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Geothermal to the rescue

Geothermal to the rescue

Geothermal industry can create new jobs, improve the economy, says Doug Dougherty, president and CEO of The Geothermal Exchange Organization

DOUG DOUGHERTY IS walking the walk: this March he became president and CEO of The Geothermal Exchange Organization (GEO), a non-profit trade association just formed 18 months ago representing the economic and political interests of its member companies, including all facets of the U.S. geothermal heat pump industry from manufacturing and system design to sales and installation.

Previously, he had run a state association representing the telecommunications industry for 13 years. It’s easy to see that Dougherty, Springfield, Ill., has passion for geothermal technology.

He says geothermal is in his veins, and he is glad to be back in the industry. In 1986, Dougherty joined Soyland Power Cooperative, a generation and transmission cooperative in Illinois, where he was first introduced to geothermal heat pumps (GHPs).

“My job in marketing development led me to geothermal heat pumps,” explains Dougherty. “At the time, there was no stocking distributorship in the state for any geothermal manufacturer — no dealer network and no training. I developed a for-profit business plan for a co-op subsidiary that filled that void, which I oversaw from 1987 to 1995. We created a robust dealer network and a successful market for GHPs in Illinois through the electric co-op distribution system. I worked in executive positions for state government and ran a major industry association since then, but my heart remained with geothermal. When the GEO Board of Directors asked me if I would like to head up a new national association for GHPs, I jumped at the opportunity. I just wanted to be a part of it again, and was happy at the chance to be re-engaged with the industry.”

Dougherty’s past experience as a state association executive included addressing public policy issues, testifying before legislative committees, and working at the cabinet level with the governor's office and agencies.

Even though geothermal is a different industry, the legislative process is the same.

“I am comfortable working with legislators and legislative staff, and I know how to shape the issues and present them to legislators,” says Dougherty. “That includes describing our industry; what our needs and desires are; and how public policy can be shaped to help our industry create jobs.”

Dougherty believes that the geothermal heat pump industry can play an important role in this country's will to become more self-sustaining and less dependent on foreign oil.

“It's important to know that 40% of all the energy consumed in this country is for the thermal loads of buildings,” says Dougherty. “We can significantly impact that energy dependency simply by installing GHPs. That's a really big deal — especially considering how small a part of the heating and air conditioning market that we are right now. If the industry can expand to a million units annually over the next few years, it's a tremendous opportunity that will create hundreds of thousands of new, well-paid jobs. It's exciting to represent an industry that can have such a significant impact on this country's energy policy and use. That includes reducing the country's carbon footprint; cutting peak electricity loads of utilities; and lightening strains on the transmission grid.

“If new home construction comes back our market share will go from 5% to 20% to 25% of the market overnight,” adds Dougherty. “I think we set a good foundation the past couple of years about raising consumer awareness, educating people about the geo technology, so we think if new homes are starting to be built our market share will increase dramatically.”

Of course there are the naysayers of renewable energy, such as wind and solar, and energy-efficient products, etc. When asked how can geothermal technology be presented, so government officials and the public understand the technology and its benefits, Dougherty points out that he’s giving a speech to the Green Symposium this month, and he’s going to ask the audience to tell him something negative about geothermal.

“If someone says it’s too expensive I will give them the economic analysis of my home and the commercial building analysis,” says Dougherty. “There is no downside to this technology. It’s clean, renewable, and economical; it’s all there. It’s just different and sometimes people have a hard time accepting different.”

Home retrofit

Just this summer, Dougherty decided to retrofit his 2,600-sq.ft 1920s home with a geothermal system.

“When you are in a position like mine, I believe you should ‘Walk the Walk,’" says Dougherty. “I have made lifestyle decisions to be more energy efficient and reduce my personal carbon footprint. To replace my prior corporate vehicle, I bought a hybrid car (my new license plate reads ‘MOREGEO’), and I've retrofitted my home with a GHP system. It has cost me money, but the payback is there. I predict that my geothermal system will pay for itself in less than five years — probably closer to four. It makes sense, and I can tell my story as an example of how people can become more energy efficient and save money with GHPs.”

“For Doug's house we installed five ¾-in. x 180-ft. loops to save a little room on space versus six ¾-in. x 150-ft. loops we would have likely otherwise installed,” says Dan Crowe, president of The Hole Deal Inc., Goodfield, Ill., the company that drilled the bore holes and installed the loops. “Doug's yard was a little tight, but nothing really out of the ordinary for us. We used some methods of controlling our drill cutting and grout as well as using plywood to stack dirt on the neighbor's yard.”

“I have about 1,800 linear feet of ¾-in. plastic pipe buried in my yard below the frost line,” says Dougherty. “That’s about a third of a mile of pipe in my yard, that’s extracting or dumping BTUs in the earth. Also, the properties of the bentonite grout have gotten to the point where it accelerates heat transfer.”

