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Geothermal Heat Pumps: The Forgotten One

by Richard T. Stuebi

Before I was introduced to EnLink Geoenergy Services in 2000, I had never heard of geothermal heat pumps (GHPs), even though I had been in the energy industry for almost 15 years then, and even though GHP systems had been in successful operational service for over 50 years by that time.

The GHP concept is pretty straightforward: use conventional heat exchanger technologies to utilize the soil underneath the surface as a heat sink in summer and to exploit the soil’s absorbed warmth in the winter. Thermodynamically, this is much more efficient than using the hot summer air as a heat sink when in air conditioning mode. As a result, the use of GHP systems can reduce a building’s energy consumption associated with space heating and cooling by up to 70% relative to traditional HVAC systems.

Given that buildings are responsible for a large portion of the economy’s overall energy requirements, and that heating/cooling requirements represent one of the largest energy loads for a building, GHP systems thus represent a technology that could potentially take an enormous bite out of current energy demands.

GHP systems are not new and unproven: hundreds of thousands of systems are installed across the U.S., some dating back to the late 1940’s. Way back in 1993, the U.S. Environmental Protection Agency released a report called Space Conditioning: The Next Frontier, which declared that GHP systems “are the most energy-efficient, environmentally clean, and cost-effective space conditioning systems available” — a statement that’s probably still accurate in most cases.

Even with all of this substantiation, GHP still represents only a very tiny segment (no more than 1%) of the U.S. HVAC industry.

Why should such a promising technology area be so overlooked?

There are several reasons why GHP systems are not widely adopted yet. Certainly, there are economic factors at play. Simple GHP systems have historically had higher up-front costs than conventional HVAC systems (particularly cheap, inefficient ones), and this up-front cost premium is no doubt an important decision factor in many instances.

We all know that many customers often make irrational economic decisions, selecting the lowest first-cost option for capital purchases, even when other options offers superior life-cycle economics.

In the context of heating and cooling options, such short-term thinking is likely to come back to haunt customers. Rising energy prices and climate change concerns should increasingly drive more customers to undertake more thoughtful analysis when making HVAC decisions.

Most simply considered, the “payback” from the energy savings relative to the incremental additional outlay for a GHP system is often reasonable — less than five years for many buildings in many locations. If more sophisticated financial approaches (such as a discounted cash flow analysis over the life of the system) are conducted and all future costs the customer is likely to face — including maintenance and replacement costs, likely price increases for electricity and heating fuels, and the economic impact of probable greenhouse gas policies — are considered, the financial case for GHP over conventional HVAC becomes even more compelling.

A more fundamental challenge than economics for the GHP sector is that very few decision-makers have ever heard of GHP systems, and therefore don’t even know to consider them when evaluating HVAC alternatives.

This is the case even in California, which prides itself on energy efficiency innovation and progressivism. Look in all of the issuances from the California Energy Commission, the California Air Resources Board and the California Public Utilities Commission — all of whom are desperately looking for good energy efficiency approaches as critical answers for meeting the ambitious carbon emission reduction requirements of AB 32 — and you’ll find hardly a mention of GHP systems as an attractive approach for building HVAC.

Although there are not just one but rather two relevant trade associations — the Geothermal Heat Pump Consortium (GHPC) and the International Ground Source Heat Pump Association (IGSHPA) — the GHP industry has clearly been ineffective in promoting the compelling benefits of GHP systems to the masses of building owners and professionals. In general, the architect and engineering community has been especially remiss in failing to learn more about an attractive heating/cooling alternative for their clients — and one would think that continuing this neglect would not serve their profession’s long-term interests well.

The unfortunate result from all of these forces at work is that GHP systems are rarely even considered (much less selected) when an HVAC decision must be made for a new building being constructed or an old building being renovated.

