GeoHuddle - Community Geothermal Heating and Cooling Systems

8/9/2019 GeoHuddle - Community Geothermal Heating and Cooling Systems

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Shared Community

Geothermal Heating and Cooling Systems3/24/2010

Climate Leadership Challenge at the University of Wisconsin - Madison

Author: Steve Faulkner, CEO and cofounder of GeoHuddle

Significant Contributor: Mike Major, CTO and cofounder of GeoHuddle


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Project Overview

2010 GeoHuddle LLC1www.geohuddle.com

1 PROJECT OVERVIEW1.1 SummaryGeoHuddle is a company founded by Steve Faulkner and Mike Major that develops large-scale ground source heat pump

systems to supply the heating and cooling needs of residential neighborhoods. Ground source heat pumps (GSHP) take

advantage of constant temperatures several feet underground to heat and cool homes, eliminating the need for highcost, high energy use furnaces and air conditioning units. An average GeoHuddle customer can see annual utility bil

reductions of up to 79% and cost savings of up to $1900. GSHPs are currently used in a few commercial buildings and

residential units. They are not more widely used because of high equipment and installation costs. GeoHuddle

eliminates this barrier by supplying all of the capital needed for the installation of GSHP systems in a community.

Individual homeowners pay for the use of GeoHuddle systems similar to other utilities like natural gas, water, and

electricity. Even after charges from GeoHuddle, the customer will still see significant utility cost reductions. Further

details of GSHPs and GeoHuddles business plan can be found in sections 2 (Background Review), 4 (Financial Feasibility)

and 5 (Distribution).

1.2

Potential to Mitigate Climate ChangeMany people are focused on improving methods to supply energy in order to achieve 50 to 80% emissions reductions

necessary to mitigate the effects of climate change (IPCC, 2007). Energy consumption and demand must also be

considered. As an efficiency measure, GSHPs have a huge potential to decrease the CO2 emitted by buildings by

decreasing total energy use. GSHPs do not directly produce any emissions or energy, but rather improve heating and

cooling efficiency by capturing a portion of thermal energy stored in the earths surface. The International Energy

Agency found that employing heat pumps worldwide has the potential to reduce global carbon emissions by 8%

(International Energy Agency Heat Pump Centre, 2008). In reality, GSHPs may never reach full dissemination, but it

illustrates the large impact that simple energy efficiency measures can have on CO 2 emissions. Based on GeoHuddle

own analysis in section 3.3, the U.S. could potentially reduce its CO2emissions by 6.2% through the adoption of GSHPs

Each individual household that installs a GeoHuddle GSHP system will cut their emissions by 15.7%. Detailedexamination of the environmental impacts can be found in section 3 (Environmental and Social Impact).

National Potential:6.2%of the U.S. CO2 emissions

GeoHuddle Emissions Reductions Summary

Individual:15.7%of the average household CO2 emissions1.3 ImplementationGeoHuddle business plan initially will be implemented over one year using funds and office space provided to the

winner of the Climate Leadership Challenge. Initially the focus will be developing cost and pricing plans, custome

contracts, and professional media for pitching to investors and developers. After 3 months, we will begin meeting with

developers and investors interested in GeoHuddle. After 7 months, we plan to have the first contracts signed. After 9

months, the first system installations can begin. More details on implementation can be found in section 6 (Project

Timeline), 7 (Team), and 8 (Award Budget).


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Background Review


2 BACKGROUND REVIEW2.1 Simple Heat Pump DesignA heat pump is a device that moves heat from one location (source) to another (sink). A simple heat pump consists of

four components: evaporator, compressor, condenser, and expansion valve. A working fluid, such as water or glycol

absorbs energy from the the source, which is subsequently removed in the condenser. Figure 2.1 shows a diagram ohow a basic heat pump operates.

Figure 2.1 Heat Pump Diagram

Source: (International Energy Agency Heat Pump Centre, 2008)

2.2 Ground Source Heat Pumps2.2.1 Basic DesignA GSHP uses the earth as a constant temperature reservoir. The ground acts as both a heat source and a heat sink. This

allows GSHPs to cool and heat the air in a building. This results in annual net zero energy use from the ground, since anyenergy removed during heating is reabsorbed by the ground during cooling. Ground temperatures are generally stable 6

feet below the surface. This temperature varies by region but is on average around 55 F. There are many possible ways

to implement this system, but the four most common are: vertical loop, horizontal loop, slinky loop, and pond loop.

Figure 2.2 shows a sketch of all four common GSHP types.


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Background Review


2.2.2 Working fluidAll GSHP systems utilize a coolant loop containing a working fluid. All GeoHuddle systems will use an environmentally

friendly glycol/water mixture. This choice will prevent freezing in colder climates and minimize environmental impact in

the unlikely event of a system leak.

Figure 2.2 Ground Source Heat Pump Types

Source: (Grand Valley State University, 2008)

2.2.3 Proven TechnologyGSHP technology is well established in the world market and currently the U.S. has the largest number of installed

GSHPs of any country. There is an installed base of over 1,000,000 GSHPs in the US (DoE, 2009). In 2008, manufacturers

shipped 121,243 new GSHPs (EIA, 2009).

2.2.4 System LifespanTwo systems, the heat pump, and the in-ground coolant loop components determine the lifespan of a GSHP. The heat

pump components are easy to repair and service, and have similar lifespan compared to other heating and cooling

equipment. The in-ground components are much more difficult to service, repair, and therefore require a much longe

lifespan. The main in-ground component, polyethylene tubing, comes with a standard 50-year warranty from the

manufacturer. Independent lab tests indicate that in-ground components have a useful lifespan of 200 years (Econa

GeoSystems, 2009).


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Environmental and Social Impact


3 ENVIRONMENTAL AND SOCIAL IMPACT3.1 Global ImpactThe next few sections will explore GeoHuddles potential environmental and social impacts. The scope of the discussion

focuses on the U.S., as this will be GeoHuddles initial target market. As discussed in the market analysis section, there is

a large international market for GSHP systems as well, but GeoHuddles plan is to gain traction in the U.S. beforeexpanding internationally. International data is also highly dependent on the infrastructure and policies of individua

countries, making meaningful comparisons difficult. However, it is important to note that GSHP systems can potentially

play a large role in global efforts to mitigate climate change and reduce dependence on fossil fuels for residentia

heating and cooling.

3.2 Environmental ImpactIn the U.S., 43% of residential energy use arises from heating and cooling. Figure 3.1 shows a breakdown of the major

components of residential energy use with and without extensive use of GSHPs . GeoHuddle systems, being cheape

and cleaner than current heating and cooling systems, have the potential to decrease the heating and cooling sector to

22%. It is highly unlikely that GSHPs ever achieve this scale of energy reduction, but it is helpful to know the totapotential capability of implementing GeoHuddle systems. The next sections will explore how the installation of

community GSHP systems could influence individual energy use.

Figure 3.1 U.S. Residential Energy Usage

Source: (DoE, 2008)

3.2.1 IndividualGeoHuddle systems are capable of significantly reducing an individual homeowners cooling and heating energy use

Figure 3.2 shows the average annual energy use of a 3000 square foot home by census region. Each region is broken

into three possible heating and cooling systems: natural gas/AC, oil/AC, and GSHP. The use of GSHPs will save the

average homeowner 62% in energy use and a maximum of 71% in the West North Central region. This is due to the high

Space

Heating

27%

Space

Cooling

11%Water

Heating

11%Lighting

9%

Appliances

13%

Other

29%

Current

Total: 21.8 Quadrillion Btus

Space

Heating

13%

Space

Cooling

5%

Water

Heating

14%

Lighting

13%Appliances

17%

Other

38%

With GeoHuddle

Total: 16.0 Quadrillion Btus


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cooling loads in that region and the significant advantage GSHPs have over traditional AC systems. After installation of

GeoHuddles community based systems, we anticipate seeing similar energy savings.

Figure 3.2 U.S. Annual Heating and Cooling Energy Use of a Typical Home by Census Region

Source: (DoE, 2009)

3.2.2 Energy PricesThe return on investment of a GSHP system is highly dependent on market energy prices. The previous two sections

have shown the favorable economics of GSHPs at current prices, which are only likely to improve as electricity, natural

gas, and fuel oil prices continue to rise. Figure 3.3 shows the inflation-adjusted costs of residential energy sources since

1973.

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

MillionBtus/yr

Natural Gas/AC Oil/AC GSHP


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Figure 3.3 U.S. Residential Energy Prices

Source: (EIA, 2010)

3.3 CO2 EmissionsThe capacity of GSHPs to reduce CO2 emissions depends on the existing method of electricity generation. Critics o

GSHPs claim that switching to a GSHP from a natural gas fired furnace will lead to an increase in CO 2emissions (95%

efficient furnace vs. 30% efficiency for electricity). However, based on the calculations in section 3.3.1, GSHPs with COPs

of above 3.4 will see a decrease in CO2emissions or, at worst, be carbon-neutral. In the future, emissions will continue

to decrease as the emissions from electricity production become less fossil fuel intensive.

The most important thing to understand is that GSHPs conserve a significant amount of energy compared to tradition

heating and cooling systems. Delaying investment in GSHP infrastructure because of a few exceptional cases where

natural gas heating is comparatively carbon neutral is not advisable. As the country moves away from fossil fuels, the

impact of installed GSHPs will further decrease carbon emissions from electricity production. This effect exists in other

countries where coal is not as prevalent as in the U.S. In Canada, which emits roughly 1/3 of the CO2per GWh compared

to the U.S., carbon emission reductions from switching to GSHPs are 4.4 metric tons of CO 2 (t CO2) per house per year

compared to only 2.8 tCO2 per house per year in the U.S. (EIA, 2007).

In conducting research for this project, the GeoHuddle team had some difficulty finding comprehensive data about

emissions reductions due to GSHPs. As a result, we have performed our own reduction analysis based on data from

Census, DOE and EIA reports. Doing this provides us with a high level of confidence in the results presented in section3.3.2. Section 3.3.1 details the calculations used for this analysis.

0

5

10

15

20

25

1970 1975 1980 1985 1990 1995 2000 2005 2010

$/MillionB

tu

(1982-1984Dollars)

Year

Heating Oil Natural Gas Electricity


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3.3.1 Calculation of Carbon Emissions ReductionCarbon emissions from a GSHP compared to a standard furnace and AC unit are calculated using the following formulas:

2 = (

1000

1000

)

2 = (

1000

1000

)

HL = 94.95 GJ/year = Average U.S. home heating load calculated from data in

Variables and Sources:

Figure 3.1 and Figure 3.2

CL = 36.93 GJ/year = Average U.S. home cooling load calculated from data in Figure 3.1 and Figure 3.2

FI = 50.3 kgCO2/GJ = Emissions intensity for natural gas (Supple, 2007)

EI = 168.8 kg/GJ = Average emissions intensity of electricity generation in the U.S. (Supple, 2007)

AFUE = 95% = Furnace efficiency for fuel fired furnace (DoE, 2009)

COP_GSHP = 5 =Coefficient of Performance of GSHP system (DoE, 2009)

COP_AC = 3.4 = Coefficient of Performance of AC system (DoE, 2009)

3.3.2 CO2 Emissions Reductions from GSHPThe potential impacts of GSHPs were calculated for three scenarios. The first scenario represents the potential impact i

every U.S. home installed a GSHP. The second scenario illustrates the expected impact based on the EIAs estimate o

2.2 million GSHPs installed by 2030 (EIA, 2009). The last scenario demonstrates the impact of each installed GeoHuddle

system. No international estimate is included because of the extreme country-to-country variability of emissions

intensity from the production of electricity.

National Potential Reduction of CO2

355 million tCO2 per yearEmissions

6.2% of the U.S. CO2 emissions (EIA, 2009) Equivalent emissions of 92 coal fired power plants (EPA, 2010)

National Expected Reduction of CO2

9.76 million tCO2 per yearEmissions

0.17% of the U.S. CO2 emissions (EIA, 2009) Equivalent CO2 reduction of 2.1 million acres of pine forest (EPA, 2010)

Single Home Reduction of CO2

6.2 tCO2per yearEmissions from a GeoHuddle GSHP System

15.7% of the average household emissions Equivalent emissions of burning 694 gallons of gasoline (EPA, 2010)


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3.4 Social and Economic Impact3.4.1 Individual CostsFigure 3.4 shows the average annual energy use of a 3000 square foot home by census region and system. The green

values represent the use of GSHPs. Similar to the chart in 3.2.2, this chart is broken down by census region to account

for different climates across the country. The average cost savings over traditional systems is 75%, with a maximum cost

savings of 79% occurring in the East South Central region. Dollar wise, the highest savings are available in the West

North Central region, with an average homeowner potentially saving over $1,919 on annual utility bills.

Figure 3.4 U.S. Annual Energy Costs of a Typical Home by Census Region

Source: (DoE, 2009

3.4.2 Political Benefit and Social BenefitIn todays political climate and with the growth of the environmental movement, GSHPs provide a great solution for

customers looking to go green. The use of GSHP systems will significantly decrease a homeowners reliance on grid

electricity and/or fossil fuels. Homebuilders can also take advantage of this additional value when selling GSHP

equipped homes. The political benefit of GSHP systems will become even greater as more pressure is placed on the U.S

government to move away from fossil fuels and a reliance on foreign oil.

