Energy Efficiency, Geothermal

A Key to the Future: Utilities’ Vital Role in Widespread Adoption of Geothermal Heat Pumps

Utilities are a natural partner for the geothermal heat pump (GHP) industry. Why? Because utilities have a broad consumer base and infrastructure, and need to both build load (sales) and levelize that demand to make the most efficient use of their electrical generation capacity throughout the year.  GHPs are a technology that fills that niche.

The Geothermal Exchange Organization (GEO) has long recognized the key role that electric service providers can play in the promotion of the technology. And today, with a slow economy and the changing nature of government incentives for GHPs, that support is more crucial than ever.

“The ability of GHPs to reduce on-peak kW demand has been demonstrated both in summer and winter,” said GEO President and CEO Doug Dougherty. “It’s incumbent on the GHP industry to demonstrate to the investor-owned utilities (IOU) how our technology can further their energy efficiency and renewable energy goals.”

Before electric industry deregulation in 2000, utilities were under regulatory pressure to control electric power growth and limit pollution from their power generation plants. A good way to do that was through demand-side management (DSM) programs to promote and finance energy efficiency.

Many utilities large and small sponsored major promotional and rebate programs for insulation, windows, lighting—and more efficient heating and cooling. Given the clean, renewable energy and cost savings that GHPs produced for home and building owners, they were a natural and effective component of utility DSM programs across the country. All that came to a halt in 2000, when deregulation of electricity markets shifted utility focus away from DSM.

Utility Promotion of GHPs

“Fortunately, some electric providers around the country—including IOUs, non-profit electric cooperatives, and municipal providers—still recognize the system and ratepayer benefits of energy efficiency,” said Dougherty. “Many still offer at least modest GHP incentives to their ratepayers. In fact, more than 350 out of 900+ electric co-ops in the United States offer varying levels of cash rebates for the technology.

Electric service providers offer low-cost on-bill financing that helps ratepayers pay for their GHPs, with monthly payments that are less than the cost of the energy they save on heating and cooling. Other incentives may include special lower electric rates for those who adopt GHPs, or cutting upfront cost with “loop lease” programs, where a utility installs an expensive portion of a GHP system at a rate-payer’s property—the ground loop heat exchanger—then charges a low monthly fee for the renewable energy it provides.

According to Dougherty, there is a resurgence of interest by IOUs in the value of GHPs—among both electricity and natural gas providers. “Good examples of IOUs taking another look at GHPs can be found in Illinois and New York, where state geothermal associations are working hard to show the value of the technology to utilities and ratepayers,” he said. “This is especially true where state strategic energy plans focus on carbon emission reductions. As DSM reemerges as an issue that IOUs have to address, GHPs are back in the game.”

Illinois Rebates and Market Expansion

With the Geothermal Alliance of Illinois (GAOI), GEO was largely responsible for changing the state’s Energy Efficiency Portfolio Standard to allow fuel switching, and making appropriate revisions to the state’s Technical Resource Manual (TRM).

In turn, this prompted the state’s largest utility, Commonwealth Edison (ComEd) to initiate a growing residential GHP rebate program for its ratepayers. GAOI has worked closely with ComEd to ensure its success. “In ComEd’s case, their GHP program shows a new appreciation for the value of GHPs when it comes to DMS of their summer peak,” said Dougherty.

According to GAOI Executive Director John Freitag, “We’ve made several recommendations on advancing the program. And we’ve been working to get more contractors into the ComEd approved dealer network.” GAOI has developed training sessions to make more contractors eligible for the utility’s network. The utility is promoting those sessions, and paying 80 percent of the $500 registration fees.

With the help of the University of Illinois at Chicago’s Energy Resources Center and Inova Energy, GAOI is also working to develop a commercial GHP rebate program for ComEd. “Right now, we are putting together a pilot program,” said Freitag. “And we’re developing a new chapter on commercial GHP installations for the TRM Manual, which will allow ComEd to have a commercial GHP program.” GAOI hopes to see it in place for 2018.

