Heat pumps warm Minnesota’s economy from the ground up

Central heating systems go all the way back to the ol’ wood burner in the middle of the room but have yet to progress beyond the rudimentary combustion of fossil fuel in a furnace or boiler. The lack of progress into more efficient systems cannot be explained away by the lack of alternatives because all along there’s been an elephant prancing around for attention in all our homes. Geo-exchange systems, driven by heat pumps have been around for years and are one of the most efficient ways to heat a home and they are a pretty good investment. And now the recovery package even provides large tax incentive for it too.

Relying on the market to separate the cream from the chaff and to drive innovation usually is a good bet. Back in the late 1970s and early 1980s JVC and Sony fought a bitter format war between their respective systems, VHS and Betamax vying for dominance. Betamax was initially widely perceived as the better of the two, offering higher visual and audio quality. Yet by 1981, U.S. Betamax sales had sunk to only 25% of all sales as VHS was gaining market share due to its longer tape time. Sony ultimately conceded the fight in 1988, bringing out a line of VHS VCRs of its own. Hurrah for the invisible hand!

In straightforward consumer products competition, society usually gets the best deal from the market place. But with more complex products sometimes entrenched interests, inertia, or the fear of the unknown inhibit the best product from reaching the consumer: it took far too long for hybrid cars to hit the streets.

What is a Heat Pump? Or is it just geothermal
Your first reaction to hearing “geo-exchange” and “heat pump” is most probably “what the heck are those?” or for those sort of in the know, “you can’t use the ground to heat our homes, it’s too cold in Minnesota!” For those of you in the former category, in a nut-shell, geo-exchange systems work by exploiting the earth’s constant temperature via a heat pump which pumps water or substitute through piping that runs through a building and then 8 or more feet beneath the ground. It essentially moves the heat from the earth into the home in the winter, and pulls the heat from the house and discharges it into the ground in the summer. The underground piping loops serve as a heat source in the winter and a heat sink in the summer.

Since these systems use the earth to heat and cool they are also called geothermal systems or ground source heat pumps. But whatever you call them, heat pumps do not require the ground to be hot because they can exploit the normal heat in the ground. Concentrating heat and moving it around is not something new. Air conditioners and refrigerators have been doing it for almost a century. A geo-exchange heat pump uses the same underlying science and technology as air conditioners. A well designed heat pump can concentrate the ground heat even in the middle of a Minnesota winter. A company in Appleton, MN has been making cold weather geo-exchange heat pumps for more than two decades. And yes, in the summer the very same heat pump will cool the house.

Efficient and Green
According to the Environmental Protection Agency (EPA), Geo-exchange heat pumps systems are the most energy efficient, environmentally clean, and cost-effective space conditioning systems available. Even the coldest climates, heat pumps are still cost effective compared to alternate systems. While the initial purchase price of a residential system is higher than that of a comparable gas-fired furnace and central air-conditioning system, it is more efficient, thereby saving money every month. For further savings, in the summer cooling period, the heat that is taken from the house is used to heat the water for free. In the winter, water heating costs can be reduced by about half.

To understand why the system is more efficient, a very efficient electric heater has a coefficient of performance (COP) of 1.0. This means that one unit of electrical energy will cause the heater to produce one unit of heat. But one unit of electrical energy can cause a heat pump to move more than one unit of heat from a cooler place to a warmer place. Ground source heat pumps have a COP that is typically in the range of 3.5-4.0. The same argument applies when comparing to gas furnaces. So even though gas energy is cheaper than electricity, the heat pump is still cost effective because of its high COP.

Oh, and wait, don’t forget the environmental benefits. Geo-exchange systems in both new and existing homes can greatly reduce energy consumption 50% to 75% compared to older or conventional replacement systems and thus has a corresponding decrease in emissions. Annual operating costs are lowest with geothermal heat pumps. Heat pumps are a viable option for current and to be homeowners. Not only do they save energy and money, they reduce emissions and provide indoor comfort at less cost to the environment. One might think that such efficiency gains come with a steep price tag but let’s do the numbers.

