Today at HeatSpring Magazine

Forget Small Potatoes, We need to Introduce Geo to 1,000,000 Homes

Posted on April 5, 2012 by Chris Williams

This map of geothermal installations and testimonials on geothermalgenius.org. It’s one of the coolest things I’ve ever seen. It’s certainly the first time I’ve seen something like this for the geothermal industry and it’s something we need to be doing more of. Why? It adds VISIBILITY to a technology that is otherwise hidden.

I wanted to speak with the folks that created this map so I reached out. Josh Kresge followed up with me and said they started the site with an epiphany that most in the geothermal industry tend to have, which was “this technology is so amazing, why doesn’t everyone have it”

They quickly realized that the main issues in the industry is customer awareness so their solution was creative marketing to bring awareness and introduce geothermal to the masses. Their goal is to make geothermal simple, and to show the public the technology works, and it’s not a science experiment.

Full Agenda

Question: Whats the quick pitch for geothermal genius.org?

  • Answer:
  • We don’t claim to be the genius on geothermal, but the concept is that geothermal itself is genius.
  • We’re a public awareness group and we’re working on introducing 1,000,000 people to geothermal every year and doing that through creative marketing
  • We’re able to take a small marketing budget and reach a large number of people
  • We see our main objective is to increase public awareness.

Q: It’s interesting you note that public awareness if a major issue because I’m beginning to feel like this IS the issue and that technical competence is not holding us back anymore. Also, I like your 1 million mark because it gets the industry to start thinking larger. We know it’s an amazing technology, why are we still going after small potatoes? From your work, what do you think is the main thing the industry needs to do to start selling huge projects and getting our messaging correct?

  • Answer:
  • The industry as a whole has not been able to come together and unite around the public awareness issue.
  • Everyone is doing their own marketing in their own local areas
  • I gave a talk at IGSHPA and compared geothermal to the milk industry with the “got milk” campaign where the milk industry created a consortium to make the campaign happen. The message was milk vs the rest of the drinks.
  • I see the geothermal industry facing the same issue. It is geothermal VS the rest of the heating and cooling methods.
  • Right now, the issue is being attached by geothermal brand vs geothermal brand.
  • We’re less then 1% market share, we don’t need to be competing against each other but instead simply introducing geothermal and the concept to everyone.
  • We have been able to reach 1 million people, with no market budget so it’s possible.
  • There should be a united effort and this will make a larger impact.
Posted in Geothermal Heat Pumps, HS TV | Tagged , , , | 1 Comment

Can We Eliminate Residential Solar Financing? A Conversation About Driving Down PV Costs with Barry Cinnamon from Westinghouse Solar

Posted on April 2, 2012 by Chris Williams

This is a great thought experiment. Can we make solar PV so simple and cheap that we’ll no longer need residential solar financing? Jigar Shah thinks so. Shouldn’t the goal of the PV industry be to NOT need financing? Or, are there technology constraints that will make financing always needed? Like for automobile market. This is a thought that came up in a recent conversation I had with Barry Cinnamon, the CEO of Westinghouse Solar.

Last April, I wrote a post titled “Will Home Depot Kill the Residential Solar Market?” that was first published in cleantechies and then picked up by Reuters. Home Depots goal was to use their massive supply chain bring solar to the masses and reduce installed costs. The article unpacked some fears that solar professionals were having about big box stores entering the solar supply chain and if that would have a large impact on the solar market. The article dug into industry specifics around pricing, permitting, incentives, and comparisons to other trades to determine if contractors would favor the move and also discussed the implications of major brands backing solar. I published the post a little less then 11 months ago and since then all my assumptions have been correct. I havent’ spoke to a single contractors that does business directly with Home Depot to supply their equipment. I think the reason is simple, the technology requires support. It’s still too complicated and a large majority of companies are not comfortable enough with it to buy it from a big box store when no technical support.

Last week, Barry Cinnamon from Westinghouse Solar reached out to me bring up the article and say he felt the reason Home Depot has not helped the solar industry much. I responded to Barry for 3 reasons. First, he wasn’t a PR person. Sorry PR friends :) Second, he brought up a good point, the solar being sold through Home Depot was too complicated. Third, it was too expensive. So, I decided to do an interview with Barry to get his perspective about technology and business model innovations within solar that are using common sense to make solar cheaper and easier.


Here are the highlights from our discussion. 

  • After talking with Barry about their continued efforts to simplify solar, I realized an interesting point. Isn’t the goal of the solar PV industry to be to not NEED solar financiers? Like Solyndra. Reduce the costs of solar so much that most homeowners will not need financing.
  • Westinghouse’s best customers are completely new to solar. They’ll never need to learn string sizing, temperature coefficients, and residential solar will become extremely simple.
  • Barry said that AC modules are seeing a 50% direct labor reduction compared to industry norms. They’re seeing around 6 to 7 man hours per kW on residential installations compared with the industry average 10 to 11 hours per kW
Posted in HS TV, Solar Photovoltaics | Tagged , , , | 1 Comment

[Slide Show] “How HVAC Contractors Can Make Money Selling Geo” ACCA New England Recap

Posted on March 30, 2012 by Chris Williams
ACCA New England – How to Make Money in Geothermal

View more PowerPoint from Chris Williams

Last week, I was invited to give a short talk to ACCA New England about ground-source heat pumps. My main message to the HVAC contractors in the room was some what contradictory to the standard geothermal message.

