Green is hot, at least as far as residential building is concerned. A 2016 study from Booz Allen Hamilton for the United States Green Building Council found that green building construction growth currently outpaces general construction and will continue to do so through 2018, with LEED residential at a year-over-year growth of 31.1 percent from 2015 to 2018.
A growing number of residential builders aiming to build green are looking more closely at geothermal heat pump systems, a technology that uses the earth’s thermal properties in conjunction with electricity as an alternative to traditional HVAC and water heating systems. The technology lowers water, sewer and energy costs over time as well as reduces greenhouse gas emissions.
This technology is slowly being implemented in new construction; for example, Whisper Valley, a new 7,500-home master-planned net-zero community in Austin, Texas, will be equipped with geothermal heat pumps to save on future energy costs. In addition, production builder Bozzuto recently opened one of the first geothermal-standard communities in the country ,Sage at Maple Lawn.
So if builders recognize that geothermal heat pump systems can be integral parts of a green home, why aren’t more using them? Most say that is comes down to the upfront costs: The massive system relies on installing a ground loop heat exchanger, a complex web of pipes that snakes hundreds of feet beneath the ground to heat and cool the water within a geothermal system. Installing it can represent as much as 60 percent of the total cost of the system, making it a difficult check to write.
To eliminate this barrier, three new kinds of partnerships have emerged that give builders more options for installing geothermal technology. They are:
Third-Party-Owned Geothermal Loops. This partnership is similar to a power purchase agreement (PPA) with a utility provider, but instead, the third party begins a thermal power purchase agreement and enters into a 20- to 25-year contract to own and operate the geothermal system. This third-party provider forms a special purpose entity that owns the energy-producing asset and essentially becomes a mini utility that sells to the end user at a specific rate.
The homeowners incur no upfront costs for the geothermal system, as the ground loop infrastructure is pre-installed through the community. Homeowners enjoy peace of mind with an extended warranty and no maintenance costs for the first three years.
Utility-Owned Geothermal Loops. This type of partnership allows a third-party utility to install the loop system and lease it back to the end user. In this scenario, the geothermal contract to use the eco-friendly utility remains tied to the property, which is billed as a line item on the end user’s monthly bill, just as if the utility provider were billing the property for traditional heating resources.
At Sage at Maple Lawn, Bozzuto’s customers can defer associated upfront costs through geothermal utility provider Orca Energy. This benefits both the utility and the customer; it is considered a “rate recoverable” long-term asset to the utility, while the customer has a system that delivers proven comfort from a distributed energy resource.
Third-Party-Owned Loops with Utility Participation. This hybrid partnership is similar to both the utility and third-party-owned models, but in this instance, the utility collects the energy payment rather than the third party. The utility takes a small percentage of the profits from the third party and gives the end user some added security.
In all three of these partnership scenarios, a geothermal unit has two main benefits. First, the renewable energy aspect allows the utility or third party to use Business Investment Tax Credits and other federal incentives, further driving down the cost of installation. Second, because the technology is more energy-efficient, end users can expect a much lower utility bill.
While developers and contractors have recognized the ecological and economic importance of installing geothermal systems, the upfront investment continues to be daunting. With these new options, however, builders can now partner with utility providers, third-party ownership models or a creative mix of both, meaning geothermal systems may soon transition from novelty to normality.