The following day, the mechanical contractor came to install the 5.5-ton GeoComfort unit and reconfigure some of the ductwork since the airflow would have been inadequate using the existing ducts. The contractor also put a cold air return in the second story and had the return go down to the unused chimney which Dougherty was using as a flue for a gas furnace and water heater.

“That vastly improves the heating and cooling in the second story,” says Dougherty. “My house was built in the 1920s so I have significant insulation, but no side wall insulation. They had to take that into account and that’s why they did the cold air return. That enhances air flow and has less of a temperature differential in the summer.”

“The ductwork needed to handle 2,000 CFM of air,” says David Weidner, president of Weidner Refrigeration Inc., Divernon, Ill., the contractor that installed the geothermal unit and reconfigured the duct work. “We had quite a chore there, we did a good job, but it was a challenge. It was a small house with small spaces, not much room, trying to get all the air to the right rooms upstairs; I think we did a good job. We had to make it bigger and built things custom.

“We also ran a load on the house, which we always do on every job, a Manual J, so we could actually get the air right in every room,” adds Weidner. “Then we did a Manual D, and designed the duct work accordingly."

Dougherty points out that he will cut his annual heating, cooling and hot water bill by two-thirds. Dougherty’s annual cooling and hot water cost before the geothermal system was installed was $3,200.

“He [Weidner] believes the geothermal will average about $80 per month, so that’s less than $1,000,” explains Dougherty. “So I will be saving about $2,200 dollars a year. I think total installed costs, including the heat pump and drilling, would be around $22,000 or $24,000. I get a 30% federal income tax credit, so I will get $7,500 off. My local electric municipality is giving me $2,475, so I get about $10,000 in tax and utility credits. So now it’s $15,000 out of pocket, so it comes out to six and a quarter years’ payback, so after six years I’ll be saving money. The life of the machine is 20 to 25 years. Also consider that my gas furnace was 27-years-old and my air conditioning unit was 20-something years old too, so you figure that a new 98% efficiency furnace and 18-19 SEER air conditioner would have cost me $10,000-$12,000. If I consider that, then my payback is a year.”

Dougherty says that the challenge is for someone to write the checks for the costs of the install, drilling, unit, etc. “A lot of people can’t do that,” says Dougherty. “What we say is, if you have the ability to take out a home equity loan, your utility savings is greater than your debt service on the loan, so you are making money, so you pay the debt service and pocket the difference. Same thing with a new home: tell people if you put an extra $10,000 for a geothermal system since an air conditioning system and gas furnace would cost $10,000 to $12,000, put the extra $10,000 into the 30 year mortgage, and your utility savings is greater than your debt service, so that’s positive cash flow from the beginning.”

Dougherty says that the same is true for commercial.

“We just did an economic analysis for a 30,000-sq.ft. three-story office building in Oklahoma City, which is the home of ClimateMaster,” explains Dougherty. “They have a 148-ton system. The geothermal system utilizes 50 units, averaging three tons, in the building. Each room gets its own unit, so each office has an individual thermostat, so the climate can be controlled in each office.

“The project cost was approximately $1,050,000. The conventional HVAC cost was $600,000. The difference is $450,000. The utility gave a rebate of $23,300 dollars, so the net cost is $426,700. There is an income tax credit at the federal and state level and then there is an energy credit on the 10% federal income tax credit, so it’s been estimated the annual energy costs savings per square foot is 75 cents.

“If you look at bonus depreciation, a five year MACR depreciation, you then have a depreciation tax benefit of almost $400,000. You have an energy credit tax benefit of 10% off the $1,050,000 ($105,000). The first year you save $30,000 in energy costs, the positive cash flow of year one is $107,300.

“On the surface the business man is thinking he’s going to pay an additional $450,000 for the system and can’t afford it,” says Dougherty. “But if you do the economic analysis you realize he is putting $107,000 dollars in his pocket the first year. With the tax benefit, depreciation benefit, utility rebate and energy savings, once it’s factored all in you realize it’s positive cash flow from year one.”

Change the mindset

According to Dougherty, the biggest challenge is changing the mindset of the architect and mechanical engineering professional since they often have a hard time doing a 180-degree change.

“They are comfortable designing chillers and boilers and using natural gas and electric in a traditional way,” says Dougherty. “When you say what about geothermal heat pumps they think that they now need to deal with drillers, pipes in the ground, finding someone to size the units and accurately design the loop field. Often they don’t think they can make that transition, and decide just to keep doing what they have been doing.”

However, things can change. For example, in Oklahoma City, almost every new office building being constructed is going to use geothermal.

"What happened was that Dan Ellis, president of ClimateMaster, which has its 750-employee factory in Oklahoma City, along with a number of its suppliers, was able to convince a leading general contractor [in Oklahoma City] to install geothermal heat pumps in its new headquarters," says Dougherty. "And the general contractor became a true believer in geothermal heat pumps, and has gone on to utilize geothermal in seven other projects including four office buildings, a large manufacturing plant, a heavy-duty truck dealership and a multifamily housing project. So now ClimateMaster has an influential general contractor that is a champion of geothermal heat pumps and is leading by design."

