State-by-State Comparison of Geothermal Heat Pump Legislation

I want to thank John Rhyner, Greg Mueller and LI Geo for putting together this report. If you’re new to legislation around renewable thermal technologies this article will provide you a great overview and direction for where you can get more information. Here are a few other articles to read to get up to date:

In Depth NH Renewable Thermal Policy Update
Massachusetts Geothermal Policy Review
Trendspotting: US State Heating up to Renewable Energy Heating and Cooling Part 1
Trendspotting: US State Heating up to Renewable Energy Heating and Cooling Part 2
If you have a question about geothermal heat pump policy, ask as HeatSpring expert here.

Enter John and Greg

The Long Island Geothermal Energy Organization (LI-GEO) is a newly-formed organization with the primary purpose of promoting and increasing the use of energy-efficient geothermal heat pump technology for building heating and cooling on Long Island, New York. A core organizational priority of LI-GEO is to guide future legislative and advocacy efforts at the local and state level. To that end, this document was prepared to establish the current status of geothermal heat pump (GHP) legislation in other states as well as at the federal level.

INTRODUCTION

Most states have established a Renewable Portfolio Standard (RPS), which is a legislative requirement for utilities operating in the state to obtain a certain amount of the electricity they sell from eligible renewable sources. For example, utilities in a participating state are required to obtain some percentage of their electricity from renewable energy sources in Year 1 with that percentage increasing annually until reaching some maximum percentage after a period of time. The states are generally assigning one Renewable Energy Credit or Certificate (REC) for every 1,000 kWhs (1 MWh) of electric production from an eligible source.

Until recently, only traditional renewable technologies including solar PV, wind, “hot rock” geothermal, etc. were deemed eligible technologies under the states’ RPS programs. GHPs were not considered to be an eligible technology since they do not produce electricity which can be metered. There is an ongoing debate, often heated, over whether or not a GHP system can be considered a “renewable energy” system. Some classify GHP technology solely as an energy efficiency measure since it requires electrical energy input. The industry’s general position is that the technology leverages renewable solar-derived heat stored in the ground and converts it into a useable form, namely building heating, and thus has the same net as other renewable energy systems such as solar thermal. Further, for cooling, heat is removed from a building and rejected back into the ground where it is stored and can be accessed again during the upcoming heating season. The technology also offers significant demand reduction potential, particularly relative to electric resistive heating and other conventional cooling systems.

Circumventing the renewable debate, a growing number of states are recognizing the overall societal benefits of GHPs and have begun allowing utilities to meet their RPS requirements by awarding “Thermal RECs” for GHP systems. A Thermal REC is the equivalent thermal energy associated with one MWh of electrical energy, or 3,412,000 BTUs of thermal energy. Much of this trend has been the result of efforts by a strong advocacy movement led in part by national and regional-based geothermal advocacy groups including The Geothermal Exchange Organization (GEO), National Ground Water Association (Geothermal Heat Pump Interest Group), New England Geothermal Professionals Association (NEGPA), and others. As a result, there is growing momentum amongst the states towards incentivizing the use of GHP systems to meet rising RPS mandates.

STATE LEGISLATION AND INITIATIVES

At the forefront of state GHP legislation are recently-enacted laws in Maryland and New Hampshire, which now allow utilities in these states to meet RPS requirements using Thermal RECs generated by GHP systems. The Maryland and New Hampshire programs now categorize GHPs as “renewable” and include them in the same incentive category as solar PV, wind, etc. Details on each bill are presented below along with summaries of some other states that have or are considering provisions for Thermal RECs or for provisions which would otherwise allow GHPs to contribute toward satisfying RPS requirements.

Maryland: S.B. 652, H.B. 1186 – Enacted 5/22/12

In May of 2012 Maryland passed legislation allowing geothermal heating and cooling systems commissioned on or after January 1, 2013, that meet certain standards to qualify as a Tier I “Renewable Source” for the purposes of the state’s RPS mandate. According to the legislation the owner of the geothermal system will receive RECs based on the number of annual Btu’s of thermal energy supplied by the system and converted into MWhs. One REC will be awarded for each MWh produced. Systems must be designed and installed in accordance with local regulations. The Maryland legislation includes GHPs in the same Tier I Renewable Source designation as solar, wind, biomass and other traditional renewable technologies.

