Open Forum

So we cried for a year... the credits returned... now what

  • 1.  So we cried for a year... the credits returned... now what

    Posted 04-16-2018 09:20
    For a year we bemoaned the inequity of the tax credits and how we desperately needed them for more sales in the geo world. So now we have them back, great! So let's see how many on this list have seen any kind of positive response. Now, remember it is spring and there usually has been a flurry of action at this time of year so don't let it fog up your glasses. Who actually thinks that the return of the credits has started to return sales?

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    Pete Prydybasz

    PSP Consulting
    Mohnton PA
    610-775-3182
    ------------------------------


  • 2.  RE: So we cried for a year... the credits returned... now what

    Posted 04-17-2018 08:21
    Incentives are basically a way to continue doing poor system design and justifying the economics of the system with someone else's money...in this case the tax payer. I know many who say the geo industry should be on equal footing with solar and wind who have always relied heavily on incentives, but it doesn't help our industry learn how to design systems that are cost-effective and efficient. A properly designed system can very often justify itself with enough energy cost savings to pay for itself with a very good return on investment...often in the range of 15-30%...a simply payback of 4-8 years...regardless of location and energy rates.

    The problem is that it requires the designer to do proper design...detailed hourly energy modeling, working with the client and design team to modify the building energy loads to work well with a ground heat exchanger, and then executing properly. Very few designers take the time to build an energy model...rather, they rely on "rules of thumb" that very often show a system will be too expensive for a good economic case. I would estimate the industry loses 70-80% of all commercial geo projects at the feasibility stage when the designer says, "well, your building is about 24,000 square feet...divide by 400...you need about 60 tons of equipment...multiply by 200' per ton...you need 12,000' of borehole...that will cost about $240,000". When in reality, with an accurate energy model and doing some research to find out about the geology and the site, the GHX could be installed for less than half that.

    The incentives do not promote good design...in fact, they allow "designers" to continue doing the same thing they've always done and get away with it till the incentives disappear again.

    ------------------------------
    Ed Lohrenz
    [JobTitle]
    GEOptimize, Inc.
    Winnipeg MB
    204-318-2156
    ------------------------------



  • 3.  RE: So we cried for a year... the credits returned... now what

    Posted 04-17-2018 09:27

    Our phones have been ringing off the hook about geothermal.  This has been an incredibly welcoming return of federal funding.  We had about 50 or so proposals from last year that never went forward with the job do to the loss of the 30% tax credit.  Some of them got other types of heating systems installed, some decided to do nothing, and others just waited.  We have reached out to everyone we gave a proposal to and they are now looking to go forward with the installation.  In addition to that we had so many residential jobs committed to air source heat pump installations, but now they have decided to look at the geothermal options instead. 

     

    SO this has been fantastic news, we have a very small staff of 6 people and we are now looking to double that in the next few months to keep up with the jobs we had.  Our 2 major geothermal suppliers have also told us that there sales have increased significantly in the last few months, and they anticipate having great numbers this year....which leads to more jobs in that area too!!!  This is what we needed!

     

    Melissa Aho; Ultra Geothermal, Inc.

    Visit us at: www.ultrageothermal.com

    Phone: 603-868-7878    Fax: 603-868-6265 

    NEED Help Buying or Selling your home?  I specialize in energy efficient homes:

    MELISSA AHO RICE / Sales Agent REALTOR:   Cell**: (603) 380-6126  

     






  • 4.  RE: So we cried for a year... the credits returned... now what

    Posted 04-17-2018 10:38

    I would love to say that the geothermal systems sell on their virtues alone and that an experienced salesperson can get it done without the credits.

     

    That being said, here in Iowa, the 30% federal credit reinstatement has made a significant impact and we are seeing a tremendous increase in interest.  Our company is in the ground loop installation segment of the business and work with the HVAC partners to complete the inside portion. 

     

    The return of the tax credit of 30% leveled the playing field with solar, and we have seen and heard the customer explain that the up front credit helped make the decision to go geothermal.

     

    And to that, I can say from one small company perspective that we have written more proposals in the two months since the federal tax credit was reinstated than we did from Jan 1, 2017 to October 31, 2017.

