Geothermal Heat Pumps Strategic Renewable for NYC

It is time to revisit geothermal heat pumps, and the battle of renewable energy versus energy efficiency. It has been noted with some regularity on this blog that NYC Clean Heat, and its comrade in arms the NYSERDA MPP are destroying real estate values in NYC, and not contributing much to reducing GHG reductions. I was an early advocate for geothermal heat pumps as the single most strategic renewable technology for energy retrofits in NYC buildings, and in April of 2013, then Mayor Bloomberg finally commissioned a serious study of geothermal energy for New York.  We had been advocates (with my consulting firm DaBX) since 2011 at least in our PlaNYC2020 report, and then hurricane Sandy did its bit to promote geothermal heat pumps. It is time now to demonstrate why not only does geothermal have "certain advantages," but is actually the single most important strategic renewable energy technology in the city.

Multi-family Buildings and Geothermal Heat Pumps

In general, if you are looking at any building, energy that you can generate on-site with renewable energy technology (Site Derived Renewable Energy, or SDRE) has numerous advantages. Most importantly, financially, if you analyze long-term (say 30 years) cash flows, thirty years of no cost energy often beats out the "savings" of 15-25% that are achieved by most energy efficiency overhauls. This pays for the heavy capital commitment up front.

1. The first advantage is that you have no transportation losses.
2. A second efficiency factor is that because there are no transportation losses, you can often save the conversion to electricity and pure thermal technologies win the day, because heating and cooling are the larger part of the energy budget, often 75%.
3. On top of that, if you are operating with pure process heat, you have a pretty economical way of storing that either at high temperature (i.e. process heat from solar thermal), or as pre-heated hot water (from geothermal).

A geothermal heat pump is 400% efficient: for every joule of energy it uses (electricity), it returns 4. To take the simplest application in a building, for Domestic Hot Water (DHW), it was traditionally provided by a coil in the boiler, and the efficiency of such systems is typically in the range of 45-75%, in particular because those boilers were oversized relative to the need for hot water, and the need for hot water is year round.

Why the NYSERDA MPP marginalizes Renewable Energy (RE)

The NYSERDA MPP is built on a set of mistaken assumptions and foolish economics. It bundles a set of energy efficiency programs and incentivizes the building owner to deliver efficiency retrofits that score above (currently) 15% gain. It all but marginalizes renewable energy. It all results in owners trying to find the cheapest way to qualify for the incentives, and technologies are selected based on their marginal energy savings, just to get the incentives, in terms of advantaged financing etc. The program focuses on energy efficiency (EE), which always yields high returns at first,  but suffers diminishing returns later, and it is biased against renewable energy (RE) projects, which are capital-intensive at first, but come with a "long tail" of free energy.

The Math of Geothermal Heat Pumps

Here is the typical math for a geothermal heat pump in the DHW application - based on the assumption that the prices for the BTU inputs (oil, gas, electric) are all the same:

1. Old situation: DHW from a coil in the boiler - oil/steam, usually 60% efficient (between 45-75%)
2. New situation: DHW from geothermal heat pump (electric, 400% efficient), and natural gas secondary heat cum backup at 95% efficient, in about 70/30 proportions, so that the combined efficiency is 0.7*400+.3*.95 =280%+29%= 309% efficient.
3. Let's round it off: 60% efficient vs 300% efficient
4. Therefore, if the Btu pricing was all the same that would be the comparison, meaning in case OLD our marginal energy cost is 1.67x the Btu demand, and in case NEW it is 0.33x the Btu demand. In other words the marginal Btu input of the new system is ca 20% of what it would be under the old system.
5. In real life this picture is then complicated by the pricing differences between oil/gas/electric,  but the point is clear, the innate efficiency of the solution is staggering.
6. We should emphasize again, if we can generate any of our own electricity, with wind energy or solar PV, we can store it as pre-heated hot water, and get a higher return than selling it back to the utility.

Geothermal Heat Pumps: The Math of Effective Btus

Again, this beautiful equation will evidently have different outcomes depending on the actual pricing of the different energy sources.

