat pumps falling behind solar in terms of adoption? There are many reasons on the consumer side why solar seems more attractive, but there are also other items the industry can focus on.
5 Critical Things the Geothermal Industry Can Learn From Solar
1) Vocal, Passionate Industry Assocations with a Clear Message.
The solar industry does an amazing job at branding and organizing national chapters that provide one clear message for installers, distributors, and manufactures to consumers and the government. These organizations make it easy for the industry to get involved locally and nationally. SEIA and ASES, the American Solar Energy Society, are both great examples of this. Not only do they have a national chapter to lobby the government, but they create state chapters as well to provide a clear path for interested companies to get involved. NABCEP, the North American Board of Certified Energy Practitioners, and IREC, the Interstate Renewable Energy Council, have done a great job providing news and information on policy, net metering and training that have helped to develop the industry by disseminating information quickly.
Within the geothermal industry, there are two main organizations working to develop the industry; IGSHPA, the International Ground Source Heat Pump Association, andGeoExchange. These two organizations do an amazing job at promoting the industry and providing resources, too. However, the geothermal industry still tends to be very fragmented regionally and weak politically. If we want to continue to develop the geothermal industry, we must focus on uniting all the stakeholders in the industry so that we can establish a creditable and powerful voice to both consumers and politicians and provide useful and accessible information to geothermal installers, distributors and manufacturers.
2) Group Purchasing.
Solar, like Geothermal, is a large investment up front that pays for itself over the 25-year-life of the system. They’re both amazing investments, but the long term view keeps some from purchasing for equally justifiable reasons. For a long time, this upfront investment hindered the growth of the solar industry. Group purchasing with 1 Block Off the Grid, is one concept that has substantially decreased the cost of installing solar. There is ABSOLUTELY NO REASON why the geothermal industry should not also utilize group purchasing similar to the solar industry. The economies of scale for a geothermal company to bid on ten, twenty, or thirty $40,000 contracts could decrease the installed costs by 10%-25%. This is due to purchasing power of building equipment as well as efficiency of the design team and installation crew. Geothermal group buying should start immediately. 1BOG is a not-for profit, but if a for-profit model was attempted, geothermal manufactures or distributors are best suited to use this sales approach.
3) Market Luxury, Sell Investment.
The solar industry has implemented this strategy with extreme success. Homeowners and businesses typically become interested in solar because of the environmental benefits–the same reason that attracts many news stories. However, they are sold on the financial benefits of solar (in states where the needed incentives). The geothermal industry mainly sells its product as an investment only. The geothermal industry should utilize the fact that heat pumps provide very comfortable, even heat to a location, and they are more comfortable than traditional heat systems. This makes geothermal seem like a luxury, peeking people’s interest, like granite counter tops. The sale will then be completed due to the very attractive returns that geothermal will provide.
4) Provide Financing.
The solar industry has also successfully created financing packages that, similar to group purchasing, decrease the up front investment in installing solar systems for consumers who want solar but don’t have a large amount of cash. SunRun and Tioga are great examples of this for private companies, and some utilities, including PGE in NJ and other utilities, will also provide financing. This is genius. The geothermal industry too needs to push for greater financing options for consumers. How would it work? A third party would pay for and own the group loop, the piece of equipment that is actually generating the heat, and sell the heat created by the loop to the property owner for a lower price than traditional fuel sources. This is similar to how PPA providers own the solar arrays and sell the electricity to the property owners. LVestus based in New Hampshire is the only company I’m aware of that provides this financing option, but we’re beginning to see more companies focusing on this.
5) Always Showcasing Installations.
Not only is the solar industry very vocal and organized, but they are always showing their installations off to politicians, students and news agencies. This basically provides a lot of free marketing to both consumers and politicians for the whole industry. Showcasing installations provides a significant amount of free marketing that increases public support from consumers and the government, both critical elements to the success of the solar AND geothermal industries. The geothermal industry must get more proactive at showcasing installations not only to each other but to the general public.
By Chris Williams
June 7, 2011