Your organization might want to break into the renewable energy fields — you may be considering geothermal and solar installation or energy auditing, but you might not know if you should take the plunge. You must determine: is there demand?
The truth is, most times it may not be a good idea to invest in training until you know whether or not the proper demand exists. Once a real job is in place, it won’t be difficult to justify the investment in training; however, the question of how to measure demand still stands. This process differs for each technology — we’ll start with geothermal demand. Before you survey potential customers, do a quick self-assessment within your own company:
Where is your company in the value chain?
It is important that you understand where you are in the supply chain, because this will impact how you go about measuring demand. Make sure to note who your own suppliers are, and how much support they will or won’t be able to provide. This leads to the next question.
Who is involved in your existing business and who are your customers?
Geothermal installation typically involves a driller, licensed HVAC technician, duct workers, and an electrician for wiring. Some general contractors, sales people, and the designer are also involved. Every skill you already have in-house represents an advantage you have over potential competitors.
How do you get jobs and what are they?
Are you in direct communication with customers or are you getting your jobs as a sub through a GC, another company that is selling a service?
If working directly with customers or building owners who are paying the bills, the survey below will apply directly to you.
Who to target in a survey:
Once you have an idea of where your business resides within the industry, survey existing customers and all potential customers with a couple key questions to start measuring demand.
If you are a subcontractor, speak with the contractor who you typically work with and see if you can collaborate to find some geothermal jobs. When directly involved with customers, it is easier to begin surveying them. Remember to ask previous customers for retrofits. Send a survey to all old customers saying that new government incentives have made geothermal more economical and that they could be saving money on heating. Ask them a few simple questions about their existing heating system — this is one of the quickest routes to getting information on geothermal demand since the connection already exists between you and the customer. The objective here is to find the lowest hanging fruit possible with the least amount of sales and marketing investment.
Here are the top-line questions to ask existing customers to see how much low-hanging fruit you have in your area:
- What type of construction is being performed? New or retrofit?
- What type of heating system do you have or are you looking for?
- How much do you pay in heating, or how much do you expect to pay?
- Are you aware of government tax credits to upgrade HVAC equipment?
- Where is the building located? How much space is on the property?
If you get someone who has already stated interest in geothermal heating and cooling, here are some pieces of top-line information that are useful for qualifying potential customers:
- How much land is on the site? Remember you need to get a drill rig in for vertical bores or have enough room to excavate for horizontal bores.
- If it’s new construction, what type of heating system are they do they prefer, if any? If a retrofit what’s currently in the building? If it’s forced hot air, geothermal is a perfect fit. If it’s a radiant floor system, geothermal can sometimes be used for heating– it is tricky in the northeast for cooling, as hot, wet summers will make water condensate on the floor.
- How much is the customer spending on heating and what is their existing system use as fuel? Keep in mind that geothermal is between fifty and ninety percent cheaper to operate than traditional methods. The older and less efficient the system is, the better a candidate for geothermal.
- What is the customer’s budget? A normal home will need a system that is between four and eight tones. In the northeast, each ton will typically cost ten thousand dollars, before government tax credits.
- Is there an existing well on the property? Standing column well geothermal systems are typically used in rural locations where wells are more common. If the customer has a well, geothermal can be cheaper to install and operate as long as the flow rate coming from the well, temperature and quality of water is suitable.
Other things to keep in mind:
- How is the construction being financed? Geothermal is almost always a good fit for profit-conscious customer because the savings from the heating bills will be greater than the addition loan costs.
- Ten thousand dollars per ton is the typical total quote for a project. A normal house, around 2,000 square feet, generally needs a four-ton system, depending on the quality of the shell and siting of the building. This figure is without including federal and state incentives. (See DSIRE for those.)
- Standing-column well systems are really cheap since the drilling has already been done, and the drilling is the most expensive part of the system.
If you go through this process and are encouraged by what you see, then chances are there is an opportunity to find success. Line up some customers, get some geothermal training, and start building your business.
