Posted By 183eej on 01/01/2010 10:00 AM
I have to apologize in advance for the long paragraph. I have a new computer with Windows 7 and I haven't been able to figure out how to get the paragraphs separated on this forum.

 So, here's my post. In a separate thread, a conversation has been going on about problems in Missouri with coop rebates. As I pondered this topic, I began to wonder about the wisdom of relying on utility administered rebates to promote energy efficiency measures.
It doesn't make sense that a business trying to turn a profit would aggressively push to pay their customers to buy less electricity. I can't imagine any business being interested in that kind of deal. Certainly utility administered rebates are widely available to some degree all over the country.
At best, however, I would expect a utility to bring a half-hearted attempt to the table with the singular goal of appeasing the state regulators which, I suspect, may be what is going on in Missouri. Combined with a lousy credit market, the lack of any significant market penetration for high efficiency HVAC equipment may be an indication this approach is not working real well.

A report was issued in late 2008 out of Oak Ridge Labs in Tennessee that referenced an intriguing program administered by the Delta/Montrose cooperative in Western Colorado that appears to address this conflict. Delta/Montrose tapped into 35 year money from the Department of Agriculture to fund the installation of geothermal earth loops.
 For customers who want to install geothermal, Delta/Montrose will finance the loops, which represents about half the cost of a typical geothermal installation. In return, the customer agrees to let Delta/Montrose charge a monthly fee for a "geothermal loop tariff" on their electric bill and it costs the customer anywhere from $25 to $35 a month depending on the size of the installation. This lets the customer buy geothermal for about the same price as high efficiency conventional equipment.

What I like about this model is that the cost of the loops stays with the meter, not the customer. If the customer sells their house, the "tarrif" is disclosed at closing and the new home owner has the option of continuing to pay to use the geothermal loops or not before they close on the property. A home with a geothermal system is typically a good reason to buy that home anyway so there is not much risk to Delta/Montrose of absorbing the cost of loops.

It's certainly a good financial deal for the customer because the monthly loop tarrif will typically be more than offset by the monthly savings in electricity generated by the geothermal equipment. And Delta/Montrose likes it because they net about $10 a month on the loop tarrif over the cost of the USDA money and their administrative costs.
 The additional revenue generated by the loop tarrif is plowed back into the rate they charge their customers for electricity. So, the more geothermal loop fields they install through this program, the lower the eletric rates to all their customers which is congruent with their business charter. So, a coop administered program, like Delta/Montrose appears to make financial sense all the way around.

Because of the conflict issue I mentioned with efficiency rebates and for-profit utilities, I don't know that the above model would be as effective. Another model being looked at that might address this area is a variant of the Delta/Montrose model. Essentially, everything is the same except the billing entity for the loop charge is the property tax folks or a municipality instead of the utility.

 The taxing jurisdiction or municipality funds and administers the program and assesses the amortized cost of the loops on the annual tax bill or the monthly water and sewer bill. Just like the Delta/Montrose model, any residual cost of the loop installation stays with the property in the event the home sells.
Taxing jurisdictions and municipalites, however, indicate politics which provides for-profit utilties with lobbying opportunities so, for political reasons, this idea might find itself beached somewhere and not become uniformly implemented across the country unless the federal government steps in with low cost financing like the USDA money being used by Delta/Montrose.

What's exciting about both of these models though, is that they show there are other ways to skin the "energy efficiency" cat besides the homeowner taking on all the risk.

Posted By 183eej on 01/01/2010 10:00 AM
 In a separate thread, a conversation has been going on about problems in Missouri with coop rebates. As I pondered this topic, I began to wonder about the wisdom of relying on utility administered rebates to promote energy efficiency measures. It doesn't make sense that a business trying to turn a profit would aggressively push to pay their customers to buy less electricity. I can't imagine any business being interested in that kind of deal. Certainly utility administered rebates are widely available to some degree all over the country. At best, however, I would expect a utility to bring a half-hearted attempt to the table with the singular goal of appeasing the state regulators which, I suspect, may be what is going on in Missouri.

Posted By 183eej on 01/01/2010 10:00 AM
... For customers who want to install geothermal, Delta/Montrose will finance the loops, which represents about half the cost of a typical geothermal installation. In return, the customer agrees to let Delta/Montrose charge a monthly fee for a "geothermal loop tariff" on their electric bill and it costs the customer anywhere from $25 to $35 a month depending on the size of the installation.

Posted By geome on 01/02/2010 1:21 PM
The tariff is just for the loop (not the entire system), so hopefully the loop can be reused when the units need replacing.

Posted By TechGromit on 01/02/2010 6:44 PM

Now that you put it that way, it sounds like a pretty sweet deal.... for the utility anyway. An 8k install (which sounds low in my opinion) takes 35 years to pay off at 3% interest at month payments of $31 a month, you stated that any repair or replacements will be the responsibility of the utility, which would indicate to me that the tariff is a forever fee.  Given the loop should least at least 50 years, possibly a lot longer, this is a guaranteed profitable income stream for the utility for years to come.  If the loop is indeed only $8,000, as part of the total install, I would say your far better off in the long run just paying for the loop yourself and paying it off rather then opt for this tariff. 

Quote "This lets the customer buy geothermal for about the same price as high efficiency conventional equipment."

Say that? Hardly. I replaced my geothermal system last year, the system alone, without any duct work, drilling, piping or the well pump for $15,200, considerably more than any natural gas or oil based system.  If you believe that systems are pretty much the same price, except for the ground loop, you need a serious reality check. Your high efficiency conventional equipment cost about a third as much.

Posted By geome on 01/03/2010 9:33 AM
Looking at this another way, it would take 19 years of monthly $35 payments to equal $8,000 (no interest factored in). So, if a person planned to stay in the house for 19 years or less, it might be a great deal for them since they don't need to lay out or finance the $8,000. For a future purchaser, it might be attractive to know that they don't need to worry about loop problems if loop repairs are included.

Does this plan make sense for everyone, probably not. Individuals need to make financial evaluations based on their particular situation, and consider non-financial items as well if that is important to them.

Posted By TechGromit on 01/02/2010 6:44 PM

Say that? Hardly. I replaced my geothermal system last year, the system alone, without any duct work, drilling, piping or the well pump for $15,200, considerably more than any natural gas or oil based system.  If you believe that systems are pretty much the same price, except for the ground loop, you need a serious reality check. Your high efficiency conventional equipment cost about a third as much.

Posted By gregj on 01/04/2010 2:03 PM
Ouch. 15 k for just the unit! What size? How old was the unit you replaced?

Posted By Alex_in_FL on 01/10/2010 7:05 AM
The real reason utilities do this is not total electrical use but peak load use. A GSHP uses less electricity during peak times than air source units. By leveling the peak load usage the utility doesn't requires as much peak load or surge capacity. Therefore they don't have to build a new plant (or upgrade) which saves them a bundle of money.