Slash Geothermal Costs With Free Money

Couple inherent energy cost savings with incentive dollars to make a huge dent in the cost of a geothermal system.

Jay Egg, Egg Geothermal

Jay Egg, Egg Geothermal

The economics of purchasing and operating a geothermal HVAC system are not solely reliant on paying notable upfront costs and then counting on energy-cost savings to recoup those costs in the first few years of operation. In fact, much of the upfront costs can be quickly offset by taking advantage of a variety of available incentives.

To start the discussion, let’s simply list the various incentives that are available to residential and commercial consumers. Residential options are included for comparison purposes. Here is a list of the most readily available options:
Residential:

  • 30% Federal tax credit, uncapped.

Commercial:

  • 10% Federal tax credit, uncapped
  • Maximum Accelerated Cost Recovery System (MACRS)–benefit as high as 38%, uncapped.

Commercial and residential:

  • Property Assessed Clean Energy (PACE) funding funds entire geothermal HVAC projects for property taxpayers
  • State and local government incentives (varies by region)
  • Utility incentives and funding (On-Bill financing)
  • Geothermal utility services (ORCA Energy).

Many of the incentives/benefits cover the entire cost of a new geothermal HVAC system or retrofit/improvements to an HVAC system. These improvements can include the following:

  • Geothermal source (ground loop/pond loop/Class V well system or standing column well
  • Geothermal (water sourced) chiller/heat pump equipment
  • Ductwork, distribution piping, and specialties
  • 100% fresh-air equipment (geothermal water sourced)
  • Controls and indoor air quality (IAQ) items
  • Electrical service connections
  • Excavation & recovery costs
  • Engineering drawings, permits, and fees.

Federal incentives for geothermal HVAC systems that are currently in effect through the year 2016 include different criteria for commercial and residential.

If the project is residential, all that is required is that the client be a taxpayer and fill out IRS form 5695. The customer will realize 30% of the entire cost of the geothermal HVAC system in direct tax credits. The credits can be rolled over from year-to-year until the full incentive is earned. For example, a $30,000 HVAC system, purchased in 2014, will generate a $9,000 tax credit on the very next tax filing, through 2016.

The reason I included residential is for comparison. If the customer is a commercial entity who owns the commercial property, that entity receives a 10% Federal tax credit. That doesn’t appear to be favorable until the rest of the story is considered. When MACRS is applied, the geothermal HVAC system is depreciated in an accelerated manner from 27 yr. down to an abbreviated 5 yr. A 50% bonus depreciation is also applied to the first year. This 50% bonus has been extended and modified several times since 2008, most recently in January 2013 by the American Taxpayer Relief Act of 2012.

By taking advantage of the commercial/corporate geothermal HVAC tax credits and incentives, an expenditure of $1 million for a geothermal HVAC system will net tax incentives amounting to $480,000 over 5 yr. under current program guidelines. A 48% tax incentive for corporate clients is clearly favorable to the 30% tax credit for residential clients.

PACE is a Federal program, currently available in 31 states, designed for residential and commercial consumers. The program works best for commercial customers in participating areas. PACE is arranged by local government and pays for 100% of the project’s costs. Payback is accomplished through property-tax assessments. Though PACE is also available for the residential sector, the housing market reverses in 2010 brought that funding to a halt. Commercial PACE programs have accelerated and, as of February 2013, 16 commercial PACE programs in seven states are accepting applications to fund geothermal HVAC and other energy-efficient projects.

On-Bill financing provides a way for consumers to repay the capital costs of retrofit geothermal HVAC systems as part of their monthly electric bill.

Electrical service providers have made energy-efficiency retrofits available to consumers for years. The utility companies use their reserves or third-party capital providers to cover the cost of the efficiency upgrade projects. Consumers/businesses are then obliged to pay the costs back over a period of 20 yr. on their electric utility invoice. These programs seem to be gaining favor and continue to grow, as shown by House Bill 1428, MD., “Public Utilities-Geothermal Heating and Cooling On-Bill Financing-Pilot Program,” initiated in February, 2013.

Third-party capital providers have emerged with programs such as “In-Electric Rate Funding,” introduced in January 2013 by Constellation Energy.

