Ground Heat Exchangers Market 2014

A Short Story About Energy
-only two (2) chapters-
The Title of the Story is:
“The GHEX and The Third Industrial
Revolution (TIR)”
11/19/2014
© copyright Garen N. Ewbank and Ewbank
Geo Testing, LLC
1

There are two paths to go by, but in the long run; there
is still time to change the road you are on!
• Utility Incentives
– Do they really do anyone good; or
just raise the price to the
consumer?
• Manufacturer Rebates
– Why would a manufacturer extend
discounts?
• Contractor Discounts
– Is the trade (HVAC/R) that slow?
• Federal Tax Credits
– Tax Credits expire at the end of
2016 for our industry!
11/19/2014 © copyright Garen N. Ewbank and Ewbank Geo Testing, LLC 2

The First Chapter:
“The Engineers Explanation” using
the Big Picture
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Comparing Darcy’s Law (flow of water) with Fourier’s (flow of heat) and Ohm’s (flow of current)
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Parameter Flow of water Flow of heat Flow of current
Quantity Volume- V (m3) Heat- Q (J) Electric charge (C)
Potential Head- ht (m) Temperature- T (K) Voltage (V)
Gradient Hydraulic- ih (unitless) Temperature- it (K/m) Electric field- E (V/m)
Flux Flow rate- Q (m3/s) Heat transfer rate- H (J/s) Current flow (C/s)
Flux density Velocity- ν (m/s) Heat flow- q (J/s.m2) Electrical flux density (C/m2)
Conductivity Hydraulic conductivity- κ (m/s) Thermal conductivity- κ
(J/s.K.m)
Electrical conductivity- σ
(S/m)
Storage Compressibility Specific heat- ϲ (J/kg.K) Capacitance/Inductance
Decay coefficient Coefficient of consolidation- ϲν
(m2/s)
Thermal diffusivity- α (m2/s) Electrical diffusivity- D
(m2/s)
Law Darcy Fourier Ohm
Heat, Q, is a quantity of energy (classical) measured in Joules (N x m), (ft x lb), or
BTUs. Power is the rate of usage in kW·hr or MCF (BTUs prior to combustion) per
unit time {Citation: Jean-Luis Briaud, Geotechnical Engineering}

What is this
3.23 increase
all about?

Energy in
the form
of BTUs
65.4%

Energy in the form
of BTUs
60%

Consider Only the Residential and
Commercial Markets
• Quadrillions of BTUs by GHEXs
– Together Residentially and Commercially:
• How big is this number???? Position as Energy Storage
– Collective Energy Supply by others, i.e., site
sourced and stored renewable energy, onsite
power generation (fueled), Electric Utility supply
• Jeremy Rifkin? Energy Internet? The Third Industrial
Revolution? The Second Great Electrification?
• Remember the 3.23 to 1 loss?

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Residential and commercial combine for a
total of 19.99 Quadrillion BTUs of energy
usage.
*What are Power and Electric utilities really
good at? “Managing Energy” is their core
competence.
*What customers really want from Power
and Electric utilities is advice on “how to
implement energy systems that are more
efficient and use less energy”. Energy costs
are eclipsing labor costs in some markets.
*{Citation: Jeremy Rifkin, The Third
Industrial Revolution}
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What would this look like if GSHPs and GHEXs
were used to meet all the space conditioning
and water heating (SC&DHW) needs in
Residential and Commercial Markets?
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What would this look like if GSHPs and GHEXs
were used to meet all the space conditioning
and water heating (SC&DHW) needs in
Residential and Commercial Markets?
Residential 65% of 11.4 = 7.4 for SC&DHW Leaving
4 Quads
Commercial 60 % of 8.59 = 5.15 for SC&DHW
Leaving 3.44 Quads
That is a total of 12.55 Quads for
SC&DHW from Ground Source HVAC/R
Since a GHEX is direct use and a GSHP
requires on 20% Electrical Power INPUT
(with good design)……..
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requires on 20% Electrical Power INPUT
from utility generation or on-site solar PV
or wind kW……..
65% of 11.4 = 7.4 x 80% =5.92 direct
supplied Leaving 7.4-5.92 = 2.2 Quads
inputs by electric powering GSHPs
60 % of 8.59 = 5.15 x 80% = 4.12 direct
supplied Leaving 5.15-4.12 = 1.03 Quads
inputs by electric powering GSHPs
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Geo Testing, LLC

65% of 11.4 = 7.4 x 80% =5.92 direct supplied Leaving 4
+ (7.4-5.92) or 5.48 Quads for the utilities
60 % of 8.59 = 5.15 x 80% = 4.12 direct supplied
Leaving 3.44 + (5.15-4.12) = 4.47 Quads for utilities
requires only 20% Electrical Power INPUT
from generation or solar PV……..
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Geo Testing, LLC