At long last, the rise of GHP systems may finally be beginning in earnest. Last month, the New York Times published a prominent article on the GHP sector, in which a number of sources in the U.S. GHP marketplace are cited to highlight the industry’s rapid growth. For instance, Climate Master — the largest U.S. manufacturer of in-building heat pumps for GHP systems — reported that revenues increased by 200% between 2005 and 2007.

As the article reports, the bottlenecks to continued increases in GHP adoption include equipment and component supply, and probably more importantly, a lack of adequate capability around the country to install GHP systems — particularly the underground component of the system entailing a series of plastic pipes buried underground.

Leveraging drilling techniques and other mechanical equipment long used in the oil/gas sector, my long-time client EnLink has consistently focused solely on developing new technologies and approaches to improve the economics and speed of installing the underground “loop field” for GHP systems.

With such innovation, it will become more feasible to expand a base of experienced GHP installation capabilities to scale across the U.S. As this occurs, the costs and time required for GHP installation will become lower (and less variable) for building owners and professionals in more regions of the country — at which point, GHP systems will become increasingly compelling as the preferred HVAC approach.

Although they have long provided subsidies and incentives for other renewable and efficiency technologies to accelerate their adoption, the Feds have consistently ignored GHP for similar treatment — at least so far, though this too may be changing. Three bills are currently under consideration in Washington, most notably the Geothermal Heat Pump Development Act (S. 2314) sponsored by Senator Ken Salazar (D-CO), which would make GHP systems eligible for tax credits already afforded to other clean energy technologies.

The GHP market is a sector rapidly in the making. Perhaps GHP systems won’t long remain the forgotten one in the cleantech universe.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

Aloha

by Richard T. Stuebi

I have the pleasure of writing this posting from one of the most beautiful places on the planet, Hawaii, where I am lucky enough to travel regularly to visit family.

In 1995, while lounging on the Big Island, I decided to shift my career away from conventional energy towards alternative energy. I saw what was then considered a big windfarm at South Point — 37 Mitsubishi 250 kw turbines. Many of the hulking machines were not turning, even though the wind was consistently strong, no doubt because of mechanical difficulties. Still, I was intrigued, and foresaw the need and possibilities for renewable energy — especially in places like Hawaii that rely upon imported oil for virtually all of its energy needs. I had just been reading The Prize, Daniel Yergin’s awesome history of the oil industry, and it wasn’t hard to conclude that we as a society needed to move off of oil for a variety of environmental, economic, and geopolitical reasons.

Every time I return to Hawaii, I take measure of how much renewable energy has been installed. Solar, wind and bioenergy technology and economics have improved considerably, and of course oil prices have skyrocketed. The local utility companies, owned by Hawaiian Electric Industries (NYSE: HE), have actively pursued collaborative integrated resource planning efforts to engage the public in shifting to a more diversified and cleaner energy supply.

And yet, 13 years after I first took note of the situation and opportunity, oil still dominates Hawaii energy supply, even though there’s been significant additions of renewable energy. Solar panels are nowhere near ubiquitous. A few new windfarms have been installed, but considerable potential remains untapped, stymied presumably by aesthetic issues. With its history of sugar production, biofuels should do well here — but they aren’t much of a factor so far. Even the geothermal resources associated with the volcanic activity is not fully exploited.

If renewable energy can’t make massive/rapid inroads in Hawaii, where can it do so? It seems to me that the Aloha State represents an excellent laboratory for CleanTech Revolutionaries to study the barriers to widescale advanced energy technology/infrastructure adoption — and more importantly, how to overcome them. At minimum, Hawaii represents a cautionary tale of how hard and slow it will be for CleanTech to change our world.

Richard T. Stuebi the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

Blogroll Review: Biocrude, Alaska, & Policy

by Frank Ling

Waste to Oil

Think you need special enzymes to convert plant materials into fuel? It looks like science is getting closer to eliminating that step. Pretty soon we might be able to directly convert crop residues, waste paper, and pretty much anything organic into bio-crude, which is essentially oil.