Geothermal Utility Services are a promising program that has been party to a market penetration of almost 40% of heating system replacements in Canada in 2011 according to the Canadian GeoExchange Coalition. Geothermal Utility Services, such as Canadian based GeoTility, and its US sister company, OrcaEnergy, cover the cost of the exterior geothermal ground heat exchanger/well system. The consumer then pays a one-time connection fee and a predetermined monthly utility charge to the geothermal utility. The consumer is then only concerned with the cost of the geothermal heat pump/chiller upgrade and is still eligible for many of the other programs mentioned, including the federal tax incentives (U.S.).

But, how much more do geothermal HVAC systems cost than standard HVAC systems? That subject is covered in the Commercial Conversation podcast, “Breaking New Ground With Geothermal.”

Briefly, standard HVAC systems may cost about $3,000/ton, compared with geothermal HVAC systems that may cost $5,000 to $6,000/ton at the lower range tonnage (less than 500 tons). As the tonnage goes up, the cost per ton goes down until, in many cases, a geothermal HVAC system can have a competitive first cost comparable to a standard HVAC system.

In other words, when a commercial entity takes advantage of federal incentives for geothermal HVAC systems, they are realizing essentially a 48% cost reduction benefit on the entire mechanical system. One can be reasonably assured that the resultant first cost of the system can actually end up being substantially less than the first cost of a standard HVAC system.

However, the federal incentives and energy efficiency of a geothermal HVAC system, though compelling, are secondary to some of the other tangible benefits of going geothermal. Consider the following advantages that can be attained only with geothermal:

  • Elimination of outdoor equipment
  • Storm proofing (geothermal equipment is sheltered from storm events)
  • Longevity of system (a result of all indoor equipment)
  • Elimination of fresh water consumption (from commercial cooling towers)
  • Elimination of fossil-fuel consumption (on-site)
  • Superior comfort in heating and cooling modes (more on this in future columns)
  • Enabling thermal load sharing (swimming pools, domestic hot water, HVAC re-heat)
  • System efficiency, as high as 40 EER.

You can see that we are in a favorable market with the many incentives for the implementation of commercial geothermal HVAC technologies. It does take a little legwork on the part of the contractor, engineer, and consumer. Construction professionals that up-sell to geothermal HVAC have all of these resources available to them.

Jay Egg is a geothermal consultant, writer, and the owner of EggGeothermal, Kissimmee, FL. He has co-authored two textbooks on geothermal HVAC systems published by McGraw-Hill Professional. He can be reached at jayegg.geo@gmail.com.

PNNL and PPG to develop dynamically responsive IR window coating

pnnlThe Pacific Northwest National Laboratory (PNNL) and PPG have been awarded up to $750,000 to design a coating that can “switch” from a solar IR-reflecting state to a solar IR-transmitting state while maintaining high levels of daylight transmittance in either condition. PPG will provide an additional $78,000 in cost-sharing.

The development of such a coating would represent a major advance compared to current thermochromic window technology, which involves coatings that darken and block visible light when exposed to high volumes of IR energy, and existing electrochromic window technology, which relies on external power sources such as electricity to balance tinting and light transmittance.

The new PPG/PNNL coating technology also has the potential to be inexpensive, which will help ensure that dynamically responsive IR windows are an economical option for use in residential and commercial retrofit applications.

The two-year project is designed to develop dynamically responsive IR window coatings on a laboratory scale. If development is successful, the product could be scaled up and potentially commercialized within several years. PPG also collaborated recently with PNNL to develop and study waste-heat recovery technologies to save energy in the glass manufacturing process.

Building energy management systems sales to reach $5.6B by 2020

BuildingEnergyManagement_IconThe market for building energy management systems (BEMSs) continues to grow, driven by technology advances as well as a growing familiarity among customers with the benefits that BEMs provide. A number of new and existing companies are developing software-based platforms to help customers squeeze cost-reducing energy efficiency and operational benefits out of their building portfolios. According to a new report from Navigant Research, worldwide revenue for BEMSs will reach $5.6 billion annually by 2020, more than doubling from the 2013 level.

While many BEMS vendors have developed platforms with commercial and government customers in mind, the utility sector is playing an increasingly important role in the BEMS market, according to the report. Utilities face a growing number of regulations, such as energy efficiency resource standards in the United States, that require them to play a proactive role in reducing the energy consumption of their customer base. A BEMS deployed by a utility to its customers provides energy efficiency gains that utilities can claim in compliance with such regulations.

