Benefits and Issues to Consider for Shifting the

Ground HeatExchanger Cost to a 3rd Party or Utility Tariff

 

•      Energy Efficiency and Energy Efficiency Programs:

–     Increasing efficiency reduces kW•hr and MCF•day revenues for the utility (usage or volumetric pricing) but lowers the costs for consumers

•      Demand Reductions and DSM Programs, kW and MCF, are much harder to obtain; but are beneficial:

–     Benefits of demand reduction go across the stakeholder chain

•      back through the RTO & ISO to generation and or production

•      cleaner air and reduced particulates

•      new revenues

•      WHAT DO GROUND SOURCE HEAT EXCHANGERS (GHEX) DO?

–     SOMETHING THAT COAL, NATURAL GAS (MCFs), NUCLEAR, WIND, SOLAR, HYDRO, BIO-FUELS, AND ELECTRIC kW  CANNOT DO…MOVE BTUs

–     DIRECTLY MOVE BTUs TO CONDITION THE SPACE AND THE DOMESTIC HOT WATER FOR PEOPLE

–     ALWAYS AVAILABLE, 24X7X365

•      The Historical Ground Source Market:

•       Currently only those capable purchase Ground Sourced Systems!

  • How does one make it “affordable”; by using life cycle costing!

•      However, how do those with a modest income get a Ground Source system?

–     3rd party financing or a rate based tariff by the utility!

–     Copy solar PV business model!

•      Fossil Fuel, Particulates and CO2e reductions from a GHEX

–     12,000 Space and or Water BTUs using a GSHP reduces fossil fuel inputs at the electric power plant by 12,122 BTUs (due to the 3.23 to 1 loss from the Carnot cycle)

–     And the GHEX (with a COP of 4) reduces fossil fuel needs of an additional 9000 BTUs from the earth using 3000 BTUs (or 0.88 kW) from the utility

–     For a total of 21,122 fossil fuel BTUs avoided and conserved.

•      Options for Shifting the Higher First Cost of a Ground Heat Exchanger from the Consumer           to a 3rd Party:

–     On-Bill financing by Utility

–     On-Bill payments for 3rd Party financing through the Utility

–     Offer a Utility Tariff for the GHEX; just like the generating plant or natural gas distribution

–     3rd Party financing for the GHEX (requires sophisticated financiers)

–     PACE (FHFA removed their objections (Investor Confidence Project))

–     Debt

–     Operating lease

–     Capital lease

–     Tariff, Thermal Services Agreements, PPA, Easements of Record

–      LPs, MLPs and REITs (the GHEX is essential to space conditioning water heating)

–     Rural Electric Coops may use the USDA Energy Efficiency and Loan Program

•      Tariff versus 3rd Party financing

–     Tariffs are the tool that brought us near UNIVERSAL ACCESS to grid electricity

  • Loans terms require meeting underwriting standards that most people do not or will not meet

–     Tariff terms entitle a utility to disconnect for non-payment

  • Loan terms require collateral arrangements and a lien to deal with non-payment

–     Tariff default rates are ~10X lower than the charge-off rate for consumer lending

–     Tariff terms are transferable automatically and binding on successive customers

  • Loan terms are transferable if the lien on the collateral asset can be transferred

–     Tariff terms are compatible with the prevailing utility business model

  • Loans are a financial product subject to banking regulations

•      Commercial and residential customers predominantly purchase energy for spacing         conditioning (i.e. comfort).  A Utility Company’s deployment of a decentralized “Ground Source” renewable energy source and storage system strategically enables a Utility to:

–     Convert “Fuel Revenues” into a NEW rate base energy tariff, which has NO Fuel Revenues, and therefore organically grow the Utility’s earnings with existing customers while potentially not impacting the Customer’s total current energy cost.  The strategic renewable offering dramatically improves the Utility’s “gross profit” margin. 

–     The opportunity to invest in a new long life asset class (ground source loops @ 50 years) which possess the potential to actually appreciate in value given that traditional “fossil fuels” increase in price due to traditional inflationary pressures

–     The flexibility to create innovative energy offerings such as premium “Green Power”, “fixed rate” and “LEED Neighborhood Developments” energy contracts for geo portion, individualized customer fuel hedges, etc.

–     Generate positive Public Relations via an expanded renewable energy offering at consumer revenue neutral energy prices

–     Assist Governmental customer in achieving Federal Energy mandates while ironically increasing Utility earnings.

–     Further diversify the Utility’s Generation mix portfolio.

–     Reacquire existing Peak Generation Capacity at a negligible cost versus typically current Demand Side Management incentives.

–     Further diversify the Utility’s Generation mix portfolio.

 

•       Which of the below is the best long term thermal customer?