And Cost Effective Too!
While heat pumps are cost effective, it sometimes takes some figuring to see why. Most people when they first look at a heat pump get scared off because the installation price for a heat pump appears to be steep. There are two pieces of the costs to getting a geo-exchange heat pump installed; the cost of the heat pump and secondly burying a lengthy pipe into the ground that will act as a heat source or sink. This buried length of pipe is analogous to piping that you find on the back of refrigerators and freezers. For existing homes where there is not much open land this pipe has to be buried very deep and usually requires a well-digging rig.

Purchasing and installing a heat pump typically costs $9,000 to $12,000 for a 3500 sq foot home. Installing the buried ground piping can be another $10,000 to$14,000. But this is where the federal tax credits come in. As part of the recovery bill, Uncle Sam will give back 30% of the total cost of a heat pump installation. And most electric utilities will sweeten the deal further. After all the tax-credits and rebates heat pumps can still cost between $10,000 to $16,000, that is about one and a half times to twice as much as a furnace and AC. However the heat pumps can save $700 to $1000 per year for this 3500 square-foot house. This is at today low natural gas prices! If gas prices go up to $2 per therm or for oil heating the savings are around $2000 per annum.. On a cash flow basis the heat pump can pay back for itself in as little at 8 years.

But wait there is more. The most expensive piece of the heat pump, the piping is very durable, lasting more than 50 years. Studies show that houses with renewable sources of energy or savings can sell for up to 20 times the annual energy savings. Installing a heat pump could increase the value of the house by $15,000 to $20,000. The increase in value of the home by itself can pay for the heat pump!

Of course if heat pumps are installed in new construction, the buried piping costs are much lower and pay back times correspondingly shorter. Heat pumps and heat pump installation are still niche markets. As the market grows the costs will come down.

What should Minnesota Do?
Heat pumps have traditionally been marketed for large scale projects such as the Roseville Mall, Community centers, schools, and even universities like Ball State in Indiana, use heat pumps for their heating and cooling needs. The breadth of implementation speaks to its flexibility in application and is a testament to its soundness. In the past ten years geo-exchange heat pumps have finally started to move into private residences. But they are still quite rare in homes. This is despite that fact that an Appleton based company has been making cold climate heat pumps for the home for over twenty years.

So what’s stopping Minnesotans from enjoying the benefits of a tried and tested technology in their homes? Our own personal experience shows that the primary cause is lack of awareness. Most consumers are not aware of the value of heat pumps. But perhaps even more important, the heating and cooling contractors are not aware, not trained or interested in installing heat pumps. Part the problems is a legitimate fear of installing something new and then finding out that it does not work. Also heat pump installation bring groups of contractors together who don’t traditionally work together, HVAC contractors and well diggers. Like any nascent industry, inertia and lack of knowledge can stall growth.

But the heat pumps have a lot going for them. Residential heat pumps are a green industry where the core skills and technology are already in the marketplace. The technology has been around for many years and the can be retrofitted in most existing homes. Diverse skills such as HVAC technicians and well diggers can be leveraged for this industry. The federal government is already providing financial incentives. Promoting a heat pump industry would be an excellent way to push the green economy, create jobs and develop a new industry. Retrofitting only 10% of the houses in Minnesota with heat pumps can generate $3 billion in direct economic activity.

The key to developing a residential heat pump industry is disseminating knowledge. The state and local government organizations can do just that very cost effectively.

1. Community Colleges: Installing heat pumps does not require fundamentally new training. Custom designed short courses could rapidly bring HVAC technicians, general contractors and well diggers quickly up to speed.

2. State Government: The state through DEED Workforce Centers and county resources is already helping people find work by leveraging their existing skills. In difficult economic times the state can follow the federal governments lead and try to direct people in the housing and related industries towards the growing renewable industries like heat pumps.

3. Public Officials: Legislators and states constitutional officials have a powerful bully pulpit that can be effectively legitimize this new industry.

4. Local Government: Installing new green technologies can often get caught up in a code ambiguity zone and slow the process down. Sometime all that is needed is clarification of the code.

Minnesota can lead in heating homes from the ground up using heat pumps!