Here was my message:

  • Everyone should not be selling geothermal projects
  • Contractors should minimize the risk and amount of time and energy they put into a new business line until they have some traction.
  • The best places to start with geothermal is new construction and oil to geothermal retrofits. I will get to why this is the case in my post on understanding geothermal economics. Read ‘Finance 101 for Renewable Energy Professionals’ here.
  • If you have a lot of oil customers and are doing new construction, start there!
  • Your number 1 goal should just be to get a few site visits, then work on getting distribution, design and other partners. Download a really simple geothermal site visit checklist form here.

A huge thank you to the other presenters

A few highlights from the event:

  • Martin is seeing water to air systems starting around $6,000 a ton, and for water to water around $8,000 a ton in the Northeast
  • Safety can be a large selling point for geothermal. There have been “ONLY” 12 NG explosions in homes in the past 5 years in Massachusetts.
  • Roger Skillings is doing between 140 feet to 180 per ton in the northeast for closed loop
  • Mike shared a 10,000 sq foot home with geothermal that spent under $2,000 for heating and cooling for the entire year, a 60% savings in heating from a conventional system
Posted in Geothermal Heat Pumps, Solar and Geothermal Sales and Marketing Tips | Tagged , , , , , | 1 Comment

Solar Moving Forward in Illinois and How You Can Get Involved

Posted on March 29, 2012 by Chris Williams

Illinois is in the midst of a battle with their utilities to get retail-to-retail net metering for solar projects up to 2MW and to make necessary adjustments to the RPS.  If you’re interested in the success of the solar market in Illinois, you need to get involved. Last year, their legislature passed both net metering changes and a distributed generation renewable energy carve out that has prompted the hosting of workshops to develop a statewide REC program.

I’m familiar with most of the developments happening in the east coast solar markets, but no so much in the Midwest; so  I decided to speak with Michelle Hickey, Program Coordinator for the Illinois Solar Energy Association.  For a small organization, ISEA has one of the best state solar organization sites I’ve seen.  It has amazing resources regarding policy, net metering, event and education.  If you want to get into solar in Illinois, you should get lost in the ISEA site for a few hours.

Michelle and I spoke about a few things in our 20-minute discussion, see our full agenda and highlights below.

My main goal was to understand what exactly is happening in Illinois from a policy perspective and how solar contractors can get involved to help push for better policy.


 

Here are the Highlights of our Conversation

 

  • In Illinois, ISEA is the only game in town and they’re organizing everyone’s efforts to focus on policy. Learn about ISEA membership and join here. 
  • Solar Drinks is an event ISEA holds and is the best ways to meet people in the solar industry in Illinois.
  • The industry is holding a public workshop to determine how the SREC program should be created and managed on April 2nd. Get information on that event here. You must RSVP.
  • ISEA’s current policy push is to get net-metering retail-to-retail rates pushed up to 2MW for all electric customers and sites in the state
  • The industry is growing despite this turmoil. Major installers are hiring and the existing solar rebate money is being used quickly.

 

Here’s the full agenda of the questions I asked and the topic we discussed, in chronological order

 

  • The Illinois solar market is growing and major installers are hiring
  • The solar industry in Illinois is getting stronger and we have a seat at the table with policymakers. Our voice is being heard but we can always use more support.
  • The main way that ISEA involves new members is through their Solar Drinks event. It is where they educate and get their members involved in policy to organize everyones efforts
  • Question: If a solar installer or construction company is located in Illinois and wants to get involved, what is the best way for them to involved?
  • Answer: Join ISEA, we’re the only game in town! Also, come to our solar drinks event. They’re bi-monthly and the best way to meet and get in touch with people in the solar industry in Illinois.
  • Q: You were mentioning that now that the solar industry is organized in Illinois and are pushing for policy improvements, what specific policies are you pushing for?
  • A: Last year, we pushed hard to get net-metering pushed forward and expanded. Before that, we had net-metering but it was only system under 40kW that had retail-to-retail rates. Last year, we pushed for 2MW retail-to-retail and the utilities made some major adjustments. Now, the net-metering rate are determine by customer class. Currently, the only customers eligilbe for retail-to-retail are residential customers and small businesses.
  • Question: So, ideally your goal is to have retail to retail rates up to 2MW?
  • Question: You also mentioned Illinois is working on getting SRECs in place with a solar carve out. How is all this working out? What is the existing solar carve out?
  • A: Last year the ‘smart-grid’ legislation was passed. It had net metering language and a DG solar carve out. The carve out allows us to create a REC program for systems that are 2MW and smaller. 50% of that carve out must come from systems that are 25kW and smaller. Solar thermal is written into the definition, however the definition also clearly states systems must be metered and tied directly to the electric grid. Becuase solar thermal can’t be tied to the electric grid, it can’t apply for RECs, yet.
  • Q: Do you think solar thermal will ever be written into the REC program? Is it something you’ll be pushing for in the future?
  • A: We’re very interested in having SHW included in the future. However, right now we’re happy with what we can get and that we have something for the PV and wind market.
  • Right now, we’re having workshops with energy regulators and the utilities to determine how exactly the REC program will work. The Illinois Power Authority (IPA) is not pre-tending to know what the best solution is for a the REC program and so they want input from the industry on how to create and run the program.
  • Currently, we have a REC aggregation program for systems that are 10kW and smaller.
  • Q: How much of the development of the SREC program are you taking from other successful SREC markets?
  • Q: It seems that in Illinois the bottleneck of the industry seems to be on the policy side, is this correct?
  • Answer: Yes it is but it’s all happening right now. Also, even with all this turmoil, growth is still happening. We have a rebate program is was closed within one day.