“From a marketing standpoint,” said Dougherty, “GEO’s work with GAOI has enhanced our technology’s reach throughout ComEd’s service territory of 3.8 million households. By any measure we’ve created a tremendous opportunity to expand and move the market for GHPs.”

New York Promotes Carbon Reduction with GHPs

“New York is a great example of where change in public policies is coming from the regulators, opening an opportunity for electric and gas providers to promote GHPs,” said Dougherty. The New York Geothermal Energy Organization (NY-GEO) is currently supporting a Central Hudson Gas and Electric proposal for an “earning adjustment mechanism” to help them pay for carbon emission reduction with electric vehicle and heat pump incentives. NY-GEO is also supporting a National Grid proposal called the Electric Heat Initiative, which includes GHPs.

“Both proposals are meant to help meeting the state’s economic and environmental goals under the Gov. Cuomo’s REV (Reforming the Energy Vision) process,” explained NY-GEO Executive Director Bill Nowak.  The association is also reviewing a Request for Information recently issued by Consolidated Edison (ConEd), which is seeking ways to reducing winter peak gas demand in New York City, which has essentially banned new gas lines. ConEd is considering various non-fossil fuel heating technologies, including GHPs. “That’s a pretty remarkable and exciting event in terms of our industry,” said Dougherty. Nowak agrees with GEO that IOUs have a key role to play in the future of GHP technology. “Utilities are ‘getting it’—they understand the value of GHPs, and that geothermal brings them both carbon reduction and peak demand reduction,” he said.

Utilities, Public Policy and GHPs for the Long-Term

Even with federal rollbacks of limits on carbon emissions at power plants, utilities remain concerned with both efficiency and the environment. Several large IOUs like American Public Power and GEO Member Southern Co. are pushing ahead with their renewable energy goals.

“With proper changes to public policy and education, utilities are once again understanding the value of GHPs,” said Dougherty. “This renewed appreciation by the IOUs has tremendous potential for the GHP industry. It’s GEO’s task to convince IOUs, co-ops and munis everywhere that if they aren’t already, GHPs should play an integral role in their technology and DSM.”

“There’s plenty of opportunity for IOUs to craft programs to incentivize customers to install GHPs, either in new homes or retrofits,” he continued. There are many electric co-op incentives already in place that IOUs can readily adopt, including the on-bill financing, special rate designs and loop-lease programs already mentioned that benefit GHP adopters.

GEO is developing state-level strategies to help ensure that the right public policies are in place for utilities to promote GHPs and bring down needless barriers to the technology. “GEO and its allies have been successful in securing recognition of GHPs as a thermal source of energy within the existing renewable portfolio standards of Maryland, Massachusetts, New Hampshire, Michigan and New Mexico,” said Dougherty.

“In some states like Minnesota, there remains an arcane prohibition on fuel switching,” he said. “GEO’s strategy in Minnesota is to change public policy to allow electric providers like Otter Tail Power Co. to promote GHPs in place of fossil-fuel furnaces.” In some of the more progressive states, Dougherty reiterated, energy efficiency policy is being driven by public utility commissions.

“An important component of GEO’s encouragement of IOUs to promote GHP technologies is increased involvement and education through the National Association of Regulated Utility Commissioners (NARUC),” Dougherty said. “This will ensure that regulatory policies promoting GHPs are shared among other states so that regulators everywhere fully understand the benefits of our technology.

“State recognition of GHPs as a source of clean, thermal energy in their energy efficiency and renewable energy portfolio standards creates the opportunity for IOUs to utilize the benefits of GHPs.” State geothermal associations are of critical importance to this effort, paving the way for GHP inclusion in both utility and state renewable energy credit (REC) programs, which offer yet another important incentive for GHP adoption.

Dougherty is quick to point out, however, that it is important to have a long-term view. “In our enthusiasm for GHPs, we must all remember that making such changes are not done overnight. Intensive outreach and education efforts, as well as identifying and changing public policies to remove regulatory barriers to IOU promotion of GHPs is a long process. But if you are not at the table—you’re out of the game.”

Lead image credit: CC0 Creative Commons | Pixabay