The secret ingredient? Heat. It turns out that raising the temperature breaks the bonds of organic materials (in fact heat pretty much breaks any bond at a high enough temperature) through a process known as pyrolysis.

Jim Fraser, in a recent article at the Energy Blog, explains how this works:

Fast pyrolysis is a process in which the organic materials are rapidly heated to 450 – 600 °C at atmospheric pressure in the absence of air. Under these conditions, organic vapours, pyrolysis gases and charcoal are produced. The vapours are condensed to bio-oil. Typically, 70-75 wt.% of the feedstock is converted into oil.

The product can be used not only to replace gasoline and diesel, it can be used as feedstock for the chemical industry.

Steamed Alaska

Geothermal power is coming to a resort near you. At least the ones in Alaska.

At the Chena Hot Springs Resort in Fairbanks, Alaska engineers have created a breakthrough hydrothermal system that generates power using “low-temperature” reservoir water at 165 F, in contrast to conventional systems that required at least 300 F.

Jack Moins writes in EcoGeek:

The plant cost a mere $2.2 million to build as it uses all off the shelf parts. It produces 200 kw at a cost of 5 cents per kwh, compared to the former costs of 30 cents per kwh when using diesel. The design is projected to pay for itself within four to five years. Hydrothermal power is very promising, as it is estimated that the water beneath the Earth’s surface holds 50,000 times the amount of energy in the remaining gas and coal resources

Among its innovations, the system uses a three-pressure system and ammonia-water cycles, which limits the use of toxic coolants. With this early success, the entire town of Chena is adopting hydrothermal for its buildings and a greenhouse for food production

U.S. Climate Legislation

All the major US presidential candidates are making global warming a part of the their platform. Whoever wins, policy for energy, environment, and even agriculture are bound to change significantly.

But democracy is not always a fast process. Dan Reicher, director of climate and energy initiatives for Google.org and former U.S. assistant energy secretary, says that the next president will indeed push for change but any regulations will take time to phase in.

Rachel Barron, in Green Tech Media, writes:

2009 could bring a dramatic increase in support from Congress for R&D and more favorable approaches to clean-energy incentives.

Frank Ling is a postdoctoral fellow at the Renewable and Appropriate Energy Laboratory (RAEL) at UC Berkeley. He is also a producer of the Berkeley Groks Science Show.

Big, Green Power is Flowing – But Where Are the Power Lines?

I had the opportunity recently to speak with Stuart Hemphill, the Director of Renewable and Alternative Power for Southern California Edison (SCE), the power company for Los Angeles and Southern California, on SCE’s activities and views of renewable and green power. SoCal Edison is a subsidiary of Edison International (NYSE:EIX). Stuart has a direct team of 40 staff working entirely on developing and managing new renewable generation, not including the teams across the company that support from legal, operations, transmission, and marketing.

One of big challenges for SCE in building its renewables portfolio is that even though they already stand at 17% of total generation from renewables (which Stuart touted as placing SCE the farthest ahead of any US utility), customer demand in SoCal is growing rapidly – 4 of the top 10 fastest growing counties in the country are in SCE service territory.

But SCE is working to do its part. They have been the leading purchaser of renewable power for the last 20 years and don’t intend to relinquish the crown any time soon. In 2006 they purchased 13 Billion kwh of electricity, about 17% of their needs. More than half of this green power is geothermal, with solar and wind making up the rest. 50% of the power was produced locally in Southern California itself, with most of the rest from Northern California, and the remainder from surrounding states.

The geothermal resources that make up the bulk of their green power come from three regions: The Geysers in Northern California – primarily developed by Calpine; The Salton Sea (better known for its status as a massive migratory bird stopping place and an environmental headache) – primarily developed by Ormat (NYSE:ORA) and CalEnergy; and Eastern California/Western Nevada in the Mammoth Lakes region – primarily developed by Caithness Energy. The wind power comes from all over the state.

In Stuart’s mind, the biggest issue is not supply of green power but transmission. He says they have plenty of contracts in the pipeline. But it takes roughly 7 years to permit and build major transmission lines, and the California RPS itself is less than 7 years old.