Lastly, HeatSpring is hosting a solar training in Illinois in partnership with ISEA. Learn more about our Illinois solar training.

Posted in Clean Energy Policu, Solar Photovoltaics | Tagged , , , , , | Leave a comment

Finance 101 for Renewable Energy Professionals

Posted on March 27, 2012 by Chris Williams

Understanding finance is required to sell renewable energy projects. It’s needed to communicate the value of both residential and commercial projects, and for all types of technologies: solar PV, solar hot water, and geothermal heat pumps.

The reason financial metrics are important is that all of these technologies are financial investments.  Thus, you must be able to communicate the financial value of the system to the client and ‘payback period’ does not do this. I repeat, don’t use ‘payback period’, and we’ll talk about why later.

The key to understanding financial analysis is a small contradiction. The actual financial calculations are not difficult ONCE YOU HAVE ALL THE NUMBERS. The challenging aspect of financial analysis is that many of the numbers the model depends on are assumptions and projections, things you can’t always nail down. Thus, it’s important to perform sensitivity analysis to see how a few critical variables will impact a project’s returns.

Another challenge is communicating exactly what these numbers mean to a consumer, so they understand it. In order to do this, you need to understand what each term represents and how to explain it in plain language.

I’ve noticed that the information and educational resources on basic financial analysis for the renewable energy industry is lacking. While many PV installers can derate conductors easily, they may not know what the NPV of an array is.  Most geothermal contractors can size of a heat pump, but few know that the typical IRR of a system is when it’s replacing an oil boiler. We need to change this.

The Goal of the Renewable Energy Financing 101 Series

My goal is to create a series that will be a resource for renewable energy contractors to learn financial analysis and how to apply it to each technology. The series will have four parts:

  • First, we will start with understanding the most basic financial terms. There are thousands of articles written about finance. So, I’m going to keep it short and only apply terms that most often apply to renewable energy projects.
  • Second, I’m going to perform financial analysis on 3 sample geothermal heat pump projects. It will cover many common situations installers will find themselves in when selling geothermal projects. One of the projects will be commercial so I can walk through how to calculate tax credits based on the EPA Act of 2005.
  • Third, I’m going to perform financial analysis on 3 sample solar hot water projects, each in slightly different but normal situations.
  • Fourth, I’m going to perform a financial analysis on 3 sample solar PV projects. One of the projects will be a commercial project so I’ll perform a walkthrough of how to calculate MACRS.

Let’s Start With the Basic Terms

Below are the basic financial terms you will need to understand to perform financial analysis on any renewable energy project. I’m simply going to discuss what each variable is and how to calculate it, with an example from excel. At the bottom of the article you’ll be able to download the excel file, so you can play with it yourself.

It’s critical to remember that the variables that impact these metrics will change based upon technology and incentives, but the underlying cash flows that create the financial returns will remain the same. NPV is NPV.

Here are the terms will will discuss

  1. Net Present Value (NPV)
  2. Present Value
  3. Future Value
  4. Discount Rate
  5. Internal Rate of Return (IRR)
  6. Sensitivity Analysis

Net Present Value (NPV)

NPV is the most recognized metric used to analyze capital projects. NPV takes every known cash flow in a period, negative and positive, and discounts back to today to see if the project is profitable or not.  If a profit has a negative NPV, it should not be completed. If it’s zero, it doesn’t matter if a project is completed or not, from a pure financial perspective. If it’s positive, all else equal, it means the project should be completed.

Unlike ‘payback period’, NPV provides a specific dollar amount that you can use to determine if a project is profitable or not. HOWEVER, NPV analysis can vary widely because it is extremely dependent on the discount rate used. On residential sales in particular, an acceptable discount rate can change greatly depending on the customer.

