Cut the Cost of Geoexchange

March 19, 2012
Use incentives to reduce the installation expenses of geoexchange heating and cooling

Geoexchange heating and cooling can drastically reduce your building’s heating and cooling bills, but for some, the first cost seems like an insurmountable hurdle.

An FM willing to spend the time on a little paperwork, however, can drive down the cost by applying for a host of financial incentives offered by federal and state governments and utilities.

Identify Incentives
Start by seeking out incentives that fit your facility’s location, size, and budget. The marketplace offers an extensive menu of rebates, tax credits, and other ways to trim your costs, including:

Federal tax credits: Commercial geoexchange systems may qualify for an income tax credit equal to 10% of the system’s cost.

Modified accelerated depreciation: This federal program imposes a shorter timeline for depreciation on qualifying energy technologies. Companies can then recover their investment costs more quickly by taking advantage of federal depreciation deductions.

State incentives: These are frequently based on the tonnage of the installed system with per-ton paybacks varying by state, says John Kelly, manager of operations at the Geothermal Exchange Organization (GEO).

Utility offers: Local utilities may also offer tonnage-based refunds or reduced rates after your system is installed, Kelly adds. “Geothermal heat pump systems are ideal for the way electric utilities operate,” he explains. “Utilities spend a lot of money building power plants and distribution lines. Instead of building new ones, utilities can avoid the cost of new infrastructure by offering a geoexchange incentive program.”

Loans: The DOE offers loan guarantees for up to 80% of the total cost of a project that avoids or reduces greenhouse gas emissions with “new or significantly improved” technologies.

The Database of State Incentives for Renewable Energy (DSIRE), a project of North Carolina State University, offers an extensive repository of rebates, grants, loans, and other renewable energy incentives at www.dsireusa.org. Narrow the search results by state, technology, and other factors to find the best match for you.

After examining your options online, check the source documentation for your chosen incentives to ensure they’re still available. Also call your utility even if it’s not listed in DSIRE’s database, Kelly recommends.

“If they don’t have a geothermal program, then you want to tell them how much good it would do them if they did,” Kelly explains. “If you have local chapters of BOMA, IFMA, or ASHRAE, they often have working relationships with utilities. Call your state energy office as well – that’s typically who gets the funding from the federal government to administer throughout the state.”

Compile Your Applications
Be sure you know when each application is due, advises Brian Lips, DSIRE’s senior policy analyst. Some utility programs require you to apply before work on the new system starts.

Then ask the engineering firm designing your geoexchange system if they offer any assistance. Some may help you apply for grants and gather needed information, says Howard Alderson, president of Alderson Engineering Inc., a firm specializing in the design of mechanical, plumbing, electrical, and fire protection systems.

“We complete the forms and point your accountant in the direction of all the incentives you can get when you file your tax returns,” Alderson explains. “You have to segregate the construction costs so you know the system cost vs. other parts of the building. We work with the contractor or construction manager to make sure the costs are separated properly to take the deductions.”

Other requirements may include:

  • Building area
  • Proof of installation
  • Documented savings based on ASHRAE’s model
  • Proof the system meets a minimum efficiency level set by the utility
  • Installed tonnage
  • Receipts
  • Computer modeling
  • Shop drawings for the heat pumps

Apply for Awards to Defray Costs
The cost of ground loops and heat pumps generally ranges between $3,600-$7,700 per ton, underscoring the importance of funding assistance, says Fleming Roberts, communications specialist for Energetics Inc., a technology and management consultancy under contract with the DOE. The potential cost reduction is considerable regardless of where your building falls in this range.

“Put an energy efficient geothermal system in now,” Alderson says. “Nobody knows how long these incentives are going to last.”

Janelle Penny ([email protected]) is associate editor of BUILDINGS.

About the Author

Janelle Penny | Editor-in-Chief at BUILDINGS

Janelle Penny has more than a decade of experience in journalism, with a special emphasis on covering facilities management. She aims to deliver practical, actionable content for facilities professionals.

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