1. We were buying oil to heat the hot water, and the Btu value of #6 fuel is approximately 153,000 Btu per gallon. In the winter of 2014, in NYC, a gallon of #6 goes for $4.00, therefore, the cost per 1000 Btu is 2.61 cents.
2. We are substituting this with electricity, which in the winter of 2014 in NYC, goes for about $0.25 per KwH, and the thermal value of a kWh is about  3,214 Btu. The cost per 1000 Btu therefore is ca. 7.78 cents; and with natural gas as a secondary fuel, which goes for about $1.25 per therm (100,000 Btu) and therefore costs ca 1.25 cents per 1000 Btu.
3. For argument's sake, we needed 1,000,000 Btus for a given quantity of DHW, and the comparison now becomes: Old style (oil/steam): 1.67 x $0.0261 x 1000 = $43.59, and New style (geothermal plus gas): (0.7 x 7,78 x .25 + 0.3 x 1.25/.95) = 1.36 + 0.39 = 1.75 cents per 1000 Btu, or $17.50 for 1,000,000 Btu.
4. Now, if we can generate some of that electricity ourselves with a wind turbine or with solar PV, we have the benefit of storage, which gives us a higher return than selling it back to the grid, and we are compounding our savings.
5. In short, most building owners got taken to the cleaners when they invested lots of money in converting to natural gas, and made some small savings and efficiency improvements, but long-term they are still at the whim of energy prices. Their buildings have become LESS resilient. With DHW being 30-50% of Btu requirements in the typical apartment building, the geothermal solution would be a hands down winner, and perhaps a first step towards a mostly renewable heating and cooling solution...
6. From the standpoint of clean energy and reducing GHG emissions, we are now servicing 70% of this Btu requirement (DHW) with electrically driven geothermal heat pumps, with 400% efficiency. In short, 75% of the 70% is GHG-free, representing over 50% of this requirement is now free of GHG-emissions.

What really happened...

The conversion to natural gas under the NYC Clean Heat program, combined with the NYSERDA MPP has been neutral event for GHG-emissions because, while gas burns cleaner, the production and transportation losses of methane make it about as bad as coal for overall air quality, although within city limits there would be some reduction of smog.

Only very few buildings made the conversion to geothermal hot water systems, and when they did, these systems were most often wrongly designed, as just water heaters, and not with a view to pre-engineering whole building energy solutions, in which boilers might eventually be replaced with a solar thermal plant, at most with only a simple boiler for backup.

In most cases, conversions were from oil to gas, which reduced building resiliency, for we are now in a city that is wholly dependent on a single fuel, and if you watched the news tonight, one pipeline explosion could cause a tremendous amount of havoc, as they are finding out in the Mid West.

Conclusion

Energy efficiency programs mean that building owners are paying for making energy from the grid more economical, instead of investing in their properties and generating their own energy with (mostly) thermal technologies. Though finally geothermal heat pumps seem to be getting some more recognition, it is clear again that energy efficiency gets prioritized by current programs at the expense of renewable energy, and ultimately to the financial detriment of building owners.

Baucus Energy Tax Reform Misses with GHG-emissions Reduction

The Baucus Energy Tax Reform Proposal, which has reduction of GHG-emissions as its focus, risks aggravating the very problem it is trying to cure. As drafted, for all its merit, and precedent-setting simplification, it would exclude an entire class of technology that offers more bang for the buck in GHG-reduction: all forms of thermal technology that can be deployed at the demand-side of the grid.

The proposal limits itself to addressing electricity generation, and production of transportation fuels. In other words, it limits itself to addressing the production of energy at the supply side of the grid, and thereby reinforces the grid model, at the very time that technologically we are capable of building microgrids, and net-zero or near-zero buildings (including retrofits), and because of the increasing demand for building resiliency, we should be stimulating more Site Derived Renewable Energy (SDRE), for that eliminates at least one energy conversion (from whatever to electricity), as well as the transport problem for either gas, or oil, or electricity.