The analysis can also vary widely due to the confidence one has in the financial assumptions used to create the model. It is key to perform a sensitivity analysis when performing NPV analysis because most times the cash values being used are projections and it cannot be said with 100% confidence the numbers will be exact.

The equation to calculate NPV is to add together the present values of each cash flow for each period for a project. Here is the formula to calculate present value for a single period.

Present Value = Net Cash Flow / (1 + i)^t

i = discount rate

t = time period.

**Note, I’m using “^” meaning to the power of X, or in replacement of a supercript because our publishing software does not allow superscript. This is also the same script that excel will use if you want to raise a integer to a power of X**

If we had 5 periods, we could calculate the present value for each period, then add those numbers together.

What is the net present value of $500 investment, with 5 unequal cash flows, 50, 200, 200, 300, and 300 at a 5% discount rate?

Figure 1: Adding together the present values of 5 future cash flows to determine NPV

A few notes.

The cell in C13 is simply summing the values of C6:C11. Each of the values in C6:C11 is calculating the present value of a single cash flow. Notice how $200 in 2 years, is worth more then $200 in year 3? This is because it’s getting discounted by 5% every year.

Present Value (PV):

Present value is the present value, today, of a future cash amount discounted back to today. Net present value is thus, a series of cash flows all discounted back to today’s terms. For example, what is $50 worth today? It’s worth $50. However, if you wanted to find out what $100 in 5 years would be worth today at a 5% interest rate, you’d need to calculate the present value. Here is the equation.

The equation to find present value of a future cash flow is:

PV = FV / (1 + i) ^ n

i = interest rate

n = number of period.

So, what is the present value of $100 payment in 5 years at a discount rate of 5%

PV = $100 / (1 + .05) ^ 5

PV = $100 / 1.28

PV = $78.15

This means that is someone gave you $100 in 5 years, and you have a bank account with a yield of 5%, it would have been the same value of money if they would have given you $78.15 today and you put the money into the bank for 5 years.

Future Value: (FV)

The future value is asking what the future value is of a present day cash amount, given it is accumulating at a specific interest rate. The best way of describing future value is a typical savings accounts.

If you put $50 dollars into a savings account with a 5% interest rate and take it out in 10 years, how much will it be worth?

The equation to calculate future value is

FV = PV (1+i)^n.

FV = the value of a future cash flow today, given x % interest rate.

PV = the present value of the investment

i = the interest rate of the investment

n = number of periods of the investment

FV = $50 (1+.05) ^ 10

(1.05)^10 = 1.63

$50 * 1.63 = $81.44

In other words, $50 today at 5% interest is EQUAL TO be given $81.44 in 10 years

How about a 10% interest rate?

FV = $50 (1 + .10) ^10

FV = $129.69

As you can see, the interest rate used over the term has a huge impact on the value of the investment.

Discount Rate / Interest Rate:

In the calculations of NPV, PV, and FV, you’ve noticed that we’ve been using an interest rate to calculate the value of money in different parts of time. This value is called the discount rate. Sometimes, it’s referred to as the interest rate (for future value), or minimal attractive rate of return (MARR), which we’ll discuss below.

The discount rate can be somewhat confusing to some. There are critical pieces to understand about the discount rate. First, what it does. Second, how you determine it.

In the above examples of calculating PV and FV you noticed I used an interest rate to calculate the value of cash between a certain  period in time and another period in time. So, to define it very simply the discount rate is an interest rate that is the difference between a present value and future value of the same dollar amount. The difference between $100 today and in five years is the discount rate.

How one should select the discount rate is a little more difficult. Many times the discount rate is selected based on a few characteristics. None of these is wrong, it simply depends on the circumstances.

  1. A comparable investment or savings rate. If a homeowner could invest the same money in a CD at risk free interest rate of 5.6%, they will likely use 5.6% as a discount rate for other investments. Also, keep in mind that many times a homeowner might add a few percentage points to a different investment that is not risk free to cover the additional risk.
  2. The inflation rate. If I had $100 in cash and stuffed it in a safe (a place that is not getting interest), and took it out in 5 years, it would have lower purchasing power. To understand how the purchasing power changes, we would calculate the FV of $100 in 5 years with the discount rate being the expected rate of inflation.
  3. Risk tolerance. The more risky the investment, the higher discount rate you’d need to satisfy the level or risk. Having a higher discount rate will decrease the time it takes for you re-coup your investment, given the NPV is still positive. When risk tolerance is being used to determine need returns, it’s sometimes referred to as “Minimum Attractive Rate of Return” (MARR), or the “hurdle rate”.

The thing to remember about discount rate is that while it’s use in the financial analysis is extremely clear, determining what exactly to use as a discount rate is extremely subjective or will vary widely between homeowners.

The impact of a different discount rate can be huge when talking about renewable energy projects because an acceptable discount rate between different homeowners can vary widely. Let’s walk through some examples to demonstrate.

A Sample Solar Hot Water Customer in Greenflield, MA.

