the geothermal heat pump loop tariff october 1-2, 2008 paul bony director of residential market...
TRANSCRIPT
The Geothermal Heat PumpLoop Tariff
October 1-2, 2008
Paul Bony
Director of Residential Market Development
IGSHPA Technical Conference
The Ground Loop “Utility”
The new energy “crisis”: – Fossil fuel price shocks– Climate change– Energy independence – Consumer and government focus on renewable energy,
energy efficiency and CO2 reduction– Fuel switching from propane/fuel oil/natural gas to
electric resistance heating (plug-in and installed) • Placing pressure on electric utilities & rates by increasing
demand for new generation and distribution
– Consumer & government resistance to new generation (especially coal)
The Ground Loop “Utility”
Fertile ground for new efficiency products and services
Utilities can be key players and leaders!Or not?If not traditional utilities, then who?
The GSHP “Market”
The national residential market for HVAC is 6.4 million “units” per year– Geo sales are a small component of this market
New home starts are down (a lot)Retrofits are the market drivers
– $3,000 annual propane bills hurt, a lot. Fuel oil hurts more.
– Natural gas prices are increasing
Retrofit customers are cash limited
The Ground Loop “Utility”
Mass market approach for geothermal heat pumps
The Ground Loop “Utility”
The Utility Loop Concept
Utility owns and recovers the cost of the loop, interest expense, program costs, and profit or operating margin. – Utility installs or contracts out loop construction.
• Controls system design and installation quality– Electric utilities get improved load factor & incremental kWh
revenue.• System load factor is even better with load control.
– Future carbon credits may stay with the utility
Consumers Get: – Lower total energy bills.– Utility grade service and reliability
The Ground Loop “Utility”
The Ground Loop “Utility”
The Ground Loop “Utility”
DMEA / Customer interface
The Ground Loop “Utility”
DMEA Objectives– Reduce first cost barrier for GHPs– Provide members with a net positive cash flow
from their GHP investment– Encourage builders & developers to use
GeoExchange in new homes.– Build load factor
The Ground Loop “Utility”
Average margin from GeoExchange members = $91.05/month (from AMR analysis)
Average margin for all members = $56.83/month
Incremental margin ($91.05- $56.83) = $34.22/mo
The Ground Loop “Utility”
Sample of Electric Utility Value
Installed loop cost $6,000 (retail).= Premium over high end gas equipment with AC.
Generates $410.64 in annual net margins.– $12,319 total revenue over 30 years.– An IRR of 5.45%.
Co-Op return on poles & wires.– ROI 3.8%.
Investor owned utility return on equity– 10-11%
The Ground Loop “Utility”
Value to Utilities They can recover the cost of the loop, interest expense,
program costs and earn more than their cost of funds through a loop fee.
And gain earnings from incremental electric sales.
And improve load factor w/o load control (even more with it!)
And help customers lower their total energy bill.
And reducing carbon emissions.
The Ground Loop “Utility”
Value to Utility CustomersPiece of mind
– Less volatile heating & cooling costs – Utility grade customer service
Annual energy savings of $250 to $2,000 +– Reduced or no up-front investment (using
supplemental financing)– Immediate positive cash flow
They are doing their part for the environment
70 degree heating and cooling
Electric Resistance $2640(100% radiant/convector zoned system with 13 SEER A/C)
Propane $2474(91% condensing system with 13 SEER A/C)
Natural Gas $1021(91% ignitor condensing system with 13 SEER A/C)
GeoExchange $724(350% efficient system with horizontal ground loop)Assumes:• Typical 2,000 sq foot home (48,000 Btu/hr heating load & 20,000 Btu/hr cooling load)• Average temperature design data for Montrose, CO• Energy costs: Electricity@ $.093/kWh; Propane @ $1.96/gallon; Natural Gas @ $.76/therm
The Ground Loop “Utility”
DMEA member value
The Ground Loop “Utility”
Lease (lawyer said it looked like a loan)Loan (banks are better at it than utilities are)Tariff
Investment will be recovered through the loop tariff and the incremental electric revenue generated
The Ground Loop “Utility”
H.R. 2419Food and Energy Security Act of 2007
(Engrossed Amendment as Agreed to by Senate)– SEC. 6108. ELECTRIC LOANS TO RURAL
ELECTRIC COOPERATIVES.– “The committee notes that assistance is
authorized for renewable energy including geothermal ground loops”
The Ground Loop “Utility”
The USDA/RUS can now provide 35 year loan funds for GHP loops (new in the Farm Bill)– The GHP loops become utility plant
– Instant first cost savings for co-op members• Drives positive cash flow cash flow
• New margin opportunity
• Long term utility relationship and member satisfaction
– Levels the electric utility playing field with natural gas
Establishes a model for Investor Owned, Municipal, and other utilities
The Ground Loop “Utility”
Requirements– Loop Tariff
• Rate hearing for start-up and subsequent changes
– Loop Policy– Member contract– Member easement– Third party GHP equipment installer contract
(FUTURE)
The Ground Loop “Utility”
Applicable to residential and small commercial consumers currently receiving service from DMEA, for 2 to 6 ton systems.
