The best kept secret that needs to be communicated
A sustainable renewable energy revolution is slowly taking place “underfoot” in Maryland. Unlike solar, or wind which involve above ground panels or wind turbines, geothermal systems consist of heat pumps and in-ground vertical and or horizontal loops that utilize thermal energy stored in the earth and exchange of that energy to heat or cool thereby reducing (by as much as 80%) the energy costs for residences and commercial /institutional structures. Because these systems can fit beneath the footprint of most structures or property parcels, most people are unaware of the existence of residences and buildings in their community that have installed geothermal systems.
Recently, on March 26th the Maryland Energy Administration (MEA) held a half-day meeting regarding geothermal development in Maryland. The diverse group of participants in the packed conference room included geothermal well installers, geothermal equipment manufacturers, piping and other product suppliers, energy companies, energy company financiers, builders/developers, and state and local government employees, etc. The conclusion of the presenters was that geothermal is a viable renewable energy source, however its success at the moment relies on overcoming certain hurdles including lowering the initial cost of installation over traditional air to air systems, increasing available financing options on single and multiple geothermal installations, and most of all, increasing public awareness.
Background on Energy Initiatives and the Development of Geothermal Energy in Maryland
The State of Maryland has four main energy objectives to ensure future reliable energy while protecting the environment by: 1) reducing energy consumption and demand by 15% by 2015 (based on 2007 baseline); 2) increasing the use of renewable energy sources by requiring 20% of Maryland’s electricity be generated by renewable energy sources by 2022; 3) reducing Maryland’s Greenhouse gases emissions 25% by 2020; and 4) creating 100,000 new green jobs in Maryland by 2015. These four objectives were established by a framework of regulatory state statutes and legislative agenda involving: EmPOWER Maryland Energy Efficiency Act of 2008; Maryland Renewable Portfolio Standard (RPS); The Greenhouse Gas Emissions Reduction Act of 2009; and the 2009 Smart Green and Growing Legislative Agenda.
More recently, the Maryland legislature passed a bill entitled, Renewable Energy Portfolio Standard – Renewable Energy Credits – Geothermal Heating and Cooling on May 22, 2012. This bill allows energy generated by Geothermal Heating and Cooling (GHC) technologies to be eligible for the Renewable Portfolio Standard (RPS) as a Tier 1 renewable source. The RPS requires that renewable sources generate specified percentages of the State’s electricity supply each year. Electricity suppliers must accumulate “renewable energy credits” (RECs) equal to the percentage mandated by statute each year, or pay an alternative compliance payment (ACP) equivalent to the supplier’s shortfall. GHC system owners are eligible for Renewable Energy Credits (RECs), equivalent to 1 Megawatt-hour of electricity.
The May 2012 RPS REC GHC statute allows Maryland to become the first state in the country to make the energy generated by GHC technologies eligible for the Renewable Portfolio Standard (RPS) as a Tier 1 renewable source. GHC system owners are also eligible for Renewable Energy Credits (RECs), equivalent to 1 Megawatt-hour of electricity. As a renewable energy source, it is anticipated that the future development of GHC will help Maryland meet its energy and environmental objectives including reducing greenhouse gas emissions, energy consumption and green jobs.
Public Awareness of Geothermal Benefits is Lacking
While the successes and failures of solar and wind technologies have been widely chronicled in the news, public awareness of geothermal has lagged behind. Given the established regulatory framework outlined above, the MEA geothermal installation data indicates that increased public awareness, financing options, and incentives such as tax credits, equipment rebates, and increases in financing opportunities will result in increase GHC installations. Below I describe the geothermal market in Maryland and recent developments that may reduce the hurdles involving initial costs, financing, and awareness.
Based on the 2007 to early 2013 data maintained by the MEA, the number of residential geothermal installations almost doubled from 386 in 2009 to 634 in 2010 and since then the number of GHC installations have fluctuated between 594 (2011) to 567 (2012). Maryland Counties with over 200 residential geothermal installations include Anne Arundel (447); Baltimore (242), Harford (238) and Montgomery County (291). The counties with the higher installation counts reflect the presence of a county property tax credit (in addition to other credits). With respect to credits, there are several Maryland GHC incentives, such as a Maryland state tax credit of up to $3,000, a federal tax credit of 30% of the system costs, and in certain counties a county property tax credit (e.g., $2,500 for Anne Arundel and Harford Counties, and $5000 for Baltimore and Prince Georges Counties). Montgomery County suspended its property tax credit program effective November 8, 2011. In addition to the above, an energy company (such as BGE) may also provide company rebate for installed systems. All of these incentives have clearly influenced, in a positive way, the development of geothermal installations in Maryland.
The MEA historical data also include data fields regarding the capacity of system installed (tons); project contractor, the total project cost, and location information. Consumers and interested individuals may find this data helpful for identifying local experienced contractors, estimating system size/costs. While the data are helpful, it is known that the data are not complete because many homeowners may not have submitted the application for state credits. The MEA data also include information on commercial/industrial systems. It is known that as result of EmPower Act and the Public Schools Energy Efficiency Initiative Engineering Design Program, with other Federal and State initiatives, Maryland is increasingly utilizing geothermal energy for public buildings such as schools and government buildings (both new construction and renovation) to reduce energy needs and costs.
Strategies for Reducing the Hurdles and Increase Geothermal Use
As mentioned earlier, the three hurdles to successful geothermal market development involve efforts to: lower initial cost of installation; increase finance options for geothermal installation; and increase public awareness. Maryland has established the regulatory framework to support geothermal development with incentives. Working together, these incentives can reduce the cost of the GHC systems and make them competitive with traditional heating and cooling systems. Finance options are increasingly available by equipment manufacturers, energy providers, and builders/installers. These include sale-lease back options with on bill invoicing (through the energy supplier, builder/installer and/or financing company). The sale-lease back option involves leasing the system at a cost that is based on the savings between and traditional system and the GHC systems incurred during the operation of the system over a given payment period (ranging from five to fifteen years).
Participants in the MEA March 26 Conference learned of a GHC program involving a mid-west electric cooperative that developed a program to install GHC as strategy to manage generation demand and to reduce its need to increase its generation capacity and thus cost to its ratepayers. The cooperative estimated that 1 ton of installed GHC resulted in 0.65 kilowatt (kW) of avoided generation capacity. The cooperative estimated if it could convert 9,615 homes (80% new construction and 20% in existing homes) in its service area (over six years to GHC ) it would result in 50 megawatts and over $100 million in avoided generation and transmission investment. To encourage the GHC installations, the Cooperative coordinated with home builder associations (increase awareness on builder side), and agreed to offer on-bill financing for the GHC system. As a result of these creative initiatives the Cooperative saw GHC installation jump. Another option for financing presented at the conference included a Third-Party Geo-Thermal Purchase Agreement in which the ground loop system is owned by a third-party and the owner pays the cost of the system over time plus operational cost targeted percentage of the energy savings.
In closing, lower GHC installation costs will likely result when the GHC market expands due to increases in market competition, financing options, and public awareness. Maryland has significantly regulatory milestones to achieve and geothermal may provide increased opportunities for Maryland to achieve those milestones.
Mr. Wyckoff is owner of Wyckoff Environmental Consulting LLC. He provides environmental consulting services to commercial, industrial and attorney clients involving: litigation/dispute; compliance and auditing; transactional due diligence; and site investigation and cleanup. Mr. Wyckoff assists clients with issues of compliance including those involving geothermal installation and permitting. He can be reached at 301-351-0756 or at firstname.lastname@example.org.