  • Net Installed Cost After Incentives: $4,000
  • Displaced Oil : 130 Gallons with 3 Full Time Occupants
  • Value of Displaced Oil @ 3.00 Gallon = $390
  • The life of the system will be 20 years.
  • Maintenance costs are $200 at year 10.
  • All other equipment failures will be paid by the manufacturer
Here’s the T*Sol estimation for the system production and load. 

Continue reading →

Posted in Financing, Geothermal Heat Pumps, Solar Photovoltaics, Solar Thermal | Tagged , , , , , , , , | 3 Comments

How to Select a Top Solar Manufacturer To Work With

Posted on March 19, 2012 by Chris Williams

For the fourth part of my interview series with BrightGrid Renewable Energy Finace, I spoke with Tim Slavin, VP of Credit and Operations at BrightGrid. We talked about a solar installer should be asking from their manufacturing partners and how solar installers should select a partner to work with.

The BrightGrid series is for residential solar contractors that are looking to use a solar lease to build their business. We created the series because solar leases are becoming the market norm and are key to selling mass market clients on solar. You can watch the full BrightGrid and HeatSpring series here. If you’d just like to watch an individual interview, here they are:

Here are a few highlights from our discussion.

  • The solar market is not just about product anymore, but solutions. Solutions like financing programs for client, financing for equipment sales support. Look for manufactures that can be complimentary to your business and not just sell you product.

Here’s the full agenda of what we talked about

  • Q – If you’re new to the solar business, what role are manufacturers and distributors playing?
  • Q – How is their role changing and how is it different then distributors and the supply chain in the traditional trades?
  • Q – What do you think the reason is for the solar supply chain changing so rapidly? Why are manufacturers moving from just selling product to other services?
  • Q – With that being said, I’m a new solar company and want to offer a lease. What are the top 3 questions I should ask when selecting a distributor or manufacturing partner to work with?
  • A – Tim’s short answer:
  • 1 – Do they have training? Both sales and technical. Are they giving you a tool box of marketing material and saying good luck, or are they backing it up?
  • 2 – Do they help you in the field helping you to close sales. Lead generation and creating proposals is great, but you need to close deals.
  • 3 – What is the “point of sale” experience like for you, the installer, and for the client. Is it easy to use and understand? What are the online capabilities? Can you use a mobile device to close a sale, approve credit, provide online documentation, all on site?
  • Q – What do you tend to find is the most common mistakes installers make when selecting a partner?
  • A – Tim’s short answer:
  • 1 – If I offer it (the solar lease), they will come and buy it. This is simply not true.
  • 2 – The other common mistake is that a lease and cash sale are the same and you can sell the two inter-changeably.

If you are a solar installer and have more questions, or would like to work with BrightGrid, you can more information about their residential financing product here.

You can watch the full BrightGrid and HeatSpring series here.

Posted in Financing, HS TV, Solar Photovoltaics | Tagged , , , | Leave a comment

Certified GeoExchange Desiger Certification – The CGD – What is it? Who needs it? How to get it?

Posted on March 16, 2012 by Brian Hayden

Certified GeoExchange Designer Certification is the most prestigious credential that exists within the geothermal heat pump industry because few people have it.  It’s hard to get because you can’t sit for the exam without some combination of education and experience (these requirements are explained in detail below).  It’s also really hard to understand the process of getting it, which turns a lot of people off.  Don’t be afraid!  Read this and you’ll know what it takes to get “CGD” next to your name on your next proposal.

We see two groups who stand to benefit the most from earning the CGD credential:

Group 1: Engineers Bidding on Schools and Government Projects

For a long time, the CGD was simply a matter of pride.  There were 100 or so engineers in the world that identified as geothermal experts and they communicated that to the rest of the world by earning the CGD credential.  More recently, as the market for university and government projects has been heating up, it has been showing up as a requirement on commercial-scale RFPs.  HeatSpring alumni have reported seeing RFPs with a CGD requirement in Massachusetts, New York, and several other major markets.  It’s usually a risk-averse institution like a college or municipal client that requires it.  Restricting the bid list to Certified Designers, especially in a specific state or region, means there are only a small handful of potential bidders.  If your company likes to bid these projects, you’re likely to need somebody you work with to get their CGD.  If you fall into this first group, meaning you have an engineering degree, here’s what you need to do:

  1. Fill out and submit your application to sit for the CGD Exam ($250)
  2. Take the 20 hour CGD Prep Course
  3. Pass the CGD Exam

Group 2:  Geothermal designers & installers with deep experience that want to stand out in the market

Greg Beach with GeoHydro Supply has been designing and installing high-quality geothermal heat pump systems for the past 22 years.  He recently inquired about taking the CGD exam to help them communicate their expertise more clearly.   It turns out engineers don’t appreciate input from a well drilling company on how to correctly size a geothermal system (can you believe it!?!), even when they have 22 years of experience.  Greg felt the CGD credential would help earn them respect within the design and installation team, which I completely agree with.