An Executive Summary of the report is available for free download on the Navigant Research website.

NRDC, NYU to recognize most energy-efficient commercial real estate tenants

nrdcThe Natural Resources Defense Council (NRDC) and New York University (NYU) have started a new initiative to tackle carbon pollution in the U.S. by encouraging tenants of commercial buildings to save energy. If successful, the initiative should not only reduce carbon dioxide pollution created by America’s buildings, but also save commercial real estate tenants money on their bills.

Thanks to an award from the new Real Green Research Challenge from CBRE (the world’s largest commercial real estate services firm), NRDC will collect and analyze energy usage info for commercial office tenants within CBRE’s portfolio and provide feedback on how they compare to their peers. This will allow NRDC and the commercial tenants to work together to help improve energy efficiency. (A recent NRDC case study shows that the first tenant to undertake this approach is projected to reduce energy use in its office space by nearly 30%, saving $1.8 million over the course of the 15-year lease.)

NRDC will also be *recognizing the nation’s top commercial tenant energy performers* by developing a rating system for comparative tenant energy use that provides a quantitative foundation for identifying and promoting energy efficient practices.

NRDC’s Yerina Mugica blogs in greater detail about the new Tenant Recognition Initiative on the NRDC Staff Blog.

IKEA plugs-in solar panels at Boston-area store

stoughton_solar_pv_050213_8

This solar array–at the Stoughton, MA IKEA store–can generate nearly 600 kW of AC power.

IKEA recently installed a solar energy system at its store in Stoughton, MA. The 118,000-square-foot PV array includes 4,220 laminated panels and can generate up to 590.8 kW. The installation will produce approximately 695,000 kWh of clean electricity annually, the equivalent of reducing 479 tons of carbon dioxide (CO2), eliminating the emissions of 94 cars or powering 60 homes yearly (calculating clean energy equivalents at www.epa.gov/cleanenergy/energy-resources/calculator.html).

This installation represents the 38th completed solar project for IKEA in the U.S., with one more location underway, making the eventual IKEA solar presence nearly 90% of its U.S. locations, with a total generation of 38 MW. IKEA owns and operates each of its solar PV energy systems atop its buildings – as opposed to a solar lease or PPA (power purchase agreement) – and globally has allocated $1.8 billion to invest in renewable energy through 2015. This investment reinforces the long-term commitment of IKEA to sustainability and confidence in photovoltaic (PV) technology. Consistent with the company’s goal of being energy independent by 2020, IKEA has installed more than 250,000 solar panels on buildings across the world and owns/operates approximately 110 wind turbines in Europe.

For the development, design and installation of the Stoughton store’s customized solar power system, IKEA contracted with REC Solar, Inc., a national leader in solar electric system design and installation with more than 9,000 systems built across the U.S.

IKEA, drawing from its Swedish heritage and respect of nature, believes it can be a good business while doing good business and aims to minimize impacts on the environment. IKEA evaluates locations regularly for conservation opportunities, integrates innovative materials into product design, works to maintain sustainable resources, and flat-packs goods for efficient distribution. U.S. sustainable efforts include: recycling waste material; incorporating key measures into buildings with energy-efficient HVAC and lighting systems, recycled construction materials, warehouse skylights, and water-conserving restrooms; and operationally, eliminating plastic bags from the check-out process, phasing-out the sale of incandescent light bulbs, facilitating recycling compact fluorescent bulbs, and by 2016 selling and using only L.E.D. bulbs. IKEA also installed electric vehicle charging stations at nine stores in the Western U.S.

More Companies Join Better Buildings Challenge

Department of EnergyThe Obama Administration announced recently that six new major U.S. companies are joining President Obama’s Better Buildings Challenge, which encourages private sector leaders across the country to commit to reducing the energy use in their facilities by at least 20 percent by 2020.  Starbucks Coffee Company, Staples, and The J.R. Simplot Company will upgrade more than 50 million square feet of combined commercial building space, including 15 manufacturing facilities. Financial allies Samas Capital and Greenwood Energy will also make $200 million in financing available for energy efficiency upgrades through this national leadership initiative. Utility partner Pacific Gas and Electric (PG&E) has also committed to offering expanded energy efficiency programs for its commercial customers, who are responsible for 30 million square feet of commercial building space.