Net-zero, Near-zero, Thermal Energy to the Rescue

The conversion to electricity goes with energy losses, as does its transportation, yet evidently it has redeeming value because of the ease of distribution, but the quiet revolution that is going on for the last decennia is the consistent growth and profitability of Net-Zero Energy Building (NZEB) construction. With natural gas it is already becoming an accepted fact that the production and transportation losses are so significant, that it is just as bad as coal on a system-wide basis.

The next frontier is Near-Zero Energy Retrofits, and in all cases the difference between mere energy efficiency (typically with a 20-30% reduction of energy bills), and any solution that maximizes the use of renewable energy technologies, both active and passive (Site Derived Renewable Energy - SDRE), is that projects can achieve 70/80/90% reductions in Green House Gas (GHG-emissions) with SDRE, and be absolutely economical. The extreme example is the Zenesis house, but in general Near-Zero Emissions is a tremendous achievement for existing construction, and any retrofit achieving over 50% GHG Emission Reduction should qualify.

The key technologies are thermal, both active and passive, including solar thermal and geothermal, and harvesting process heat from either the sun directly or from the ground with a ground source heat pump. The normal transportation losses with process heat do not apply if you are using the energy on-site, and you are saving energy conversions, plus you have an easy way of storing the energy in either high-temperature process heat storage or low temperature pre-heated Domestic Hot Water, as well as various other related, passive solutions. So the batteries are cheap, whereas with the centralized grid, and electricity in general, batteries are expensive, and very environmentally unfriendly.

Technological Non-neutrality and More GHG-emissions

The stated goal of technology neutrality would therefore not be achieved by this proposal, for the most efficient solutions, thermal technologies at the demand side, i.e. in buildings would be excluded from this tax treatment, whereas they would be big winners if the new technology neutral regime applied to them, since they produce far more bang for the buck than the grid-based alternatives. For example solar thermal is about 500% more efficient in converting the Sun's energy, and if you add the benefit of the ease of storage for off-peak use, that advantage becomes even greater. Plus, by nature it does not produce the fluctuations on the grid that come from solar PV.

In short, this proposal would exclude the very technologies that offer the most bang for the buck (the words used in the proposal staff discussion documents), and the greatest reductions in GHG-emissions, as well as reduce demand on the grid, and improve building resiliency, all of which are highly desirable outcomes today. Especially greater resiliency is of extreme relevance for the coastal communities and many other areas, where the reliability of the grid is questionable. The current proposal would reinforce the centralized generating model at the exact time when the nation needs more decentralization.

Building retrofits:
reducing GHG-emissions by excluding energy efficiency and including SDRE

Mere energy efficiency retrofits should probably be excluded from the tax incentives, for they are an indirect subsidy to the energy companies, not the building owners. Moreover, they are generally a solution with diminishing returns to property owners, not to energy companies. They typically achieve only 20-30% energy savings, and maybe the energy companies should sponsor them as customer retention programs. What should be included is Site Derived Renewable Energy (which may include energy efficiency upgrades). If these incentives are structured correctly, there will be a huge increase in building level renewable energy retrofits, with all the desirable outcomes noted above: greater resilience, reduced demand on the grid.

The Audit Problem: Verifying Results of GHG-reductions

The staff discussions of the energy tax proposal reflect concern about verification for retrofits on the demand side of the grid. Verification does not need to be hard, for long term lenders have a similar interests. Requiring audited GHG-reductions based on clear standards are the answer, and the EPA's Energy Star Portfolio Manager provides the framework.

Conclusion: net-zero and near zero buildings reduce GHG-emissions faster

There is a huge potential for GHG-reduction through on-site energy generation with renewable technology (SDRE), in the form of net-zero or near-zero construction and retrofits. Retrofits will obviously be the larger market. The more these solutions gain traction, the more demand will be removed from the grid and building resiliency will increase. As long as these proposed simplifications of the energy tax structure are limited to the supply-side of the grid, they will greatly impede the most promising technologies available, and they will aggravate the problem of technology neutrality which they are trying to solve. The most bang for the buck in GHG-reduction is on the demand side, with net-zero and near-zero construction and retrofits.