ECONOMICS ECONOMICS of Ground-Source Heat of Ground-Source Heat Pumps Pumps Geothermal Resources Geothermal Resources Council Council Reno, Nevada October, 2008 Reno, Nevada October, 2008 John D. Geyer, CGD John D. Geyer, CGD John Geyer & Associates, Inc. John Geyer & Associates, Inc. Vancouver, WA Vancouver, WA
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ECONOMICS of Ground-Source Heat Pumps Geothermal Resources Council Reno, Nevada October, 2008 John D. Geyer, CGD John Geyer & Associates, Inc. Vancouver,
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ECONOMICSECONOMICS of Ground-Source Heat of Ground-Source Heat
are Flexible and Adaptiveare Flexible and Adaptive
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Abridged answer to: “Why Abridged answer to: “Why GSHP?”GSHP?”
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How can GSHP be less costly?How can GSHP be less costly?
Electricity is measured in “kilo-watt hours” ( kWh )Electricity is measured in “kilo-watt hours” ( kWh )Heat is measured in “British Thermal Units” ( Btu )Heat is measured in “British Thermal Units” ( Btu )
1 kWh = 3,413 Btu1 kWh = 3,413 Btu
Efficiency measures Thermal Output v. Electrical InputEfficiency measures Thermal Output v. Electrical Input
Heating Efficiency is expressed as “ COP ”Heating Efficiency is expressed as “ COP ”Cooling Efficiency is expressed as “ EER ” or “SEER” Cooling Efficiency is expressed as “ EER ” or “SEER”
All multiply thermal output from 1 unit of Grid Power. All multiply thermal output from 1 unit of Grid Power.
== CFM x 1.08 x T.D.CFM x 1.08 x T.D.Volts x Amps x P.F.Volts x Amps x P.F.
C.F.M. C.F.M. = Cubic Feet (of air) per minute= Cubic Feet (of air) per minuteT.D. T.D. = Indoor v. Outdoor Temp Difference, Fahrenheit= Indoor v. Outdoor Temp Difference, FahrenheitP.F. P.F. = Performance Factor= Performance Factor1.08 1.08 = Constant for concerting specific heat & density of Standard Air = Constant for concerting specific heat & density of Standard Air
into Btu /° F/ hinto Btu /° F/ h
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Heating EfficienciesHeating Efficiencies
Electric Resistance Electric Resistance = 1.0, less duct loses= 1.0, less duct loses
Nat’l Gas Furnace Nat’l Gas Furnace = 0.76 to 0.90, less age= 0.76 to 0.90, less age
Oil-Fired Furnace Oil-Fired Furnace = 0.65 to 0.8, less = 0.65 to 0.8, less cleanlinesscleanliness
Air Source Heat Pump Air Source Heat Pump = COP ~1.8 to 2.3= COP ~1.8 to 2.3
Ground Source Heat PumpGround Source Heat Pump = COP ~ 3.0 to 4.5= COP ~ 3.0 to 4.5
Geo Heat Pumps use grid power to ONLY run:Geo Heat Pumps use grid power to ONLY run:– CompressorCompressor - Loop Pump - Loop Pump - Air fan- Air fan– Heat is collected from the earth and concentrated in Heat is collected from the earth and concentrated in
vapor compression cycle, w/o resistance or vapor compression cycle, w/o resistance or combustioncombustion
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Geo Heat Pump with COP = 3.5Geo Heat Pump with COP = 3.5
Consumption of 1 kWh or 3,413 Btu yields:Consumption of 1 kWh or 3,413 Btu yields:
3,413 x 3.5 3,413 x 3.5 = 11,945 Btu’s = 11,945 Btu’s 11,945 - 3,413 11,945 - 3,413 = 8,532 from the = 8,532 from the groundground
71% of Delivered GSHP Energy is Clean, 71% of Delivered GSHP Energy is Clean, Green, Renewable, Sustainable & Green, Renewable, Sustainable & LocalLocal ! !
– ““Pump & Dump” systemsPump & Dump” systems– No consumption; No additionsNo consumption; No additions– ““Once-through” FlowOnce-through” Flow
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GSHP Systems, Cont’d. GSHP Systems, Cont’d.
