I work for an HVAC and Solar installation and service company in southeastern PA. We installed our first open loop geothermal in 1983. We continued installing a few more open loop systems through 1987. In 1988, we installed our first vertical closed loop system. I actually installed that system. I have been involved in geothermal installation and service as well as everything else in HVAC and Solar for nearly 30 years. In that time, we have installed a couple thousand geothermal systems along with many more conventional HVAC systems.
We are also experiencing very limited sales of geothermal systems this year. About an 85% decline from last year, yet our sales of conventional systems has been steady. This is primarily due to government interference in the free market. Last year our geothermal sales were "through the roof". This was due to the news that the tax credit was going to expire. Basically, we pre-sold the next 2 to 4 years' worth of geo sales in that one year. Many people prematurely replaced their old working geothermal system last year, just to get the tax credit. The tax credit also caused everyone in the geothermal chain to start charging more for their part in that chain. It wasn't long after the tax credit went into effect that equipment prices dramatically increased. Well drilling and excavation prices went up, our own installation prices went up. All well beyond the normal inflation rate. All parties were guilty. Everyone was capitalizing on how easy the tax credit made it to sell a geothermal. We lost the focus of what used to sell geothermal systems. Some lousy installers also got involved and hurt the reputation of geothermal. We are still fixing their mistakes since those installers are gone already.
Now the tax credit is gone. I am glad. Geothermal never needed "welfare" in the past and it doesn't now. We had sold well over 1000 geothermal systems before the credit. I know it will hurt for a while, but once our industry gets back to promoting the real benefits of geothermal instead of just focusing on financial return; we will once again have a steady business instead of a roller coaster.
So what benefits did we talk about in the past that caused people to install geothermal. Here are a few.
1. Longevity - Here on the east coast, the average geothermal lasts over 20 years while the average air source heat pump is currently 11-13 years.
2. Comfort - Discharge air temp and humidity control in summer is better when compared to a regular air source heat pump.
3. Everything inside - No noisy outdoor unit. No condenser coil to wash. No expensive defrost modes. No shoveling out the air heat pump or furnace vents in a snow storm. No way for anyone to "mess" with your outdoor unit.
4. Hot Water Generation - It can generate cheap or free hot water as a by-product of heating and cooling the home, thus saving energy and money.
5. 10 year parts and labor warranty program - Many air source and fossil fuel systems only have 5 year parts with no labor warranties.
6. Safety - Nothing flammable or explosive in the home with geothermal.
7. Carbon Footprint - Many people say to me, "what is the difference? Use a furnace and natural gas to heat my home or use a geothermal and electricity to heat my home. Either way, we are still using gas." Yes, natural gas is used to generate electricity. There are numerous other forms of electric generation as well. All forms are harmful to our environment in some way. So, the less we use of them the better it is for all of us. We need to show how much less overall energy is consumed to generate the electricity that runs a geothermal when compared to heating and cooling the home with other forms of HVAC.
8. USA Support - Most of the geothermal units are made in the states. Many other types of HVAC are out sourced to other countries.
We also need to learn to think "outside the box" when it comes to loops and water supply. For example: We have numerous old homesteads in our area that have substantial springs either in their basement or in spring houses next to the main house. This makes the perfect set up for an open loop job and we have done a lot of those. Not all loops have to be expensive vertical wells. There are many alternatives and the loop is usually the big price difference between conventional systems and geothermal systems.
To summarize: if we can educate people on the points above, lower the overall cost to the consumer a little, say 10% – 15% (This does not mean we have to make less profit, but we do need to work smarter and leaner), then geothermal system sales will once again be a steady part of our business.
Brian Shimp. Technical & Training Director for JK Mechanical Inc.
I agree with Doug on the inequity. Most customers are going to make one and only one large investment in renewables. Very few are going to do Geo and Solar. As Geo contractors, our biggest competition in the residential market is Solar. When you run the numbers for the customer, even without any incentives, Geo can win out over Solar. However, because the government is "sponsoring" solar, and not Geo, this adds credibility for Solar as a technology. Solar vendors are seen as more mainstream, while Geo contractors are crazy scientists. With government incentives, no one ever questions that the Solar technology will work. During sales calls/installation, Geo technology is constantly questioned by the customers, other jobsite contractors, and even engineers. It is about the degree of trust the customer has. I believe Government incentives add to that trust.
I also agree with Ed that any government involvement creates disruption in the market. Perhaps the approach should be to file a lawsuit against the government for promoting Solar. The argument would be unfair trade practices since the government is picking one technology to promote over an other, equally good or better technology. If we could stop the Solar incentives, Geo sales would increase dramatically.
Snyder Manufacturing, Inc.
dba Endeavor Tool Company
255 Rochester Street
Salamanca, NY 14779
(p) 716 945 0354 x3
(f) 716 945 0114
(c) 716 378 0316
It is not the tax credit per say. It is the fact that everyone depended on it instead of extolling the virtues of the heat pump. The Bribe, Welfare or tax credit, whatever you want to call it became the motivating force for purchase. The idea of taking the burden away from the prospective building owner by subsidizing the loop install is fine. The petroleum industry has subsidies, ethanol has subsidies almost every energy source has some type of subsidy. So what's missing is a complete understanding of why geothermal is what we as a society needs to be implemented.
The Loop or energy source is an Energy Annuity, it never stops giving. Financing and leasing are both good ways to alleviate the hardship of coming up with a large sum up front. I have not seen a product become successful without a solid path of distribution. Training to homeowners and contractors run by the distributors are the keys.
Geothermal & Applied Products
B.J. Terroni Company, Inc. 3190 Tucker Road | Bensalem, PA 19020 Tel: 215-639-3600
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I favor Doug's policy incentive argument because market signals by government and regulators provide guidance for capital spending by industry, business, and consumer. That makes markets more efficient. What kind of signal is sent when lopsided or historical subsidies continue for billion dollar businesses already established? Fossil and nuclear industries have already flourished but are now able to "buy" their subsidy maintenance in Congress, while dirty air and terrorist radiation leak risks remain at 100 nuclear sites. Georgia Power will now resume their nuclear construction thanks to rate hikes to customers and the contributions from us all via the U.S. Treasury.
"…In closing remarks, [Georgia] PSC Chairman Stan Wise made a "personal appeal" to Congress to pass the nuclear PTC [production tax credit] and expressed optimism that the Senate Finance Committee has included an $800 million nuclear PTC in a tax credit extender bill…" (Posted in Utility Dive 12-21-17)
I, too, am comfortable with the elimination of ALL energy subsidies via the tax system so that the market will beat a path to the door of the cleanest and most cost effective technology available. Training, certification, and installation quality of heat pump systems are separate issues that will remain, tax credits or not.