The Better Buildings Challenge is part of the Obama Administration’s comprehensive strategy to improve the competitiveness of American industry and business, by helping companies to save money by reducing energy waste in commercial and industrial buildings.  Under the Challenge, private sector CEOs, university presidents and state and local leaders commit to taking aggressive steps to reduce the energy used in their facilities and sharing data and best practices with others around the country.  With the addition of today’s partners and allies, nearly 70 organizations have now joined the Better Buildings Challenge.  Together, these organizations account for more than 1.7 billion square feet of building space, including more than 300 manufacturing plants, and have committed almost $2 billion to support energy efficiency improvements nationwide. For more information, please visit the Better Buildings Challenge website.

The energy to operate the buildings where we work, shop, and study costs the U.S. approximately $200 billion annually. Last year, commercial and industrial buildings consumed more than 40 percent of all the energy used by the U.S. economy.  The goal of the Better Buildings Challenge is to support building upgrades to make America’s buildings 20 percent more energy efficient over the next decade, while also reducing energy costs for American businesses and local governments by more than $40 billion and creating jobs for U.S. workers.

California to require ‘solar ready roofs’ on new commercial buildings

CA Energy CommissionAccording to the San Jose Mercury News, the California Energy Commission has approved new energy efficiency standards for new residential and commercial buildings. The new standards, which would take effect Jan. 1, 2014, will require new commercial buildings to have solar-ready roofs, as well as so-called high-performance windows and lights controlled by sensors.

The new standards were backed by environmentalists, major utilities and the California Building Industry Association.

DOE Announces First Product to Meet the Commercial Rooftop Air Conditioner Challenge

Department of EnergyAs part of the Obama Administration’s all-of-the-above energy strategy to help American families and businesses save money on their energy bills, the U.S. Department of Energy today announced that Daikin McQuay’s Rebel rooftop unit system is the first to meet DOE’s Rooftop Unit (RTU) Challenge. Five manufacturers—Daikin McQuay, Carrier, Lennox, 7AC Technologies, and Rheem—are participating in this challenge to commercialize highly efficient commercial air conditioners that satisfy a DOE-issued specification for energy savings and performance. The companies have until April 1, 2013 to submit a product for independent evaluation according to the specification. When built to meet the specification, these units are expected to reduce energy use by as much as 50% over current standards. Nationwide, if all 10 to 20 ton RTUs met the specification, businesses would save over $1 billion each year in energy costs, helping American companies better compete on a global scale.

Manufacturers nationwide have a strong motivation to produce highly energy-efficient air conditioning units for commercial buildings. Members in DOE’s Commercial Buildings Energy Alliances (CBEA), such as Target, Walmart, and other participating commercial building owners have expressed an interest in equipment that meets the new energy efficiency specification at an affordable price. The Department of Energy is evaluating potential demonstration sites for high performing products that meet the RTU Challenge. In addition, the Department is also developing analytical tools that enable businesses to more accurately estimate the energy and cost savings of using high performance RTUs in their facilities.

The RTU Challenge, aimed at spurring the market introduction of cost-effective, high-performance commercial rooftop unit air conditioners, was announced in January 2011. The specification that underpins the RTU Challenge was developed by DOE technical experts and informed by industry partners.

The final participant list was announced by Dr. Kathleen Hogan, Deputy Assistant Secretary for Energy Efficiency, at the Energy Department’s first CBEA Efficiency Forum, a public stakeholder engagement event hosted by the National Renewable Energy Laboratory in Golden, Colorado. In addition to today’s announcements, the forum also featured a series of information exchanges on other energy efficiency initiatives that are underway. A full meeting report will be available on the CBEA Web page in the coming weeks. CBEA is comprised of building owners, managers, and operators that collaborate with the Energy Department and with each other to develop and deploy best practices, key decision-making tools, and advanced technologies for significant energy savings.

DOE’s Office of Energy Efficiency and Renewable Energy accelerates development and facilitates deployment of energy efficiency and renewable energy technologies and market-based solutions that strengthen U.S. energy security, environmental quality, and economic vitality. Learn more about the CBEA, Efficiency Forum, and RTU Challenge.