DMEA must approve site, structures, & system design and installation specifications.
The Ground Loop “Utility”
Customer owns GeoExchange equipment, furnace & ductwork
DMEA owns the ground loopCustomer pays a monthly tariff to use the ground
loopCustomer can cancel loop service or purchase the
loop from DMEA at any timeDMEA can disconnect loop for non-payment
The Ground Loop “Utility”
The property owner(s) grant the utility an easement for the installation, removal, maintenance, repair and/or replacement of the ground loop.
The easement is recorded with the Clerk and Recorder in the county where the property is located. – The property owner(s) must sign the easement
prior to the loop installation.
The Ground Loop “Utility”
Customer agrees that no structures shall be placed or built over the loop field without expressed written permission from the utility.
Customer must call for loop locates for all construction/landscaping. If they do not call, and the loop is damaged, they are liable for all loop repair costs.
If a customer calls the utility reporting that their loop is not working and the problem is not the ground loop, they are billed for a service call.
The Ground Loop “Utility”
If an account is transferred to a new customer, the are offered the Loop Tariff at sign-up. – The new customer is given the option to sign a service
agreement confirming their acceptance of the terms of the Geo Loop Tariff.
– They also have the option to purchase the loop. They can also terminate the loop service.
– DMEA will disconnect the loop and leave the service idle until the member, or a future member, elects to reconnect the loop.
The Ground Loop “Utility”
The member may purchase the loop at a future date for the originally installed allowance, plus a $400 processing fee.
Events which may require disconnection of the loop:– Failure by the member to stay current on their
loop tariff payment.– Request by the consumer, with 30 days written
notice (one year rule applies).
The Ground Loop “Utility”
The loop investments are recorded as utility plant and the associated income from the tariff and the electric revenue generated by the loop are recorded as utility income.
The O&M and A&G costs associated with providing the loop service are expensed as utility operating expenses.
The Ground Loop “Utility”
The rate is subject to change at the discretion of the DMEA Board of Directors subject to DMEA’s rate change process, procedures and bylaws.
Any Green Tags, Renewable Energy Credits, Carbon Credits, or similar incentives, if applicable now or in the future, shall be retained by DMEA.
The Ground Loop “Utility”
Loop fees– 2 ton to 6 ton loops only
– Horizontal loops • $14.26 to $42.78 per month
– Drilled loops• $29.56 to $88.68 per month
• DMEA will pay the entire cost (up to a loop “allowance”)
• If necessary, DMEA will require a one-time payment, totaling any amount over the “allowance” for the loop.
The Ground Loop “Utility”
Horizontal Per Month Allowance2 Ton Loop 14.26$ 3,754.00$ 3 Ton Loop 21.39$ 5,247.00$ 4 Ton Loop 28.52$ 6,819.00$ 5 Ton Loop 35.65$ 8,315.00$ 6 Ton Loop 42.78$ 9,795.00$
Vertical Per Month Allowance2 Ton Loop 29.56$ 7,300.00$ 3 Ton Loop 44.34$ 10,420.00$ 4 Ton Loop 59.12$ 13,665.00$ 5 Ton Loop 73.90$ 16,835.00$ 6 Ton Loop 88.68$ 19,995.00$
The Ground Loop “Utility”
Annual kWh through loop 9,780Total revenue $948.95Average cost of power 67.38%
kWh sales Margin (annual) $309.55kWh sales Margin (monthly) $ 25.79
The Ground Loop “Utility”
Average loop is a 4 ton horizontal– Loop value (retail) $6,800.00– Cost of funds 5.00%
• (100% debt)
The Ground Loop “Utility”
kWh sales margin (monthly) $25.79Member tariff payment $28.52
– Total monthly income $54.31
Simple payback 10 yearsMonthly debt service $16.33
– (35 years at 5%)
The Ground Loop “Utility”
A loop Tariff eliminates the “higher sales price” barrier for home builders, as they can build “GeoExchange” homes, for little or no premium versus a quality gas furnace and air conditioner.