New Hampshire: S.B. 218 – Enacted 6/22/12

In June of 2012, New Hampshire enacted a law that classifies geothermal thermal energy, including thermal energy produced using a GHP system, as a “Class I – New Renewable Energy.” This class previously included electricity produced by wind, methane, landfill and biomass gas, wave/ocean power and others but was extended by the bill to include thermal energy from GHP and solar thermal systems. The bill defines “Useful Thermal Energy” as “renewable energy delivered from Class I sources that can be metered and for which fuel or electricity would otherwise be consumed.” As in Maryland, one REC is credited for each MWhr of Useful Thermal Energy produced by the system. The New Hampshire legislation requires that “a qualified producer of useful thermal energy shall provide for the metering of useful thermal energy produced in order to calculate the quantity of megawatt-hours for which renewable energy certificates are qualified, and to report to the public utilities commission…Monitoring, reporting, and calculating the useful thermal energy produced in each quarter shall be expressed in megawatt-hours, where each 3,412,000 BTUs of useful thermal energy is equivalent to one megawatt-hour.” The bill sets a REC price of $55 for Class I sources.

Other State Initiatives Recognizing Thermal Energy/RECs

Wisconsin – In May 2010, the Wisconsin RPS was amended to allow specified non-electric resources that produce a measurable and verifiable displacement of conventional electricity resources to also qualify as eligible resources for obtaining Renewable Resource Credits (RRCs, Wisconsin’s version of RECs). GHPs, biomass, solar water heating and solar light pipes are listed as eligible technologies. This means that, like New Hampshire and Maryland, non-electric thermal energy from a GHP system may contribute toward the RPS, but the RRCs awarded are calculated based on the amount of conventional electricity displaced (electricity from non-renewable resources) rather than the actual thermal energy produced.

Arizona – The current RPS legislation allows Thermal RECs for solar thermal systems (water heating, space heating and cooling, and process heating) and biomass thermal systems. GHPs are not specified as an eligible technology, although “Geothermal Space Heating and Process Heating Systems” defined as “systems that use heat from within the earth’s surface for space heating or for process heating” are listed (implies “hot rock” geothermal but the statute is not clear).

Massachusetts – Legislation passed in August 2012 requires that the state’s Executive Office of Energy and Environmental Affairs study adding technologies that generate “Useful Thermal Energy” to the list of eligible technologies under the RPS. That study is scheduled to be completed by the end of December 2012. NEGPA is presently spearheading an advocacy effort in Massachusetts towards this end.

North Carolina – The current RPS legislation awards Thermal RECs but does not specify GHPs as an eligible technology. Thermal RECs are allowed for combined heat-power and solar thermal systems for the electricity demand reduction, like Wisconsin, not the thermal energy provided.

Vermont – Vermont currently has Renewable Portfolio Goals as opposed to Standards. A process is underway by the Public Service Board to change this to a Renewable Portfolio Standard, or RPS, expected to be complete in January 2013. The current bill language does not seem to contain Thermal RECs for GHPs although NEGPA is presently spearheading an advocacy effort for it to be added.

Federal Status/Laws and Geothermal Heat Pumps

Under the Emergency Economic Stabilization Act of 2008 (aka “Bailout Bill”), the definition of “energy property” (previously offered only to traditional renewable technologies, i.e., solar, fuel cell, and wind technologies) was extended to GHP systems. This new designation ushered in Investment Tax Credits (ITCs) for GHP systems. A review of the IRS code reveals no definition of the terms “renewable energy” or “energy property” other than to list the equipment that satisfies the latter category.

While some state RPS programs consider GHPs as renewable energy technologies, GHPs are still currently excluded from the list of eligible renewable technologies for the federal government to meet the renewable energy requirements of the Energy Policy Act of 2005 (EPACT of 2005). However, as reported by GEO, U.S. Senate bill H.R. 4850 was passed on September 22, 2012, which amends the EPACT of 2005 to specifically include thermal technologies for achieving federal energy efficiency goals. The legislation would allow thermal technologies, including GHPs, to be used to meet the federal mandate of energy efficiency for any federally-funded building, either new or rehabilitated. The legislation is pending house and executive approval.

If you are interested in joining LI-GEO or want more information contact any of the following individuals at LI-GEO: