Geothermal takes root in homes around Kansas City

Monday, March 1, 2010 | 12:01 a.m. CST

KANSAS CITY — Drill, baby, drill!

The rig tearing into the backyard of a Pleasant Hill home last week would have brought a smile to any oilman's face, except for one thing: It was drilling holes for a geothermal energy system.

The rig's owner, Evans Energy Development of Paola, Kan., did get its start finding oil and natural gas. But drilling for geothermal heat pump systems accounted for 80 percent of its revenue last year.

"It's been good for business," said Scott Evans, the company's owner.

As the shift in his business shows — along with other projects in and around Kansas City — you don't need a geyser to use geothermal energy.

In fact, the Midwest's underground temperatures — in the mid-50s year-round — are ideal for helping heat and cool homes and commercial buildings. Drill some holes or dig a trench, run pipes to circulate water or other fluid underground, hook them up to a heat pump and you're in business.

The Raytown School District has used geothermal energy for a decade, and the University of Central Missouri recently began using it for many of its classrooms. More homes around the area are being equipped with geothermal heat pumps, including two built by Habitat for Humanity. And the Army's Fort Riley base in Kansas is starting to use them.

The technology, which has been around for 60 years, can slash heating and cooling bills by 40 percent or more. That means annual savings of anywhere from $700 to $1,300 for a 2,000-square-foot home.

So why do geothermal heat pumps provide only about 1 percent of heating and cooling in the nation's buildings? Because before you can save a dime on fuel costs, you have to pay a lot for equipment and installation, often double the price of an efficient central air conditioner and gas furnace.

Sales of the systems have nearly doubled in the last two years, to an estimated 93,000 units last year in North America. A big factor is a federal tax credit, enhanced last year as part of the stimulus package, good for 30 percent of the cost of a home system. The industry expects sales to keep rising and has set an ambitious goal of 1 million geothermal heat pumps sold annually by 2017, the year after the credits expire.

"We have a solid foundation to move forward on now," said Dan Ellis, chief executive officer of Climate Master Inc., the world's largest maker of geothermal heat pumps. "This is really going to take off."

Others aren't so sure, especially with regard to residential use, which makes geothermal a perfect example of America's renewable-energy quandary: A green future isn't going to come cheap, and if it's too expensive it may never happen. Without sufficient foresight or incentives — tax credits, a lasting rise in fossil fuel prices, or both — people may never adopt alternatives widely enough to curb oil imports and greenhouse gases.

George Schluter, owner of area builder GWS Homes, said some of his customers had installed geothermal heat pumps, figuring that with the tax credit they made economic sense.

But he questions whether they'll ever be big in the new-home market, where most of the pumps were sold before the construction slowdown. Even when the economy recovers, he said, home buyers will want other features. The immediate satisfaction of granite countertops, a deluxe bathroom or a finished basement could win out over long-term energy savings.

For some considering heat pumps, just the idea of using less energy is worthwhile. Kristin Riott of Prairie Village, an avid environmentalist, a couple of years ago wanted a more efficient way to warm and cool her home and picked a geothermal heat pump that cost $21,000 to be installed. She figures the energy savings will pay back the investment in 15 years, a good enough return for her.

"I would do it again," she said.

School districts, colleges and some other commercial building owners also have found the systems worth considering even without a big tax break. Besides their energy savings, the systems can be less expensive to maintain because of fewer moving parts and a 25-year expected lifespan, longer than most other heating and cooling equipment.

The University of Central Missouri has geothermal heat pumps up and running for three buildings as part of the school's $36 million energy efficiency plan. Miles of plastic pipe filled with liquid thread through 450-foot-deep holes drilled into the earth.

The Raytown School District started to go geothermal in 2000, and about 80 percent of its schools and space are now heated and cooled with geothermal heat pumps. The work was financed with bonds, and the savings from the beginning have been higher than the bond payments.

For homeowners it has been trickier, unless they had deep pockets to pay for the systems. Folding the cost into mortgages was difficult because appraisers have been reluctant to increase the value of real estate because of energy-efficient equipment.

But the Appraisal Institute, a trade group, recently said it had begun training appraisers to include the value of such improvements. And Fannie Mae, which buys mortgages, plans to announce incentives this summer for making energy-savings improvements.

The federal tax credit also gives homeowners extra help. Commercial buildings can get 10 percent credit with no cap when buying a geothermal heat pump. But consumers buying one for a residence get a 30 percent credit, with no cap as long as the heat pump qualifies for the high-efficiency Energy Star designation.

"That tax credit is really going to launch it," said Dave Wagner, manager of commercial and residential channels for Kansas City Power & Light, who installed a geothermal heat pump in his home in 1985.

Buying energy-saving equipment always makes the most economic sense when existing furnaces, air conditioners or heat pumps need to be replaced anyway. In those instances the tax credit, which will be available through 2016, makes geothermal a more serious contender.

Here's one example: A geothermal heat pump for a 2,000-square-foot home can cost $15,000 to $18,000. By comparison, the cost of a high-efficiency air conditioner and gas furnace would be about $8,000.

The geothermal heat pump could save $700 a year in heating and cooling expenses, so without the tax credit it could take 10 to 14 years to make up the difference in up-front costs, longer than the average homeowner stays in a house.

But you can slash the payback time in half because of the 30 percent federal tax credit. If other incentives are available — KCP&L customers can get an $850 rebate, for example — the payback time is even less.

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