     

    It made that big of a difference.

     

    Larry

     

    Larry Leliefeld
    President, G.E.O. Inc.
    larry@geo-inc.com                                      www.geo-inc.com

    Decorah information (use for mailing address):                   
    Geothermal Eco Options, Inc.                 Mobile: (563) 203-0184
    P.O. Box 401                                                   Phone:  (563) 382-0300
    Decorah, IA  52101                                       Fax:        (563) 382-0305

    Cresco information (use for shipping address):    
    Geothermal Eco Options, Inc.                 Mobile: (563) 203-0184
    407 2nd Avenue S.W.                                 Phone:  (563) 547-2871
    Cresco, IA  52136                                          Fax:        (563) 547-2874

     


    Virus-free. www.avast.com





  • 5.  RE: So we cried for a year... the credits returned... now what

    Posted 04-17-2018 15:07
    So we have 2 out of 3 supporters of Tax Credits. It would be good to see a few more responses. I am on the Marketing Committee for IGSHPA and these are the questions we need answers to. We need to be more effective in telegraphing our message, so we need to know what message is and to whom.
    If we just depend on the credits then we should all start looking for new jobs. When the Credits again disappear sales will again drop. After another "crash" how easy will it be to attract quality people to the industry, how much will it cost the producers, distributors and anyone else in the supply-chain? The credits are really just good for advertising, bringing the thought of Geo to the masses. I believe the first cost issue is an issue only because we allow it to be part of the equation. We need to develop methods of relieving the feeling of the cost, understanding what you are buying, ways of amortizing the cost with methods that do not put an undue burden on the initial install. I can prove with a few fuels that the initial install is just as costly. In my area, take propane. What does a 1000 gallon tank cost and then fill it and then bury the tank? Locally, it is about the same as a 4-ton loop. You now will pay for fuel at whatever cost the propane guy charges this week.
    A little story, I am getting ready to build another home, I visited with a builder yesterday and he was bragging about the system in his new home. It was a modest home and the guy knows I am a geo guy. His opening line to me was " I got over 40K in my heating system and I am so comfortable" So I asked what do you have? His reply was,,,, wait for this,,,,, "Coal, with an oil back up"!!!! I thought, why do you need an oil back up??? I almost fell over. His next statement was "I know you like that geothermal stuff but it is the up-front cost that kills that". Then he told me his "unit" for the coal alone was 10K, said he used about 1200 bucks worth of coal last year. So we walked through his home and I noticed he had central air, so I asked and he said sure I have central air, that is up in the attic where it belongs. Then I saw his fireplace, I said Gas? He said, "yes, when we shut the coal off for the season it keeps us warm." Absolutely incredible! The conversation went on and when you add up all his homes expenses it cost him about 3.5k/yr to operate his home. This guy does build a nice efficient home, but his message is unbelievable. He is selling to many families. In my existing residence of 3350 square foot. I spend less than 2k/year. We both have wells, septic and about the same square footage.
    If we do not believe the virtues of geo then how in the world are we going to get others to enjoy the benefits?
    AWARENESS and education both on the design and availability of these systems. That is the problem we need to master!!

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    Pete Prydybasz

    PSP Consulting
    Mohnton PA
    610-775-3182
    ------------------------------



  • 6.  RE: So we cried for a year... the credits returned... now what

    Posted 04-18-2018 08:18

    Pete, you're exactly right when you say that if just depend of tax credits we need to start looking for new jobs. The key is learning to design systems that are both cost-effective to install and operate efficiently throughout their life. I've been doing some work with an electric utility trying to promote the use of geo systems in their service area. The response their customers were getting when they went to their engineer to determine if it was feasible (in 4 out of 4 projects I've worked on) was "well, let's see...your building is 24,000 square feet...divide by 400 square feet per ton equals 60 tons...multiply by 200' of borehole per ton...you need about 12,000' of borehole!"

