Keeping Cool

Richard T. Stuebi

As pretty much everyone knows, it’s been a hot summer — here in the Northeastern U.S. and across the globe — as 2010 is shaping up to be the hottest year on record. This weekend was brutally so, and to capitalize on it, the Plain-Dealer here in Cleveland ran a couple of articles on air conditioning in yesterday’s paper.

The more interesting article (which obviously was syndicated nationally, as here is the version from the Los Angeles Times) was a piece by Stan Cox entitled “AC: It’s Not as Cool as You Think”. Cox is promoting his new book Losing Our Cool, which profiles the utterly pivotal role of air conditioning in shaping today’s world.

Cox points out some staggering numbers. Only 50 years ago, just 12% of U.S. homes were air conditioned; today, that’s up to 85%. Of course, AC enabled the massive migration from the U.S. Northeast to the South and the Southwest — which would be pretty uninhabitable without air conditioning — and the development of suburbs and commuting patterns that will prevail for a long time to come. According to statistics cited by Cox, air conditioning in the U.S. is responsible for half a billion metric tons of carbon emissions annually — more than the total emissions of Australia, France, Brazil or Indonesia.

To the extent there’s good news here, it’s that substantial opportunities exist for improving air conditioning technologies. For instance, geothermal heat pump systems have long been proven to be a far more efficient method of cooling buildings than conventional AC — if only more architects, engineers and building owners would become aware of this option and consider making a modest additional investment to reduce their future energy bills. And, as noted in the article “Keeping Cool and Green” in the July 17 issue of the Economist, a plethora of innovative approaches on the drawing board promise the potential for further reducing energy consumption requirements associated with air conditioning.

Given that about 40% of U.S. energy requirements are associated with buildings, and about 40% of building energy consumption is associated with climate control, it behooves us to get much more serious about getting cool. Especially if climate change over the next few decades makes summers like this one seem mild.

Richard T. Stuebi is a founding principal of NorTech Energy Enterprise, the advanced energy initiative at NorTech, where he is on loan from The Cleveland Foundation as its Fellow of Energy and Environmental Advancement. He is also a Managing Director in charge of cleantech investment activities at Early Stage Partners, a Cleveland-based venture capital firm.

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.