So even though SCE has several big lines proposed and under review, he considers it a major limitation to rolling out green power plants. This makes sense, as by their nature renewable power plants have to be built where the ground is hot, the wind blows, or the sun shines, not where the people and the transmission lines are. He reiterated, permitting is a real challenge.

As an example, SCE has a $1.8 billion transmission project to Tehachapi just north of L.A. which has finally received initial approval. They have a 1,500 MW wind contract in place in the region with Alta Wind Power, waiting on getting the transmission built. This is the single largest wind power contract ever developed (it was signed in December of 2006). The Tehachapi region already has 800 MW of wind generation (I drove through the pass just a few months ago – and am always awed by the site of spinning wind turbines), but Stuart says SCE believes there is the potential to get 4,500 MW more, if the transmission is built to bring it down to L.A.

He also took pains to mention a recently signed contract with Sempra Energy (NYSE:SRE) for a wind project which Sempra is developing in Baja, Mexico – I believe one of the only, if not the first cross-border Mexico – US wind farm projects.

They are also active in large scale solar – SCE buys 90% of the country’s solar energy now, according to Stuart, and has signed two recent agreements (2005) with Stirling Energy Systems and (2007) with California Sunrise to buy more solar power – both also waiting on transmission according to Stuart.

Stuart told me that SCE has $17 Billion in capital to be spent over the next 5 years in transmission and distribution to address these issues, but much of the solution lies in the hands of more aggressive stances by regulators and environmental groups, not just SCE. This isn’t just an SCE problem. The US has invested heavily in generation capacity in recent years, but our T&D investment has lagged – and the regulatory, environmental and political hurdles to get new power lines built may be even steeper than those for new power plants.

I asked why they weren’t building the new renewable power plants themselves. He indicated that they were prepared to, but currently saw no need because developers are really active these days – in the last 5 competitive solicitations they have received excellent response (including the 2007 solicitation). In short, there is plenty of interest and capital to build green power plants for SCE, and they have their hands full getting it to market.

When we got to talking about the future of energy in California, Renewable Portfolio Standards, greenhouse gas emissions and upcoming issues that concerned them, Stuart highlighted a few. SCE feels that while it is working hard to do its part, Energy Service Companies (ESCOs) as a group currently produce virtually zero percent of their eligible power from green sources as defined in the California RPS – but like the major investor owned utilities (SCE, PG&E (NYSE:PCG), and Sempra) ESCOs are also supposed to be generating 20% of their power of renewable sources by 2010. Stuart wasn’t sure where that supply was going to come from given long lead times to develop projects. We did discuss whether Renewable Energy Credits (RECs), which don’t currently qualify under California RPS standards, could play a role. Both he and I are personally fans of RECs and view this as an emerging area for opportunity and debate. If the free market is going to help meet our green power objectives, it needs more regulatory permitted tools to do so (the paradox of that statement notwithstanding).

We both also clearly see renewables as part of the overall solution for reducing greenhouse gases. Stuart quickly highlighted carbon credits, energy efficiency and reforestation as the other legs of that broader solution from a utilities’ perspective. But when I put to him the question of what should we be doing first on greenhouse gas emissions, he stated flat out that energy efficiency is the first area in his mind. “Energy not consumed is the best way of reducing any source of emissions.” Of course, SCE is a leader in energy efficiency, too. They don’t intend to be left behind there either.

I must admit, throughout the conversation I was struck by their insistence on maintaining a leadership position in clean energy for SCE. I guess this is just part of the California ethos about leading the nation in environmental issues.

And before I let him go, Stuart asked me to make sure to mention that they are always looking for new renewable power suppliers, and always looking to hire in renewables, so come find him. Their information is located at www.sce.com/renewables, and he can be reached at stuart.hemphill@sce.com.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Author for Inside Greentech, and a Contributing Editor to Alt Energy Stocks.