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Geothermal Cost Sharing Helps Make Technology Affordable

By Nordic

March 14, 2016

Heat Pump Installation

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Geothermal heat pumps are known to be energy efficient, long-lived, and low maintenance. They provide both heating and cooling in a single system, and no other technology will have the same impact on your heating bill.

But if these heat pumps are so great, why aren’t they the first choice for heating and cooling in all situations? The simple answer? The geothermal ground loop.

The geothermal cost has three main components, the energy supply source, the heat pump itself, and the energy distribution system. The heat pump and the distribution system (ductwork or radiant in-floor heating) are comparable in cost to most other HVAC systems, but the energy supply source is another story.

The energy supply source, or ground loop, is expensive to install because it involves either horizontal trenching or vertical drilling. Some estimates peg the energy supply source as costing up to 60% of the entire system.

In short, the ground loop is expensive. When compared to other heating and cooling options, the upfront cost of a geothermal heat pump system can often put the technology out of the price range of the average homeowner, even though the monthly bills will be ultra-low. This upfront cost represents an insurmountable barrier for many homeowners, who are forced to choose other less efficient technologies due to lack of financial resources.

Fortunately, several companies are working on taking this initial barrier off the homeowner’s plate by partnering with them to share the cost of the ground loop. There are three primary types of geothermal cost sharing emerging in the market right now, they are:

Third-Party Owned Geothermal Ground Loops

In this scenario, the homeowner enters into 20 to 25-year contract with a third-party provider who installs the geothermal ground loop and holds it as an energy producing asset. The third-party provider sells the energy back to the homeowner at a specified rate. The owner incurs no upfront costs for the geothermal system and instead pays an affordable monthly fee. In some cases, this is a lease-to-own agreement when once the lease ends the homeowner owns the ground loop outright. In other instances, the ground-loop is preinstalled in the community as part of a planned development and the third-party retains ownership of the loop field.

This approach is becoming more common. You can see an example of it in Austin in a development called Whisper Valley.

Utility-Owned Geothermal Ground Loops

This type of cost sharing involves the local power utility owning the geothermal ground loop directly and leasing it back to the end user. This utility owned setup is used extensively with other renewable energy services like solar power, but is now just beginning to gain traction with geothermal ground loops.

In this scenario, the utility will install the geothermal ground loop, and the homeowner will sign a lease to rent the ground loop for a fixed cost every month. The geothermal contract is tied to the home and appears as a surcharge on the monthly utility bill similar to a water heater rental. Examples of utilities that offer this option include Orca Energy.

Third-Party-Owned with Utility Participation

The final financing program is a hybrid of the two programs listed above. In this scenario, the third party company installs the ground loop, but the utility collects the payment rather than the third party. The utility takes a percentage of the profits in exchange for administering the program, and the homeowner can rest assured that an organization with a long track record is responsible for their ground loop.

The aim of these three cost sharing initiatives is to make the high cost of the geothermal ground loop more palatable by spreading it out over an extended period of time. These innovative programs allow homeowners to reduce their monthly heating and cooling costs instantly while also giving them the option to own their ground loops eventually (further reducing the monthly cost).

To find out if geothermal cost sharing is an option in your community, Google “geothermal ground loop lease” for more information.

Comments

  1. Reply

    Peter Crisp

    April 01, 2016

    What about on-bill financing? The only location in Canada I know of is Toronto, and I don’t know if they cover ground loops. There was talk of Ontario bringing in a program, but nothing has been announced. I could see this being another successful option since it brings the possibility of stable, low-interest financing.

    Also, I’m seeing some progress on things such as thermal piles, which may reduce the overall costs. Not yet popular however.

    • Jordann Brown

      April 01, 2016

      Hi Peter,
      On-bill financing would be a great option for local utilities to use, similar to many of the solar programs available across the country. I haven’t heard yet if this is on the table for the new Ontario or Federal budget, but I know that this is the direction the industry should be moving in.

  2. Reply

    Peter Brown

    September 02, 2016

    Jordann
    Do you know any Canadian leasing companies who provide this in PEI market
    Peter Brown

    • Jordann Brown

      September 05, 2016

      Hi Peter,
      I don’t know of any PEI companies that are currently offering this option!

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