    No consideration of the type of building, how it would be used, what could be done on the site with the geology they had to deal with...only rules of thumb to determine the "feasibility" of the project. Three of the four projects would have gone with a conventional system. The utility asked us to work with their customer's engineer, work through a proper energy model, use the energy model to inform the design team about what changes could be made to reduce, and more importantly, balance the energy loads, look at the geology and all GHX options. In each project the size / cost of the GHX was reduced by 40-70% compared to the rules of thumb.

    With a detailed energy model used as a design tool to make changes to the building and system, all four projects installed a geothermal system. Based on this and other work we've been doing, probably 70-80% of projects, where the client wants a geothermal system, don't end up with a geothermal system because "designers" either don't know how to model the building or are too lazy / busy to do so. It's "easier" to do what they've always done.

    Of the engineers we've worked with on these projects, two of them have since started recommending geothermal systems to their clients...without incentives or prodding from the utilities. If the industry is serious about wanting to sell systems and grow the industry, designers need to learn how to design cost-effective and efficient systems. 



    ------------------------------
    Ed Lohrenz
    [JobTitle]
    GEOptimize, Inc.
    Winnipeg MB
    204-318-2156
    ------------------------------



  • 7.  RE: So we cried for a year... the credits returned... now what

    Posted 04-18-2018 09:30
    I agree with you, Ed. I often see "over-engineered" plans. I believe it is so because of a misunderstanding of what is really happening. Education is needed for an engineer to get it right. They have so many habits that do not apply. Certainty is key for them. They must feel confident what we tell them to do is correct. Predictability on the installation matters. Bonified case studies need to be brought to their attention. There are jobs that have been around for years and no one is aware of them. I know a few companies that do keep a really complete backlog of the jobs that are installed and running. That is where the awareness comes in for commercial. GEO called for us to have politicians visit jobs, do you realize how much an engineer wants to get out of the office?? I think that would really be a big help if they actually saw a properly installed and executed job.
    Terry Proffer of Major Geo in CO has a pile of case studies with pictures. He is also involved with "forensics" of existing systems. We need that kind of participation all over the hemisphere!
    The results must be documented and certified so they do not sound like a half-baked short story. An engineer won't pay attention if there aren't any credentials.

    Where are the rest of the Geo -ists there have to be more strategies and ideas out there??????????

    ------------------------------
    "GeoPete"
    Pete Prydybasz
    PSP Consulting
    Mohnton PA
    610-775-3182
    ------------------------------



  • 8.  RE: So we cried for a year... the credits returned... now what

    Posted 04-18-2018 20:59
    ​Everyone makes good points. But I have to agree with Ed Lohrenz that good design and installations, ie, solid case histories from residential to large commercial, are the best allies to grow our industry. Temporary incentives are not sustainable but good work history is. Some of the commenters really focus on how much more GSHP interest they are seeing since reinstatement of the tax credits. What's wrong with this picture? I am not saying turn away the business, but we should at least take the opportunity to really step up our game to maximize the tax incentive opportunity while it lasts.

    The majority of my work involves forensics and construction defect litigation of bad geo installs, ranging from small homes to 200,000+ sf commercial projects (geo-janitorial does provide a very good income!); as simple as our technology is, the fact of the matter is we have a substantial part of our industry that is incompetent - evaluation, design, execution, controls, maintenance and service. It is not intentional, but a lot of people in the mechanical profession/trades really do not even realize what they need to know.

    As I have said way too many times, bad news rides a faster horse then good news; Pete Prydybasz had an even better quote in his Orlando presentation pertaining to the same thing:

    "A lie gets halfway around the world before the truth has a chance to get its pants on" – Winston Churchill

    We should be self sustaining without the need for credits or incentives. However, once the Kool-Aid was mixed and guzzled, seems like we cannot go back – consumers are already poisoned. Let's be honest - will our industry really be sustainable when the current tax credits expire in 2022? Based on general comments from various contractors, engineers and clients, it does not seem like anyone has a plan to break the addiction of associating ourselves with incentives.