Top 10 states for LEED green buildings includes DC, CO, and IL

The U.S. Green Building Council (USGBC) has released its 2011 list of top 10 states for LEED-certified commercial and institutional green buildings per capita, based on the U.S. 2010 Census information. The District of Columbia leads the nation, with more than 31 square feet of LEED-certified space per person in 2011, with Colorado being the leading state, with 2.74 square feet per person in 2011.

Other top states include Illinois, Virginia and Washington, with 2.69, 2.42 and 2.18 square feet of LEED-certified space per person, respectively. The top LEED states per capita, including the District of Columbia:

Sq. ft. of space to earn LEED-
certification in 2011
Per capita
District of Columbia 18,954,022 31.50
Colorado 13,803,113 2.74
Illinois 34,567,585 2.69
Virginia 19,358,193 2.42
Washington 14,667,558 2.18
Maryland 11,970,869 2.07
Massachusetts 13,087,625 2.00
Texas 50,001,476 1.99
California 71,551,296 1.92
New York 36,538,981 1.89
Minnesota 9,591,445 1.81

LEED is the internationally recognized mark of green building excellence, with more than 44,000 projects commercial projects participating, comprising over 8 billion square feet of construction space in all 50 states and 120 countries. In addition, more than 16,000 homes have been certified under the LEED for Homes rating system, with more than 67,000 more homes registered.

Notable newly certified projects in 2011 include the Treasury Building in Washington, D.C., which is distinguished as the oldest LEED-certified project in the world; the LEED-Platinum Casey Middle School in Boulder, Colo.; the iconic Wrigley Building in Chicago, Ill.; Frito-Lay in Lynchburg, Va., which earned LEED Gold for the operations and maintenance of an existing building; the LEED Silver Hard Rock Café in Seattle, Wash.; Anne Arundel Medical Center in Annapolis, Md.; Yawkey Distribution Center of The Greater Boston Food Bank in Mass.; the LEED Gold Austin Convention Center in TX; SFO’s LEED Gold Terminal 2 in San Francisco, Calif.; the LEED-Platinum Hotel Skylar in Syracuse, N.Y.; and the LEED Platinum Marquette Plaza in Minneapolis, Minn.

In December 2011, USGBC announced that LEED-certified existing buildings outpaced their newly built counterparts by 15 million square feet on a cumulative basis. A focus on heightened building performance through green operations and maintenance is essential to cost-effectively driving improvements in the economy and the environment.

DOE guide can help you save energy

Department of EnergyThe U.S. Department of Energy (DOE) recently released the third installment in a series of four 50% Advanced Energy Design Guides (AEDGs). This latest guide will help architects, engineers, and contractors design and build highly efficient retail buildings, helping to save energy and cut store operational costs. The 50% AEDG series provides a practical approach for designers and builders of retail stores, and other major commercial building types, to achieve 50% energy savings compared to the building energy code used in many parts of the nation. These commercial building guides support President Obama’s goal to reduce energy use in commercial buildings 20% by 2020. The Advanced Energy Design Guide for 50% energy savings in retail buildings is now available for download.

Beyond helping builders achieve efficiency exceeding the current energy code, the AEDGs also provide climate-specific recommendations to incorporate today’s off-the-shelf energy efficient building products. These recommendations help designers and builders choose advanced building assemblies, highly efficient heating and cooling systems, and incorporate other energy-saving measures such as daylighting and associated control systems. Additionally, efficiency measures found in the guides can be used in the development of future commercial building energy codes.

The 50% Advanced Energy Design Guide series is being developed through a partnership with the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE), American Institute of Architects (AIA), U.S. Green Building Council (USGBC), and Illuminating Engineering Society of North America (IESNA). The Retail Buildings guide is the third installment in the 50% series, and follows the guides for small and medium office buildings and K-12 schools released in 2011. The final 50% savings guide for major commercial building types—large hospitals—is also in progress.

DOE’s Office of Energy Efficiency and Renewable Energy (EERE) invests in clean energy technologies that strengthen the economy, protect the environment, and reduce dependence on foreign oil. Learn more about EERE’s support of building technologies. Additional information on DOE’s efforts to support the development and adoption of building energy codes can be found on the Energy Codes website.