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Dollars/year

Natural Gas/AC Oil/AC GSHP


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3.4.3 Zero Energy Homes and CommunitiesThere is a niche market of individuals and communities that are striving to achieve zero net energy use. GeoHuddle is

poised to make a significant impact in this market. In combination with solar panels, wind turbines and other renewable

energy technologies, a community GSHP system can significantly reduce an individuals energy use. The use of a GSHP

will also reduce the required capacity of installed solar panels and wind turbines required for a zero energy home. There

are several examples of these communities being built in Issaquah, WAand Denver, CO, and the U.S. Department of

Energy has collaborated with several contractors to build demonstration homes (DoE, 2010).

3.5 Indirect Environmental and Social Impacts3.5.1 Combination with Solar PanelsGeoHuddle is very interested in exploring potential partnerships with solar panel installers and providers. The combined

use of a GSHP system and photovoltaic solar panels can create a completely energy neutral home. Connection to the

grid is required for peak demand use, but in several states, excess electricity generated by residential solar installations

can be sold back to the utility. The details vary by state and utility, but in Madison, WI, a homeowner can sell electricity

back to the grid if the system is less than 10kw in size (Madison Gas and Electric, 2010).

One company of particular interest to GeoHuddle isOne Block off the Grid(OBOG). OBOG uses group discounts to buy

and install solar panels for communities. This is similar to GeoHuddles business model. It is our hope that as

GeoHuddle becomes established in the market, we can collaborate with OBOG to provide zero energy solutions to

communities across the country.

3.5.2 Carbon OffsetsGeoHuddle plans to look at the possibility of integrating carbon offsets into its business model. At a minimum, the

founders want to explore the option of buying carbon offsets for the installation of our GSHP systems. Additionally

GeoHuddle could offer homeowners the option of buying carbon offsets for the electricity used by GSHP systems. This

would make the entire home heating and cooling process carbon neutral.

3.5.3 Reduced Peak DemandInstallation of GSHP systems has the potential to decrease peak energy demand from the residential sector. This greatly

benefits the utility by reducing the electricity that must be supplied to the grid during peak demand periods. According

to a study by Lienau, Boyd and Rogers,

Residential GSHP system peak demand reduction compared to single-zone electric resistance heating for 13

case studies ranged from 5.3 kW to 10.4 kW with a mean of 7.2 kW(Lienau, Boyd, & Rogers, 2008).

The reduction of peak demand also brings the possibility of extra financial incentives for the installation of

GSHP systems. According to focus on energy,

A thermal storage system in combination with the geothermal setup will reduce peak demand significantly as thegeothermal pumps can be operated during off-peak hours and still provide adequate cooling during on-peak

periods. Incentive amounts will also greatly increase. In Wisconsin, Focus on Energy pays $200/kW demand

reduction for these types of measures(Major, 2010).
http://seattletimes.nwsource.com/html/localnews/2003628451_zeroenergy21e.htmlhttp://seattletimes.nwsource.com/html/localnews/2003628451_zeroenergy21e.htmlhttp://seattletimes.nwsource.com/html/localnews/2003628451_zeroenergy21e.htmlhttp://blogs.denverpost.com/therealdeal/2008/07/15/developer-plans-net-zero-energy-community/http://blogs.denverpost.com/therealdeal/2008/07/15/developer-plans-net-zero-energy-community/http://1bog.org/http://1bog.org/http://1bog.org/http://1bog.org/http://blogs.denverpost.com/therealdeal/2008/07/15/developer-plans-net-zero-energy-community/http://seattletimes.nwsource.com/html/localnews/2003628451_zeroenergy21e.html


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Financial Feasibility


4 FINANCIAL FEASIBILITY4.1 Pricing and RevenuePricing models for a GeoHuddle system show that we can be competitive at prices of $70-100 a month or $0.20-$0.25

per ton-hr of chilled water. The billing method we use will be determined by the installation of a centralized or

decentralized system. At these rates, we have targeted our annual revenue per customer at $1000 per year. Thisamount is reasonable based on the savings seen in Figure 3.4. A target of $1000 annual revenue per customer provides

sufficient margins to make GeoHuddle profitable while still providing customers with average cost reductions of 23%.

4.2 Capital Requirements and ProfitabilityGeoHuddle will bear the installation costs of systems. This will constitute the bulk of the capital requirements to run

GeoHuddle. As a result, the required capital investment is highly dependent on the number of system installations. The

disadvantage of this approach is that if market estimates are exceeded, large amounts of additional capital to pay for

new systems may be required. Table 4.1 shows the capital requirements for low, medium, and high growth. Even the

highest growth model is still conservative with a market share just under 2%.