Surface Water Heat Exchanger Surface Water Heat Exchanger – Pond / Lake Loops (closed loops in water)Pond / Lake Loops (closed loops in water)
– Direct Contact PlatesDirect Contact Plates
Primary / Secondary Loops with Very Large Primary / Secondary Loops with Very Large CapacityCapacity– ““Poop Loops” on Waste Water Treatment PlantsPoop Loops” on Waste Water Treatment Plants
– Environment (“Walks the Talk” without help)Environment (“Walks the Talk” without help)
One GSHP Home (3-ton) equals GHG value of : One GSHP Home (3-ton) equals GHG value of : – 1 Acre of Trees Planted1 Acre of Trees Planted– Taking two cars off the road, foreverTaking two cars off the road, forever
– Low pressure air ducts, 2-Pipe hydronic distribution Low pressure air ducts, 2-Pipe hydronic distribution system system
User/Tenant BenefitsUser/Tenant Benefits– Local Control, 24/7 Comfort, High IAQ, Low Utility Local Control, 24/7 Comfort, High IAQ, Low Utility
BillsBills– Flexible equipment placement; Easy expansion or Flexible equipment placement; Easy expansion or
layout layout
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Improved Aesthetics, Security & Reduced Noise
• No Exterior Penetrations
• No Chillers or Boilers
• No Rooftop Units
• No Outdoor Condenser or Fan
Improved Comfort
• Lower Air Delivery Speed
• Lower Air Delivery Temperature
• Even Temperatures, Day & Night
• Lower Humidity
Improved Indoor Air Quality
• Operates on Principle of Natural Heat Transfer
• No On-site Combustion Products or Venting
• Less Infiltration
• Full Circulation
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Economics of GSHP DesignEconomics of GSHP Design
Containing Cost by DesignContaining Cost by Design– Keep it SimpleKeep it Simple - Keep Components Small- Keep Components Small– Avoid Over-sizingAvoid Over-sizing - Do not Over-control- Do not Over-control– Accurate Load CalcsAccurate Load Calcs - Balance Loads, Flows & - Balance Loads, Flows &
Loops Loops
Cost Reduction OpportunitiesCost Reduction Opportunities– No Boilers, Chillers or Cooling TowersNo Boilers, Chillers or Cooling Towers– Small Mechanical Room (essentially a pump center)Small Mechanical Room (essentially a pump center)– No Large Ducting; No Roof Loads; No Roof No Large Ducting; No Roof Loads; No Roof
PenetrationsPenetrations– Basic Controls’ systemBasic Controls’ system
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Operating Cost SavingsOperating Cost Savings
With COP >3 (~3.5) and EER> 13 (~17), Electricity runs With COP >3 (~3.5) and EER> 13 (~17), Electricity runs only:only:
Compressor Ground Loop Circulating PumpCompressor Ground Loop Circulating PumpForced-air Circulating Fan or Hydronic Loop pumpsForced-air Circulating Fan or Hydronic Loop pumps
Refrigeration Cycle maintenance amounts to changing filters, Refrigeration Cycle maintenance amounts to changing filters, minor control adjustments and change-out of failed minor control adjustments and change-out of failed equipment.equipment.
No water, chemical or burner maintenance for boilers, No water, chemical or burner maintenance for boilers, chillerschillers
No cooling towers or outdoor equipment to secure.No cooling towers or outdoor equipment to secure.
Short, small duct runs require minimal cleaning and have Short, small duct runs require minimal cleaning and have fewer dampers, sensors and other moving parts.fewer dampers, sensors and other moving parts.
““Energy Efficiency Ratio” (EER) and Energy Efficiency Ratio” (EER) and Coefficient of Performance (COP) measure Coefficient of Performance (COP) measure output of Btuh relative to watts (power) output of Btuh relative to watts (power) used. used.
High-Efficiency, Extended-Range, Water High-Efficiency, Extended-Range, Water Source Heat Pumps start at COP of 2.5 & Source Heat Pumps start at COP of 2.5 & EER of 13.EER of 13.
Potential performance of each climbs to Potential performance of each climbs to double the low number (i.e. to near 5 and double the low number (i.e. to near 5 and 26). 26).
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SEER & HSPFSEER & HSPF
““Seasonal Energy Efficiency Ratio” and Seasonal Energy Efficiency Ratio” and “Heating Season Performance Factor” “Heating Season Performance Factor” compare Air-Air Heat Pumps and adjust compare Air-Air Heat Pumps and adjust performance for de-rating in critical performance for de-rating in critical temperatures.temperatures.
Neither applies to GSHP, as ground loops Neither applies to GSHP, as ground loops and surface waters are largely unaffected and surface waters are largely unaffected by outdoor surface temperature. by outdoor surface temperature.
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Life Cycle Cost AdvantagesLife Cycle Cost Advantages
LCC is “All-in Costs over Total Service Life”, LCC is “All-in Costs over Total Service Life”, discounted to present dollarsdiscounted to present dollars
GSHP Advantages includeGSHP Advantages include
– Low Energy and Demand Costs Low Energy and Demand Costs – Low Maintenance CostLow Maintenance Cost– Extended Equipment LifeExtended Equipment Life
No de-rating for Elevation or Age of UnitNo de-rating for Elevation or Age of Unit
Re-usable ground loop after 1Re-usable ground loop after 1stst Heat Pump Heat Pump life life
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Financing MethodsFinancing Methods
Standard Loan for new construction cost (< down payment)Standard Loan for new construction cost (< down payment)
Standard Loan with “Shared Savings” feature (utility source)Standard Loan with “Shared Savings” feature (utility source)
Financing sources may include banks, financial orgs, utilities and 3Financing sources may include banks, financial orgs, utilities and 3 rdrd parties. parties.