When you apply to sit for the CGD exam based on your experience, you’ll need to prove that you have that experience.  Here’s how: you need to provide all of the details for at least three projects over the past ten years, including: Address, owner details, heating and cooling load calculations, ground loop design software used, schedule of equipment used, and several other small details.

What if you haven’t been keeping all of that data and information?  Well, you need to pull it together.  We’re offering up our Geothermal Designer Boot Camp as a way to pull your portfolio together and organize it for you CGD application.

To summarize the required steps for the geothermal legacy applicants, here’s how you get your CGD:

  1. Organize and document your portfolio of experience (at least 3 jobs over 10 years)
  2. Fill out and submit your application to sit for the CGD Exam ($250)
  3. Take the 20 hour CGD Prep Course
  4. Pass the CGD Exam

Important Logistical Point

Training and the exam can happen in parallel with your application to AEE and IGSHPA.  If you pass the exam before you’re approved by the AEE, you are a “GeoExchange Designer In-Training” until your approval comes through.

I’ve met so many smart engineers and experienced geo junkies that could, and should, have their CGD.  I’ve been researching and thinking about this a lot in hopes that we could simplify the process for those who want it – so feel free to reach out to me directly if you have any questions about the CGD: bhayden@heatspring.com or 800-393-2044 x44.

Posted in Inside the Classroom | Tagged , , , , , , , | Leave a comment

“If you can’t install solar at $3.45/watt, you’re going out of business.” Straight Talk on Solar with Jigar Shah at NESEA 2012

Posted on March 13, 2012 by Brian Hayden

Jigar Shah was my favorite presenter at this year’s Building Energy Conference.  Mr. Shah founded SunEdison in 2003 and sold it five years later for $200 million.  Here are some quotes he offered up in the “Energy Subsidies and the Future of Solar: Where Do We Go From Here?” session:

He outlined a 25kw project in Kentucky installed for $3.45/watt, a 5MW project in North Carolina installed for $1.85/watt, and projects at Walmart getting installed for $2.05/watt.

“If you’re a solar installer and you can’t get to these numbers over the next couple years, you should start looking for a job.  You’re going to be out of business.”

Several in the audience lamented the fact that their utility isn’t easier to deal with and puts too many hurdles in place around permitting and interconnection.  Mr. Shah shared his experiences putting at least one utility into bankruptcy and urged people to think of utilities as any other company that can be taken on and defeated.  It was a subversive message that felt powerful and a little dangerous.  The audience loved it.

When asked about what incentives the solar industry should be pushing for, he said:

“It doesn’t matter what subsidies exist for oil and gas – we’re in an age of austerity.  Pigs get fed and hogs get slaughtered.  Solar looks like a hog right now.”

During the Q&A session a member of the audience criticized Mr. Shah’s focus on solar, saying building efficiency investments have a bigger potential impact, to which Mr. Shah responded,

“I hate building efficiency people because you’re so self-righteous.”

He went on to explain that the progress made in the solar industry was hard won and as much as he would like to do more for other technologies, it’s not that simple.  He urged other industries to do what it takes to make change happen, rather than criticizing the efforts of others.

“Solar thermal is a backwater industry because companies in the industry refuse to step up when it comes time to pass the hat and fund the trade organizations and build infrastructure.” (this point clearly applies to the geothermal heat pump industry too)

Mr. Shah is abrasive, but he pulls it off because he has accomplished so much and is surprisingly warm and likable, even when he’s telling you you’re wrong.  His style stood out as honest, militant, and effective.  I left energized.

Posted in Noteworthy News, Solar Photovoltaics | Tagged , , , , , , , | 3 Comments

Selling Geothermal as a Hedge Against Rising Energy Prices

Posted on March 9, 2012 by Ryan Carda

Those of us in the ground source heat pump (GSHP) industry already know of the many benefits that these systems hold over conventional heating and cooling systems (and have probably explained them a hundred times over).  But as the appeal of geothermal technology shifts to the masses, we must find ways to relate to everyday consumers through metrics such as return on investment, life cycle cost and the like.

When it comes time to give the sales pitch, economics can be a very powerful tool.  How many of you have ever made the case for a GSHP system from the standpoint of hedging against inflationary energy prices?  In this article we intend to show that when energy prices rise, it actually gets easier to justify an investment in a GSHP system.