Eliminates “what if I sell in a few years” first cost barrier for home buyers.
The Ground Loop “Utility”
New Construction - Natural GasAverage Installed Cost, including ductwork $22,000 (4-ton Horizontal)
Example: 2,000 sq ft home, forced air, $0.81/ccf natural gas
Equipment/Installation Premium $00.00/month4 Ton Horizontal Loop Tariff $28.52/month
Total equipment costs $28.52/month Monthly savings over natural gas $32.00/month
Total savings over natural gas $3.48/month
The Ground Loop “Utility”
Average Installed Cost, including ductwork $22,000 (4-ton Horizontal)
(Example: 2,000 sq ft home, forced air, $2.30/gallon propane)
Equipment/Installation Premium $00.00/month4 Ton Horizontal Loop Tariff $28.52/month
Total equipment costs $28.52/month Monthly savings over propane $177.00/month
Total savings over propane $148.48/month
New Construction - Propane
Outdoor Split
The Ground Loop “Utility”
Retrofit Homes
The Ground Loop “Utility”
(Example: 2,000 sq ft home, forced air, $2.30/gallon propane)
Equip./installation $7,181.00 for 30 years @ 7.5% $50.21/month4 Ton Loop Tariff (Allowance $6,819.00) $28.52/monthTotal monthly cost $78.73/month Monthly savings vs. propane $177.00/monthTotal savings over propane $ 98.27/month
Propane @ $1.21/gallon would result in a “break-even” scenario
Propane Retrofit Price $14,000 (4-ton Horizontal) on an existing forced-air furnace
The Ground Loop “Utility”
(Example: 2000 sq ft home, forced air, $0.81/ccf natural gas) Equip./installation $7,181.00 for 30 years @ 7.5% $50.21/month4 Ton Horizontal Loop Tariff $28.52/month
Total equipment costs $78.73/month Monthly natural gas savings $32.00/month
Total savings over natural gas -$46.73/month * Natural Gas @ $1.35/ccf would result in a “break-even” scenario
Natural Gas Retrofit Price $14,000 (4-ton Horizontal) on an existing forced-air furnace
The Ground Loop “Utility”
DOE is working to officially designate GSHPs as a renewable energy resource.
Utilities will be able to obtain credit for CO2 savings from GSHP programs.
The Ground Loop “Utility”
Geothermal heat pumps produce the lowest carbon dioxide emissions, including all source effects, of all available space-conditioning technologies(EPA, 1993).
A GeoExchange systems saves CO2 on par with an equivalent investment in solar PV.– Based on DMEA’s electric energy carbon load and
weather data.– Your results will vary (and will probably be better).
The Ground Loop “Utility”
Geothermal Heat Pumps are the Most Efficient way to use Green Electricity for Heating, Cooling & Water Heating
The Ground Loop “Utility”
In Montrose, Colorado, an average residential ground source heat pump will save 10 Tonnes of CO2 per year using all green power when replacing conventional gas/propane heating & cooling.
How much is an annual ton of CO2 worth?– $35/ton would cover the loop cost
The Ground Loop “Utility”
Annual Tonnes of CO2 (equivalent) savings
A Geothermal heat pump saves 43% more CO2 than an equivalent investment in solar PV (OPT Colorado kWh carbon load and Montrose weather data.)
The Ground Loop “Utility”
What if electric utilities are not interested?
Natural gas utilities? – Joint Statement of the American Gas
Association and the Natural Resources Defense Council Submitted to the National Association of Regulatory Utility Commissioners July 2004
The Ground Loop “Utility”
“traditional utility rate practices fail to align the interests of utility shareholders with those of utility customers and society as a whole. This need not be the case. Public utility commissions should consider utility rate proposals and other innovative programs that reward utilities for encouraging conservation and managing customer bills ….”
“We also support performance-based incentives designed to allow utilities to share in independently verified savings associated with cost-effective energy efficiency programs”
The Ground Loop “Utility”
Business Offering:REnU Bringing Solar to Your Home. Citizenrē launches the pilot phase of its REnU Offering for the residential sector.
Packaged Approach Utility Price Parity Fixed-Rate Performance Guarantee No Investment Risk
The Ground Loop “Utility”
The renewable energy utility– Builders– Loop installers– New opportunity companies– Anyone in this room?
The Ground Loop “Utility”
http://www.usda.gov/rus/electric/engineering/2006/en-in-06.pdf
Thank You For Your Attention!Questions?
Paul Bony
970-
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