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GSHP Investment CriteriaGSHP Investment Criteria
Simple Payback Period (of incremental cost)Simple Payback Period (of incremental cost)
– Additional Cost / Annual Savings = No. of YearsAdditional Cost / Annual Savings = No. of Years– Typically 3 to 8 yearsTypically 3 to 8 years
Net Present Value (NPV)Net Present Value (NPV)
– Common comparison basis with other systemsCommon comparison basis with other systems– Sum of future savings, discounted to present with Sum of future savings, discounted to present with
interest allowance, less added cost-to-buildinterest allowance, less added cost-to-build– Typically higher than alternative HVAC systemsTypically higher than alternative HVAC systems
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Internal Rate of ReturnInternal Rate of Return
- - True Interest Rate returned over project life: True Interest Rate returned over project life:
- aka “Return on Investment” or ROI- aka “Return on Investment” or ROI
- Added cost-to-build (if any) is offset by - Added cost-to-build (if any) is offset by extended service life and low Life Cycle extended service life and low Life Cycle CostCost
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Actual Yields depend on Design Actual Yields depend on Design Energy Efficiency Energy Efficiency
– Build at -10 % to +20 % of Alternative Cost, Build at -10 % to +20 % of Alternative Cost, IF DESIGNED RIGHT !IF DESIGNED RIGHT !
– 2+ x Service Life, without High Repair Rate (25 2+ x Service Life, without High Repair Rate (25 Yrs)Yrs)
– 10 % to 30 % of Alternate System Maintenance 10 % to 30 % of Alternate System Maintenance Costs Costs ($0.08 - $0.15 / sf / yr) ($0.08 - $0.15 / sf / yr)
– Lowest Life Cycle Cost, by factors of 2 – to - 5Lowest Life Cycle Cost, by factors of 2 – to - 5– 30% to 60% Overall Annual Cost savings 30% to 60% Overall Annual Cost savings – 3 - 8 year payback of Incremental Cost-to-Build 3 - 8 year payback of Incremental Cost-to-Build
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What’s in it for the Utility? What’s in it for the Utility?
Utility EffectUtility Effect– ““All Electric Load”, All Electric Load”,
– - 20% to - 50% Energy use - 20% to - 50% Energy use
– - 50% to -75% Demand Reduction- 50% to -75% Demand Reduction ( 0.9 to 1.2 kW / ton v. 2.5 to 4 kW / ton )( 0.9 to 1.2 kW / ton v. 2.5 to 4 kW / ton )
– > 50% Run Time; hence, higher Load > 50% Run Time; hence, higher Load FactorFactor
– Happy Customers who don’t Switch FuelsHappy Customers who don’t Switch Fuels
– Peak Service Interruption CompatibilityPeak Service Interruption Compatibility
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Why not yet Mainstream?Why not yet Mainstream?
““Btu Recycling” Not Taught in Engineering SchoolsBtu Recycling” Not Taught in Engineering Schools
End-User and Environmental Savings mean fewer End-User and Environmental Savings mean fewer $$$$ for utilities and HVAC industry$$$$ for utilities and HVAC industry
– Cheap, Contractor-grade equipment is by-passedCheap, Contractor-grade equipment is by-passed
– Minimal Repair / Replacement Business for local HVACMinimal Repair / Replacement Business for local HVAC
– GSHP Savings don’t count for Renewable Portfolio Stds.GSHP Savings don’t count for Renewable Portfolio Stds.
– Investor-owned Utilities like things they can Rate-BaseInvestor-owned Utilities like things they can Rate-Base
– Aggregation of GHG Savings not yet authorized as Proxies Aggregation of GHG Savings not yet authorized as Proxies in Emissions’ Trading market in Emissions’ Trading market
AMR-enabled changes to Billing FormatsAMR-enabled changes to Billing Formats– Time of Use Energy Pricing (skip Peak Hours)Time of Use Energy Pricing (skip Peak Hours)– Residential Demand/Load Charges (“Demand Ratchet”) Residential Demand/Load Charges (“Demand Ratchet”) – Leverage optional “Service Interruption” Payments Leverage optional “Service Interruption” Payments
Penalty Avoidance in Sustainable Energy Penalty Avoidance in Sustainable Energy CommunitiesCommunities– LEED compatibilityLEED compatibility
– Building Permit Review thresholdsBuilding Permit Review thresholds
Compliance with Fed E.O. 13124 & local “Green” regsCompliance with Fed E.O. 13124 & local “Green” regs
Payment for GHG Emission ReductionsPayment for GHG Emission Reductions
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Thank You ! Thank You ! for Your Attentionfor Your Attention