“We convinced the GC by having them install geothermal in their own facility,” explains Daniel Ellis, president of ClimateMaster Inc. “When they saw how low their energy costs were, and how quiet and comfortable the system was, they were sold. This summer we reached 110°F in Oklahoma City and it was over 100°F for 63 days. This GC said his geothermal loop temperature never exceeded 73°F. That confirmed why and how he is saving so much energy. They also promote the commercial tax incentives for geothermal, which makes the financial decision almost a ‘no brainer’.”

“People are now saying, ‘Wow ... this guy is saving on a three-story office building and this other guy is saving money on a retrofit, we need to learn more about this technology’,” says Dougherty. “They changed the culture of how to design a building and how to do a thermal load of a building. We are trying to do that nationally. This is environmentally friendly and economically beneficial.”

Also, in Clinton Ill., two middle schools were retrofitted with geothermal heat pumps.

“They had a bond issued, so voters needed to approve this, and then the newspaper reported on the schools being retrofitted, how the money was being used, etc., so people were informed of the project,” explains Dougherty. “Now the whole community wants to extend the bond another 15 to 20 years, so they can build a new junior high school. At the public event encouraging voters to approve extension of the bond, all the residents said they would support it if the new school has geothermal heat pumps. This just changed the entire community’s thinking about how to heat and cool a building. Everyone in this town now knows what geothermal heat pumps are.”

Job creation

According to Dougherty, geothermal can create many needed jobs in the U.S.

“If you just look at the two crews that came to my house, those were two crews of three men, which equal six full time jobs, devoted just to that aspect of this industry that no other HVAC industry has,” explains Dougherty.

“The job creation components of geothermal are the drillers and installers of the pipe, and no one else has that,” adds Dougherty. “We have the added benefit. However, it’s a double-edge sword. It makes our stuff more expensive since you have to put a bore hole in the ground or trench it out horizontally, and put plastic pipe in and grout it, but that’s six full time jobs that traditional gas furnace or air conditioning doesn’t have. Geothermal causes drillers to come, and pipes to be manufactured and grout to be developed. It’s a real ripple effect that geothermal has, which makes us unique in the HVAC industry.”

Dougherty adds that four of the largest manufacturers are WaterFurnace, which manufactures product in Fort Wayne, Ind.; ClimateMaster, which manufactures product in Oklahoma City, Okla.; Enertec, which manufactures product in Mitchell, S.D.; and Florida Heat Pump, which was bought by Bosch, but still manufactures heat pumps in Fort Lauderdale, Fla.

“I surveyed those manufactures, and between 75% and 80% of all components are manufactured here in the U.S. Enertec was the highest, and its components exceeded 90%,” says Dougherty. “The biggest manufacturer of grout produces it in Texas or Alabama, and Centennial is one of the largest pipe manufacturers in the U.S. And the other thing is you can’t import a bore hole, you have to do that right here in the U.S.A.”

Dougherty tells CONTRACTOR that there is a need for qualified installers.

“The International Ground Source Heat Pump Association, which is affiliated with Oklahoma State University, has very good training programs, and ASHRAE in Atlanta is also a huge educational component for geothermal heat pump technology,” says Dougherty. “Those are the two largest national groups that are promoting the technology. The standards are done through AHRI, based in Virginia. They are a big promoter of geothermal heat pumps. It’s part of their portfolio. They have a wealth of knowledge about geothermal heat pumps.”

Change via education

Dougherty points out that there are programs popping up at community colleges across the nation. For example, Black Hawk Community College, Moline, Ill., is building a new building, the first in 40 years, and it will be a sustainable. The college is going to offer five different associate degrees in energy efficiency technologies and sustainable technologies. It’s all going to be taught from this new building that will be heated and cooled with a geothermal heat pump.

“Educational institutions are starting to embrace this technology, and what we are getting are living laboratories,” says Dougherty. “Students can see first hand, how to conserve energy, reduce carbon footprint on a building, how to defer electric generation, how to lesson strain on the transmission grid, all of those benefits come from putting in a geothermal heat pump.”

GEO is also working with U.S. Department of Education and the EPA on a green ribbon school initiative that will recognize K-12 schools that do a retrofit or construct a new building, using energy efficient equipment, namely geothermal heat pumps, and then incorporate energy efficiency into the curriculum.

“We are working with the DOE on putting a webinar together for every school administration in the country that may be getting some capital money from their state or federal government to retrofit a building or build a new building. It will be about the benefit of installing geothermal heat pumps, and we get the double whammy of not only having the technology deployed, but also having the kids learn about and understand the benefits of this, and what better way to teach a new generation of kids about energy efficiency.”