    I don't have all the answers but I do have some comments and suggestions:

    1.  For all of the designers, engineers and contractors doing a good job – keep it up! Do your best to keep a list of those jobs that are working great; good histories and customer referrals tend to bring in more business. Our industry needs to brag up our successes better then we have been doing.
    2.  On smaller jobs, ie, residential, try to get your systems sub-metered to trend actual operating costs where practical. This usually proves that while a tax credit is good, it is merely icing on the cake and should be emphasized as such, as the technology can stand on its own merits.
    3.  The veteran, successful geo-junkies in the industryshould make themselves available, even to their competitors, for peer review of small to large projects – and you should get paid for this as this is a value added service that can likely save a newbie engineer or contractor from creating a problem.  Or better yet, a veteran designer or contractor that continues to repeat the same mistakes….
    4.  Our industry needs to advocate for true functional performance testing of completed projects to prove performance of the system – raise the bar for design and installation requirements by confirming system integrity.  Too bad the federal tax credits do not have a requirement of this type to qualify for the incentives, I think this would take care of itself to achieve a better history we can all reference as an industry.
    5.  We need better training for all aspects of our industry – design, installation, controls, maintenance and service.
    6.  Try not to emphasize tax credits as the deciding factor for a client to go with a geo system.

     



    ------------------------------
    [Terry] [Proffer] [Geothermal Manager, CGD]
    [Major Geothermal]
    [Wheat Ridge] [CO]
    [80033]
    TerrilTerril
    ------------------------------



  • 9.  RE: So we cried for a year... the credits returned... now what

    Posted 04-19-2018 11:05
    I am in total agreement with both you guys. My only problem is who lets the world know about the good work. Just as the bad stuff travels like a bullet we need a means to deliver the good news too! That would be the awareness part. I mean Preachers Teachers and Newspapers.
    Without the good news traveling, you can design the most efficient most carbon friendly most economical system ever designed by man, and if no one knows you can take it to your grave. I would feel extremely confident working with competent designers such as yourselves but you wouldn't have anything to design if someone did not make the suggestion or communicate the features and benefits to the perspective building owner. A slide in my presentation says "If you build it "will" they come" ... the good news must be communicated. We know the problems and it is up to us to police it, so I absolutely agree with both of your competencies but am searching for a way to relieve the dependency on the handouts.
    I find it hard to believe we are the only 5 or 6 people who care enough to contribute to this thread... even edison had a lab with hundreds of workers trying to make a light bulb!


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    Pete Prydybasz

    PSP Consulting
    Mohnton PA
    610-775-3182
    ------------------------------



  • 10.  RE: So we cried for a year... the credits returned... now what

    Posted 04-20-2018 08:39
      |   view attached

    We just completed our 4th Annual NY-GEO Top Job Competition (see attached), the Winner was Larry Lassard.  We know that these stories are all over the place, they just need exposure, so I would suggest a very concerted effort, coordinated and co-funded by as many stakeholders as possible to flood all the various construction trade magazines, web sites with well written case studies.  I would suggest at the GEO level (Doug/Ryan/Ted) we rechannel funding away from the political endeavors and steer it into marketing/social media campaigns.

     

    Cheers,

     

    John

     

    John D. Manning, PE, President, Phoenix Energy Supply, (315) 253-3720

     

     




    Attachment(s)

    pdf
    Top Job Finalists.pdf   7.36MB 1 version


  • 11.  RE: So we cried for a year... the credits returned... now what

    Posted 04-20-2018 08:53
    The CGD course is built around the process needed to optimize a GSHP system design. By "optimize" I mean:
    • Understanding the building loads you are dealing with. This requires an initial accurate hourly energy model (no...there is no getting around that!) based on the building design your client brings you. The loads need to be the "building block loads" that take into consideration internal and solar gains in the heating loads (otherwise the heating loads will be exaggerated)
    • With the initial energy model you can see if the building loads are heating or cooling dominant or reasonably balanced. By "balanced" I mean the total amount of energy, including compressor and pump energy rejected to the ground annually is roughly the same as the amount of energy extracted from the ground, taking into consideration the compressor energy provided to the building.
    • If/when the loads are not balanced, working with the architect and mechanical system designer to change the building and/or building systems to work towards a more balanced load. Looking at lighting and glass specs, ventilation strategy, system design temperatures, etc. and potentially a hybrid option of one sort or another. 
    • Then reviewing the site area and geology to determine the most cost effective GHX configuration for that specific project. What opportunities are there on the site that you can take advantage of? What is the most cost effective depth to drill to? etc.
    • Then designing the GHX taking into consideration detailed borehole design, pumping energy, borehole spacing, etc. 
    Yet in the last 4 years barely over 25 people per year have taken the course. Engineers often rely on a drilling contractor to tell them what kind of GHX should be installed. many times I've seen tender documents stating that "the drilling contractor is responsible for designing a GHX that will provide ### tons of heating and cooling". Other times if you divide the building area by 400 square feet per ton and multiply that number by 200' of drilling per ton, the specified borehole field matches that exactly. Engineers are not doing their job. And incentives simply enable bad design by giving building owners tax payer's money to come up with an artificial payback.