Since a GHEX is direct use and a GSHP requires
on 20% Electrical Power INPUT from generation
or solar PV or wind kW……..
65% of 11.4 = 7.4 x 80% =5.92 supplied by GHEX Leaving 7.4-5.92
= 1.48 Quads by Utility; Plus the 11.4-7.4 = 4, + 1.48 or 5.48
Quads for the Utility (up from the 4.75 originally supplied and
without customer fuel switching; a year round customer)
60 % of 8.59 = 5.15 x 80% = 4.12 supplied by GHEX Leaving 5.15-
4.12 = 1.03 Quads by Utility; Plus the 8.59-5.15 = 3.44, + 1.03 or
4.47 Quads for the Utility (from the 4.57 originally supplied and
without customer fuel switching; a year round customer)
A real opportunity for electric utilities
by switching to renewables
to increase customer market share,
revenue, and reduce CO2e and
particulates emissions
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requires on 20% Electrical Power INPUT from
generation or solar PV or wind kW……..
A real opportunity for
electric utilities--
To increase market share,
revenue, investment, and
reduce CO2e and particulate
emissions and this DOES
NOT address the reduction
in REJECTED energy!
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A real opportunity for electric
utilities:
To increase market share, revenue,
investment, and reduce CO2e and
particulate emissions and this DOES
NOT address the reduction in
REJECTED energy!
And guess where the market battle
is--renewables are taking utilities
market growth and share with site
sourced and stored energy (consider
in Oklahoma SB 1456)
11/19/2014 18
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So Where has the Proceeding
Taken the Market?
Maevelle Energy, Scott Emery, 18th November 2014
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The Second Chapter:
“Positioning and Marketing for Ground
Source Systems”
--ADVOCACY--
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First Cost Barrier
Currently only those capable to
purchase Ground Sourced systems do
How do we make it “affordable”?
How do those with a modest income
get a GSHP system?
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First Cost Barrier
• Would you invest in the following?
• None of the heat pump manufacturers are
using their federal tax dollars to invest in
GHEXs; or their employees 401Ks.
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The 10% commercial ITC and depreciation are only available to commercial entities when they
install Ground Source Heat Pump (GSHP) Energy Property in buildings they own or in buildings
owned by others *if* the installation is done in such a way that the commercial entity is considered
the owner, for tax purposes, by the IRS.
In order to establish "tax ownership" of the property, the actual (tax) owner must establish that the
installed equipment has a market value to someone other than the owner of the building for which it
is installed.
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There are a number of ways to accomplish this:
•If the equipment is either shared between, or might be shared between, multiple buildings with distinct
owners, (for instance, in a mini-district heating or mini-thermal grid scheme), the equipment will not be
considered "limited use property." This would be uncommon.
•If the installer can show that the equipment can be removed at the end of any lease or contact and
still retain sufficient economic value, this is enough. Note: This may work for the actual heat pumps but
won't work for the ground heat exchanger since it typically can't be removed. (i.e. it is a hole in the
ground.)
•If the installer can demonstrate that at the end of a lease, contract or whatever, the equipment will
have value to someone other than the owner of the building in which it is installed, the need is
satisfied... Do this:
First, obtain a permanent easement of record for the ground in which the heat exchanger is
installed. (This gives you a real property interest, distinct from the building owner's, in which to
install the heat exchanger.)
Second, ensure that the contract with the building owner allows for ownership of the equipment
and/or easement to be transferred and also that on non-payment or end of contract, the building
is not permitted to use the equipment or interfere with the easement until a new contract is
accepted.
Third, provide "energy services" to the building, not a capital lease on the equipment. (i.e. sell a
Power Purchase Agreement (PPA). Do not "finance" the gear.) Also, assert that there are other
companies who might be willing to purchase the equipment and easement in order to provide the
same "energy services" to the building in the future. (Not difficult since there are many ESCOs
and property management firms that would be willing to do so.) This establishes a market for the
equipment that includes someone other than the building owner. As such, the tax ownership of
the equipment remains with the actual owner.
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If the equipment is installed in such a way that the installer/owner of the
equipment is not considered the owner for tax purposes, the building owner,
not the equipment owner, will receive the tax incentives. (10% ITC + 5 yr
MACRS on remaining 90% if commercial; 30% ITC if residential). In some
cases, third-party installers who haven't done it "right" have insisted that the
building owners pay them amounts equivalent to the tax incentives the building
owners receive. In this rather cumbersome manner, they "capture" some of the
tax benefits as taxable income.
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First Cost Barrier
• Just pay for the GHEX if you are capable, and what is the payback?
• Incentives
– Utility Incentives
• Do they really do anyone good; or just raise the price to the consumer?
– Manufacturer Rebates
• Why would a manufacturer extend discounts?
– Contractor Discounts
• Is the trade (HVAC/R) that slow?
– Federal Tax Credits
• Tax Credits expire at the end of 2016 for our industry!?
• On-Bill financing by Utility
• On-Bill payments through Utility
• Utility Tariff for the GHEX (AEEOK is ready to help, NESI, others?)
• 3rd Party financing for the GHEX (requires sophisticated financiers)
– PACE (FHFA removed their objections (Investor Confidence Project))
– Debt
– Operating lease
– Capital lease
– Thermal Services Agreements, PPA
– LPs, MLPs, REITs (the GHEX is essential to space conditioning water heating)
– Rural Electric Coops using USDA Energy Efficiency and Loan Program
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The Plan
• How to differentiate between “capable”,
“affordable”, and “best” (should be our
playbook—remember IGSHPA Tulsa in 2008?)
• Earth Storage, a GHEX, the best of all batteries
and/or storage, BTU to BTU, no kW or MCF
conversions
• Turn Neighbor Hoods into Geo Hoods using 3rd
party financing
• Energy Internet (TIR? SGE?)
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The Plan is to Join the
Third Industrial Revolution (TIR) by Participating in the
“The Second Great Electrification (SGE)”
1. Get the OSU Spears School of Business, the marketing
types, not the accountants, to write the “GHEX play
book within the TIR and SGE” (what is a GHEX worth
in 10 yrs?)
2. Demonstrate, with the grant from the DoE (DoE
Grant), the idea of turning a neighborhood into a
“GeoHood”
3. Use Energy Wise (Energy Wise Partners ) to capture
“big data” from the GeoHood
4. Engage a “Google” to explain the GeoHood’s “energy
value to an energy internet” from the big data
5. Partner with a sophisticated financier
11/19/2014 29
Geo Testing, LLC

Ground Heat Exchangers Market 2014

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