More effective stewardship of our resources contributes to the security, environmental sustainability and economic well-being of the nation. Buildings present one of the best opportunities to economically reduce energy consumption and limit greenhouse gas emissions.
Geothermal heat pumps (GHPs), often called ground-source heat pumps, have been proven capable of producing large reductions in energy use and peak demand in buildings. If the federal government set a goal for the U.S. buildings sector to use no more nonrenewable primary energy in 2030 than it did in 2008, based on previous analyses, it is estimated that 35 percent to 40 percent of this goal could be achieved through aggressive deployment of GHPs. In addition, $33 billion to $38 billion annually in reduced utility bills (at 2006 rates) could be achieved through aggressive deployment of GHPs.
However, GHPs have received little attention at the policy level as an important component of a national strategy. Have policymakers mistakenly overlooked GHPs, or are GHPs simply unable to make a major contribution to the national goals for various reasons?
Although the United States once was the world leader in GHP technology and market development, European markets now absorb two times to three times the number of GHP units annually as do the U.S. domestic markets. Market growth rates in Europe, parts of Asia and Canada exceed those in the United States. In terms of installed base of GHPs, the United States still has the largest absolute number, but on a per capita basis many European countries are ahead.
Today’s domestic GHP industry is better positioned for rapid growth than ever before. The technology is proven, with an installed base in the United States exceeding 600,000 GHP units. Tax credits for home and business owners investing in GHP systems were enacted in October 2008 through 2016. Since 2007, one segment of the utility industry, the rural electric cooperatives, have been able to obtain long-term loans with terms of up to 35 years at the cost of government funds from the U.S. Department of Agriculture Rural Utilities Service to provide the outside-the-building portion of GHP systems to customers in exchange for a tariff on the utility bill, which would be more than offset by the GHP system’s energy cost savings. In December 2007, Congress directed the General Services Administration (GSA) to establish a program to accelerate the use of more cost-effective energy-saving technologies and practices in GSA facilities, starting with lighting and GHPs. A growing number of states offer tax credits or other forms of incentives for GHP systems.
The most important trade allies of the GHP industry, electric utilities, today are better able to focus on peak load reduction and improved load factor – two key GHP system benefits – than they were in the past when restructuring was looming. The industry’s support organizations the International Ground Source Heat Pump Association, Geothermal Heat Pump Consortium Inc., American Society of Heating, Refrigerating, and Air Conditioning Engineers, and National Ground Water Association are mature and robust.
If the domestic GHP markets were to expand rapidly, most of the segments of the industry would be able to expand accordingly without creating bottlenecks. However, the GHP system design and installation infrastructure would require special attention. Currently, these infrastructures only exist in some localities, and elsewhere customers lack access to the technology.
The primary GHP market failure is the expectation that building owners finance the GHP infrastructure, or outside-the-building portion of the GHP system, such as the ground heat exchanger. GHP infrastructure will outlive the building and many generations of heat pumps, and is akin to utility infrastructure (poles and wires, underground natural gas piping). This begs the question why do we expect building owners to finance GHP infrastructure, but not other utility infrastructure? The outside portion of the GHP system can be half or more of the overall GHP system cost, and if this cost is excluded, GHP systems have about the same price as competitive alternatives and could cost less in volume production.
As mentioned above, Congress already has granted the authority for the USDA’s Rural Utilities Service to provide long-term financing to rural electric cooperatives nationwide to provide GHP infrastructure to residential and commercial customers. So far, one cooperative has taken a loan under this new program and one other has filed an application. The cooperatives are able to recover the cost of repaying the funds through a tariff on customer electricity bills. Apparently, the GHP loop tariff would be $15 to $30 per month for most homes, which is less than the energy cost savings. Also already in place are GHP residential and commercial federal tax credits through 2016, and Congressional direction that General Services Administration accelerate GHPs. Initiatives to capitalize on the leverage these new federal policies can provide, plus any additional federal policies that may be established in the future, would appear to be worth considering.
The key barriers to rapid growth of the GHP industry, in order of priority:
1. High first cost of GHP systems to consumers.
2. Lack of consumer knowledge and/or trust or confidence in GHP system benefits.
3. Lack of policymaker and regulator knowledge of and/or trust or confidence in GHP system benefits.
4. Limitations of GHP design and business planning infrastructure.
5. Limitations of GHP installation infrastructure.
6. Lack of new technologies and techniques to improve GHP system cost and performance.
The following actions would address the barriers and facilitate rapid growth of the GHP industry:
1. Assemble independent, statistically valid, hard data on the costs and benefits of GHPs.
2. Independently assess the national benefits of aggressive GHP deployment.
3. Streamline and deploy nationwide programs to provide GHP infrastructure.
4. Develop and deploy programs to provide universal access to GHP infrastructure.
5. Develop the data, analysis and tools to enable lowest life-cycle-cost GHP infrastructure.
6. Expand geographic areas where high-quality GHP design infrastructure exists.
7. Expand geographic areas where high-quality GHP installation infrastructure exists.
Given the need to rein in our nation’s energy consumption and carbon emissions, while at the same time stimulating the economy out of its most serious downturn since the Great Depression, it is recommended that federal policymakers seriously consider aggressive nationwide deployment of GHPs, with programs commencing as soon as possible. If this recommendation is pursued, it is further recommended that the above-listed actions be seriously considered as part of the overall implementation strategy. In addition, future policies should ensure that GHP systems are not excluded from renewable portfolio standards and goals and related environmental initiatives.
To make rapid headway on the energy/carbon front in the buildings sector, existing buildings must be improved with single comprehensive deep-savings retrofits, because repeated incremental touches to the same buildings would result in large and wasteful transaction costs. GHPs are proven to be an excellent technology for anchoring comprehensive deep-savings retrofits. GHPs can play an important role within a new national energy strategy, but this is unlikely to happen without federal emphasis and leadership.