First, A Little Ground-Work

In order to make this case, some calculations will be required.  The simplest way to compare the cost of heating with a given fuel source is to calculate the cost to deliver a fixed amount of energy to a space.  For the purpose of illustration, we will calculate the cost to deliver 1,000,000 Btu’s of heating energy (1 MBtu) using the following equation:

Before getting started, we need to know a few things, such as the amount of energy contained in a given amount of electricity, natural gas, propane and heating oil:

Fuel Type vs. Energy Content (HHV, Higher Heating Value)

Fuel Type

HHV

Units

Electricity

3,412

Btu per kWh

Natural Gas

100,000

Btu per therm

Propane

92,000

Btu per gallon

Fuel Oil

140,000

Btu per gallon

We also need to know the efficiency of each system and the price we’ll pay for fuel:

Assumed Energy Prices & Efficiencies

System Type

Fuel

Energy Price

Efficiency

Electric Resistance

Electricity

$0.15/kWh

COP = 1.00

ASHP+

Electricity

$0.15/kWh

COP = 2.00++

GSHP

Electricity

$0.15/kWh

COP = 3.75

Furnace or Boiler

Natural Gas

$1.50/therm

AFUE = 95%

Furnace or Boiler

Propane

$2.75/gal

AFUE = 90%

Furnace or Boiler

Fuel Oil

$4.00/gal

AFUE = 80%

+ASHP – Air Source Heat Pump

++Equivalent to a Heating Seasonal Performance Factor (HSPF) value of 6.8 for ASHP’s

The Calculations

Now that we have all of the necessary information, we can get started with the calculations.  For example, the cost to deliver 1 MBtu with natural gas is calculated as follows:

The results of the calculations for each system are summarized in the illustration and table below:

 

Direct Heating Cost Comparisons

System Type

Energy Cost

Delivered Cost

($/MBtu)

Cost Relative to GSHP

Savings Using GSHP (%)

Savings Using GSHP ($/MBtu)

Elec. Resistance

(COP=1.00)

$0.15/kWh

$43.96

3.8

73%

$32.24

ASHP

(COP=2.00)

$0.15/kWh

$21.98

1.9

47%

$10.26

Natural Gas

(AFUE=95%)

$1.50/therm

$15.79

1.3

26%

$4.07

Propane

(AFUE=90%)

$2.75/gal

$33.21

2.8

65%

$21.49

Fuel Oil

(AFUE=80%)

$4.00/gal

$35.71

3.0

67%

$23.99

GSHP

(COP=3.75)

$0.15/kWh

$11.72

–

–

–

Note that we also calculated the cost relative to heating with a GSHP system (because it is the cheapest method) and the savings associated with the GSHP itself.  For example, the table shows that heating with the propane-fired furnace while paying $2.75 per gallon is almost three times as expensive  as heating with a GSHP system (actually, 2.8x).  Furthermore, a GSHP system would save about 65% per year in heating costs (or $21.49 per MBtu’s of heating energy delivered) over the propane system, based on our assumptions.

Through this example, we’ve already made a pretty strong case for the GSHP over a propane-fired furnace or boiler.  But so far, we’ve only looked at today’s prices without any real consideration to the future.  To show how GSHPs act as a hedge against rising energy prices, we performed the same calculations after an assumed 25% increase in ALL energy prices:

 Direct Heating Cost Comparisons (After 25% Increase)

Returning to the example of the propane system, after a 25% increase in energy prices, it is still almost three times as expensive to heat with propane compared to the GSHP system.  Additionally, the GSHP system still saves about 65% in annual heating costs.  However, because the numbers are larger, the savings are more significant.

Compared to propane, the GSHP system saves $26.86 per MBtu of heating energy delivered (compared to $21.49 per MBtu in the previous example).  As shown in the table, the 25% increase in energy prices leads to a $8.30/MBtu increase in the cost of heating with propane compared to a $2.93/MBtu increase in heating with the GSHP system.

The Big Picture

Hopefully, the results of these calculations drive home two main points.  The first point is that heating costs and the savings associated with a GSHP system are relative to energy prices.  As the prices of natural gas, propane, and heating oil increase with respect to the price of electricity, GSHPs look more attractive.  Historically, the rise in electricity prices has been slow but steady while natural gas, propane, and heating oil prices tend to be more volatile.

The second point is that GSHP systems do act as a safeguard against increasing energy prices by virtue of how a GSHP works.  Only about one-third to one-fourth of the energy delivered in heating with a GSHP comes from electricity consumption, the rest is extracted from the Earth.  ALL of the energy delivered with a combustion-based heating system comes from the consumption of a fuel source whether it is natural gas, propane or heating oil.  To put it simply, a 50% increase in a small number makes a much smaller impact than a 50% increase in a large number.

One Final Thought

Keep in mind that our calculations were based on the cost to deliver 1 MBtu to a space.  In reality, 1 MBtu isn’t that much energy.  It would probably be more useful to know how much energy it actually takes to heat your home.