    ------------------------------
    Ed Lohrenz
    [JobTitle]
    GEOptimize, Inc.
    Winnipeg MB
    204-318-2156
    ------------------------------



  • 12.  RE: So we cried for a year... the credits returned... now what

    Posted 04-20-2018 08:56
    I personally am in favor of the tax credits.  If solar and wind, why not us?  Now with that said, I'm not a designer.  I'm an HVAC/R service person.  I am an IGSHPA Accredited Installer.  I currently work (full time) as a community college instructor.  But I still work, part time, for a company in northwest Indiana.  We service and install GSHP''s.

    The tax credits allow a potential customer to consider GSHP, when perhaps they would not have done so in the past.  BUT that does not excuse bad design, bad installation, bad communication, etc.  When we talk to potential customers, we have always tried to impress upon them the need for proper design of "every part" of the HVAC system.  I certainly don't disagree with the design loop, etc.  But we also discuss the entire system whether that be the loop (vertical bore, horizontal, etc.), air flow needs, fluid to fluid, fluid to air, etc.

    Showing calculated costs, ROI, etc., is important to the customer.  But if that is all they hear from us, then we haven't done the proper job. I believe we need to impress upon them the importance of our design engineer and staff.  The professionalism and attention to the details of the both the design and installation.  Why it will make the "ROI" what it will likely be.

    I've been to some homes that must have had DIY'ers install the system.  Everything from poorly designed duct work to PVC pipe in the ground - at least exiting the basement.  In those homes GSHP's have a bad rep.  Not the systems fault.  We need to impress upon the customer the need for the entire staff being professional and having the skills to design, install, commission the entire system.  If tax credits get us in the door, great.  But we want to WOW the customer with every part of what we do.  We want to be the leader in our area in every phase of residential installations & service - regardless of the system.

    After all, if you're not the lead dog in the pack, the view is pretty much the same.



    ------------------------------
    Charles Cooke; AI-IGSHPA; CM-RSES

    Kankakee Community College
    Kankakee IL
    815-802-8872
    ------------------------------



  • 13.  RE: So we cried for a year... the credits returned... now what

    Posted 04-20-2018 12:40
    Thank you, Charles, I do not disagree with you, however, I believe many of the bad installs are caused by the credits. I know they do help open doors, no doubt, but they also bring installers in who have no training and they just low bid the job. When the building owner calls their favorite company and said the company does 1 geo every other year, what can you expect? I agree with selling your credentials, that matters plenty. Maybe a certification requirement that carries a little credibility and maybe a more responsible distribution chain may aid and abet better installs. Maybe there should be a requirement for the dealer to be certified or he cannot offer the credit might be a way to manage the problem. Maybe there should be a job certification or commissioning of the install if you will?
    Manufacturers and distributors should also be accredited somehow. Point is if we do not get this going on its own credits will go away and we will be out of the loop!
    I think the pressure to have a trained responsible crew of installers out there is upon the manufacturers and distributors, not to mention IGSHPA.

    Pete

    ------------------------------
    Pete Prydybasz

    PSP Consulting
    Mohnton PA
    610-775-3182
    ------------------------------



  • 14.  RE: So we cried for a year... the credits returned... now what

    Posted 05-03-2018 13:08
    Now that the tax credits have been reinstated, the first thing we need to do is begin lobbying to ensure that they are renewed again... Then, the industry needs to leverage those tax credits to the greatest degree possible while also working on addressing other inequities in law, regulation, etc. We should seek to ensure that actual costs are lower after the tax credits eventually expire than they were before the tax credits were reinstated.