Check out our free Geothermal Business Plan course…
Brian, Steve Masse, Masco Homes of Lowell, Ma. here and a Babson alum…I run a small home building firm in the Lowell area and am working on plans for a project timber frame home which has a 220ft well with 22gpms to be used for dom hotwater. Above article you reference cost estimates for reg. geo and I wonder if standing col well geo can be used here and at what rough estimate for a 2000sf SIP walled and roofed home that will be fairly tight and include HRV? Always been kept away from geo because of high upfronts and because of anecdotal storiesi’ve heard of barely adequate heat produced by these systems and the higher electric bill costs. Steve Masse
Great to meet you, Steve! Call me any time at 800-393-2044 x44 – I’d be interested to hear about your business and your Babson experience.
Geo is definitely an option you should check out for your project. The key will be getting a system that is designed by somebody you trust. Everyone will have different advice for you, which can be spooky, but I’d be happy to help you find a few experienced designers to talk to. It’s possible that geo isn’t the way to go, but I think it’s definitely worth a look.
Brian, my company has been installing geo in the Portland, OR area for over 20 years now. We’ve primarily done horizontal applications with vertical wells when needed. I’m growing more interested in standing column applications but there don’t seem to be many (if any) of those installations out here. Are you aware of any reason why our climate wouldn’t represent good opportunity for standing columns? Any rules of thumb regarding depth or volume required per ton?
Thanks,
Mark
Hi Mark,
I’m not an expert, but my understanding is that standing column wells are a Northeast US phenomenon for a couple reasons: 1) bedrock is close to the surface, so you can drill a deep well with consistently good heat transfer that stays open without excessive amounts of casing, and 2) abnormally good water quality. Pump and reinjection systems seem to be really popular in your neck of the woods rather than standing column wells. If others know about standing column wells being used outside the northeast, I’d be interested in hearing about it.
Thanks for your comments and question.
Hey Steve,
Just out of curiosity, I was wondering where you’ve heard of all of the geothermal horror stories? Has it been on the news, from other homeowners, or contractors? Just curious, I always hear that people hear horror stories, but have never heard them myself.
Chris
This post is a great starting place for businesses to look at what they have to do in order to succeed in the geothermal market. The survey you provided is a great for our company, because we work directly with the customers and work crews who are putting in new housing.
I especially liked your reminder for the existing customers. So many places are interested in drumming up the new business opportunities, they forget the current business opportunities laying right infront of them.
Our company, Egg Systems, stays in contact with it’s current customers to ensure they have everything they need after the intallation. We provide service checks for them on a periodic basis as well. Here is the link to us for you to check out. http://www.egggeothermal.com I also liked your section on systems using the wells already installed in the subdivisions because we work a lot with homeowners on a one on one basis. It is good to know we can help by providing an eco-friendly system that will last them generations.
The reference to $10,000 per ton seems very high. Although there may be systems that are sold at this price, it isn’t the norm, especially in the midwest. In a paper titled “An Information Survival Kit For the Prospective Geothermal Heat Pump Owner”, written by Kevin Rafferty (2008), and distributed by HeatSpring Learning Institute, references around $13,000 for a 3 ton system with vertical loop ($4333) per ton. While this number may be a bit low, it’s probably closer than the $10,000 per ton mentioned above.
Kent,
Thank you for your comment. I agree it’s probably much cheaper in the midwest, though I’ve never been on a jobsite or sold a job in the midwest. I’ve seen many jobs around the 10k range in the Northeast. What have you typically seen for pricing in the Northeast?
Chris
The problem in giving a “cost per ton” estimate, whether high or low, is that it is not really indicative of the actual cost structure of the job. For example, a 4 ton loop may be close to twice the price of a 2 ton loop, but there are some loop related costs that are fixed and not variable based on the size of the loop. There is even a larger disparity on the equipment side. A 4 ton unit is not twice the price of a 2 ton unit, nor is a 6 ton unit twice the price of a 3 ton unit. The cost difference between a 2 and 4 ton unit might only be 30%. Same for a 3 ton vs. 6 ton. Because a significant portion of the system installation is attributed to the unit, using a cost per ton estimate is generally not appropriate, accurate or helpful.
Kent,
Interesting, I’ve never heard this perspective. While I agree the cost per ton is always going to change for every job, what else are you going to use? Would love to learn about the system that you’ve found most useful. Please let me know!
Chris