We decided to estimate the heating load and associated energy requirements for a 1,500 ft2 home (on the main level) with fully conditioned basement (assuming average construction: R-19 walls, R-20 ceiling and average tightness levels).  The table below will give you an idea of how much energy it actually takes to heat a home of this size and construction for a year:

+Approximate Heating Energy Requirements vs. Location (1,500 ft2 Home):

City

Heat Energy Required+

City

Heat Energy Required +

Atlanta, GA

26 MBtu

Indianapolis, IN

56 MBtu

Augusta, ME

74 MBtu

Knoxville, TN

37 MBtu

Billings, MT

69 MBtu

Pittsburgh, PA

57 MBtu

Boston, MA

63 MBtu

Reno, NV

56 MBtu

Brookings, SD

76 MBtu

Richmond, VA

37 MBtu

Charlotte, NC

32 MBtu

Sacramento, CA

25 MBtu

Chicago, IL

62 MBtu

Salk Lake City, UT

57 MBtu

Cleveland, OH

60 MBtu

Seattle, WA

55 MBtu

Dallas, TX

24 MBtu

Tulsa, OK

37 MBtu

Denver, CO

58 MBtu

Witchita, KS

51 Mbtu

Des Moines, IA

66 MBtu

Detroit, MI

66 MBtu

+LoopLink Load Estimator was used to estimate peak heating loads and energy requirements for the home in each location

By taking the information from this table and applying it to the Direct Heating Cost Comparison tables, you can easily figure out what your approximate heating costs would actually be.  For example, if your home is located in Brookings, SD and you wanted to know the cost to heat your home with a GSHP using $0.15/kWh electricity:

 

After the 25% Increase in Prices…


 It is hard to predict what the future will bring.  Energy prices rise and fall but the general trend is upward.  One major advantage of GSHP systems that is often overlooked is their power to act as a safeguard against rising energy prices.  It is relatively easy to show that as energy prices go up, GSHP systems become more and more economically attractive while retaining all of the other benefits.  It’s not likely that this point alone will sell the system for you; it’s just another tool for the arsenal.

Post Updates.

This post has received a great response from many people in the industry and I hope some can use the argument to improve their sales.

John Manning From Phoenix Energy Supply sent in this graph of real data captured by NYSERDA over the past 10 years.

Also, one of readers wrote in with this question:

Chris, my only issues with your graph is that we are installing air source heat pumps with an HSPF of 12-12.5, and SEER rating up to 27.2. These would be as or more efficient then a GSHP.

Ryan Carda responded with the following response: 

Two things to remember with air-source equipment:

1)      The SEER and HSPF ratings are based on tests done in a factory setting with mild outdoor air temperatures:

a.       They do not account for coil degradation over time

b.      They do not account for the defrost cycle or supplemental heat in the winter

2)      According to ASHRAE, the service life for ASHP equipment is 12 years whereas the service life for GSHP equipment is 25 years.

a.       On average, you will purchase two ASHPs to every GSHP unit.

This ASHRAE publication gives guidelines for how to adjust the performance of air-source equipment to more closely model it based on actual operating conditions.  When applying the adjustment suggested in this publication to the Fujistu equipment, you will come up these suggested ratings:

  • ·         HSPF =  6.48 (equivalent to a COP of 1.90)
  • ·         SEER = 22.1

These adjustments were based on the 27.2 SEER and 12.5 HSPF values given in the brochure for the design OATs of -3F in heating and 87F in cooling for Augusta, ME.

 

For the same location, using LoopLink to perform a closed-loop GHEX design using temperatures of 30F (min EWT) in heating and 70 (max EWT) in cooling, I calculate an average COP of 3.90 during the heating season to go along with an average EER of 30 during the cooling season.  In my example project, I used the performance of a Waterfurnace ND038 as the basis for comparison.


 

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How to Organize the Geothermal Industry and Why It’s Needed

Posted on March 6, 2012 by Brian Hayden

Already in 2012 I’ve had four conversations with geothermal organizations getting off the ground.  I’m a member at NEGPA here in New England, Phil Henry and a strong contingent are making inroads in California with the California Geothermal Heat Pump Coalition, and at least two other new state organizations have called to talk logistics.  This is great progress – I love seeing people getting out there and doing things.

If you’re completely new to the geothermal industry, check out our Geothermal 101 reading list. It has tons of free articles on design, installation, sales and marketing of geothermal systems. 

It occurs to me that we should have a set of best practices to share with one another. GEO and IGSHPA are great, but what’s the playbook for a small group of passionate geo junkies that want to make a difference in their state?  I put the question out to some smart people who’s input I value to get a conversation going.  Here is some of what they had to say:

Interview with Rich Baker, GeoSun Design

Q: What roles have you played in the Geothermal Heat Pump industry and how are you currently involved?   

Rich: I’m a geothermal designer, installer, and business owner

Q: How might the Geothermal industry look if members took a more active role in organizing themselves? 

Rich:  The industry could benefit form becoming a more organized, cohesive unit that promotes a standard of practice based on the latest ‘best practices’ information.

Q: What are the potential benefits of stronger national and state organizations? 

Rich: I see realtor associations as a good model.  They provide collective local, regional, and national advertising budgets.  It’s critical that consumers and legislators are presented with an organized group of technicians who are following time tested and results driven methods of design and installation along with support for the claims of efficiency, cost to operate information.  The organization should by example for training requirements.  I see the Geothermal Heat Pump industry developing a local/regional level, state level, and national level association.

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