    The tax credits have and will increase sales -- at least while they are in effect. That is always the case when effective prices drop. However, if the industry is smart, it won't simply enjoy easier sales over the next few years, but rather use the temporary reduction of effective cost to build up the economies of scale needed to ensure low-cost installations whether or not the tax credits are extended again. This is what is being done by "Ground Up" and Dandelion Energy in New York State. The two companies have both begun a program of offering fixed prices for a standardized installation in an effort to increase installation volume and thus lower costs. As installation volumes increase, it will become possible to fund workforce development, equipment acquisition, development of new sales and installation processes, etc. The result should be lower actual prices in the future. (i.e. lower gross prices without tax or other incentives.)

    As I've often said in the past, it is necessary for the industry, or at least some part of it, to go beyond the traditional "one-building-at-a-time" business of custom GHP installations. We now need to build a high-volume business based on quality installations of essentially standardized offerings. In New York, this means first targeting the hundreds of thousands of homes that use oil or propane for heat, have installed ducts, fit in the 3 to 5 ton capacity range, and are within a reasonable distance of existing installer's or drillers' facilities. While many others might like to have GHP installed, the wise installer will focus on building volume, one building-type at a time, and while leaving the non-standard jobs for those who prefer to remain in the low-volume, high-margin business. At a time like this, you may be best saying "No" to some jobs in order that you can build higher volumes in standard jobs.

    In addition to doing workforce and process development, the industry should also begin to identify and address the large number of laws, regulations and policies that either discourage GHP and Beneficial Electrification in general or give clear preference to competitive solutions that don't address societal needs.

    For instance, here in New York, during the Central Hudson Gas & Electric rate case, we were able to convince the utility, our State's Department of Public Service, and the other parties that the existing electric rate structure forces GHP users to pay more than their fair share of the fixed costs of the electricity system. The problem is that those fixed costs are recovered via volumetric charges ($/kWh). Thus, the amount you pay for "fixed charges" increases as your consumption increases. However, because GHP lowers summer peak and doubles annual electricity consumption mostly during off-peak periods, the installation of a GHP would actually be expected to *lower* utility costs -- not raise them! Given that GHP lowers grid costs, it doesn't make sense to have a rate structure that forces GHP users to pay more of the grid's fixed costs than are paid by rate payers who use oil, propane or gas heat.

    Using this argument, we were able to convince CHGE to propose paying an annual "Geothermal Rate Impact Credit" (initially set at $264/year) to those who install GHP prior to completion of the long process needed to create a new rate structure. This GRIC is not an "incentive," but rather is simply returning a portion of the over-payment to those who make those over-payments. (Because it is the return of an over-payment, it doesn't even need to be budgeted!) While many in the industry would have preferred an increase in up-front incentive rebates, I think what we've done here is made it easier to sell GHP since we'll be able to show a reduction in operating costs and thus an increase in savings.

    Virtually every utility in the country has a rate structure similar to New York's that forces GHP users to pay inequitably high delivery charges for electricity. The same arguments that have worked in New York should work everywhere. So, why don't we try to get other utilities in other states to create electric rate structures that are more fair, reasonable and non-discriminatory? (i.e. "FRAND") Yes, doing this sort of thing will require a great deal of work. But, then, we can use the boost from the tax credits to fund this sort of effort and thus help ensure that even if the tax credits expire again, we'll still be able to offer higher savings after the tax credits end than we did before they came into effect.

    I could list a number of other actions that we can take to leverage the tax credits, but the examples above should give you the general idea. The tax credits shouldn't be seen as an end in themselves. Rather, they will reduce effective costs in the short run and allow us to compete for capital and budget with the other measures that are incentivized or receive tax credits and preferences today. We should use this period to strengthen the industry, not just to enjoy a few years of easier sales.

    bob wyman









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    Bob Wyman
    ------------------------------