Growth

Table 4.1 Capital Requirements

Installs (Year 3) Total Installs (Year 10) Market Percentage Capital Requirement

Low 5 75 0.63% $2,733,561

Medium 15 155 1.08% $4,110,309

High 30 281 1.98% $6,330,968

The years-to-profitability and break-even point are most highly dependent on the revenue that can be generated per

customer. Based on competitive pricing analysis, we anticipate generating $1000 per year per customer. Table 4.2

shows a breakdown of years-to-profitability and break-even by potential customer revenues.

Revenue Per Year Per CustomerTable 4.2 Profitability and Break-Even Points

Profitability Year Break-Even Year

$500 14 21

$1000 9 13

$1500 7 9

The founders of GeoHuddle realize that investors typically prefer a shorter period for profitability and break-even point.

However, this model is unique because once the system is installed it poses a large guaranteed future value. For

example, if by year 10 there are 75 total installs (low growth), the value of those systems from year 10 to year 50 is 90

million dollars. This is virtually guaranteed because once the system has been installed, the customer is captive for the

lifetime of the home (50+ years). As a result, profitability and break-even year are less critical metrics. Even thoughthese periods may be longer than typical, both are guaranteed to happen. This poses a huge value for GeoHuddles

investors because they can leverage this future value when considering exit strategies.


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Financial Feasibility


4.3 Government IncentivesGovernment funded incentives for the installation of GSHP systems are available at the federal, state, utility, and local

levels. These rebates and tax credits maximize the value of a GSHP system to the customer. GeoHuddles model of

financing the entire initial cost of the system makes these incentives especially attractive to customers. Depending on

location, the customers in the GeoHuddle community could see thousands of dollars in tax and rebate benefits

immediately following installation. With this in mind, the GeoHuddle team will focus sales and marketing efforts onstates and municipalities with the largest potential incentives for homeowners.

4.3.1 Federal LevelAt the federal level, the U.S. Government provides significant tax incentives for energy efficiency measures. As of

December 1, 2009, the Department of Energy has significantly expanded its definition of qualifying GSHPs. All of

GeoHuddles installed systems will meet this new definition. Before December 1 2009, the system was required to be

integrated into the hot water heater to qualify for the full credit (DoE/EPA, 2009).

Federal Energy Efficiency Incentives for GSHPs

The United States Government provides federal tax credits to homeowners who install GSHP systems.(DoE, 2010) Credit value is equal to 30% of the cost with no upper limit on the total cost. Available to both new and existing homes until 2016.

4.3.2 State, Utility, and Local LevelStates, utilities, and local municipalities provide varying combinations of tax credits and customer rebates for energy

efficiency improvements, including the installation of GSHPs.

Personal Tax Incentives: Arizona, Idaho, Kentucky, Missouri, Montana, New Mexico, Oklahoma,

South Carolina

States providing personal tax credits and rebate programs

Rebate Programs: Alaska, Arkansas, Connecticut, Delaware, Georgia, Hawaii, Illinois, Kansas,Louisiana, Maine, New Jersey, North Carolina, Ohio, South Dakota, Vermont, Virginia, Washington,

Wisconsin Both: Indiana, Maryland, Michigan, New York, Oregon

All states except West VirginiaStates providing utility level rebate programs

Colorado, North Carolina, PennsylvaniaStates containing local level rebate programs

Note: Data does not include corporate tax incentives, sales tax,

property tax incentives, grants, or loans

Source: (North Caronlina State University, 2009)


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Distribution


5 DISTRIBUTION5.1 Business Model5.1.1 Community Based SystemsThe key to GeoHuddles business model is the installation of community-based GSHP systems. The vast majority of

residential GSHP systems are installed for single homes with a typical capacity of 3-4 tons. One ton, in reference to

heating and cooling systems, is a measure of thermal energy equal to 12,000 Btu. GeoHuddle plans to install community

scale systems with capacities of approximately 200 tons to provide heating and cooling to subdivisions of up to 70

homes.

5.1.2 Zero Initial Cost to HomeownerAs detailed in the market analysis section, the largest barrier to the residential installation of GSHP systems is the initial

equipment cost. Systems for individual homes can have payback periods up to 20 years (DoE, 2009). GeoHuddle wil

eliminate this barrier by paying for the entire cost of a community GSHP system. GeoHuddle will generate revenue by

charging homeowners for the GSHP system use, while still passing on large cost and energy consumption reductions to

customers compared to traditional heating and cooling systems.

5.1.3 Decreased Installation CostsSystems for individual homes have average costs of $3000 per ton of installed capacity and pay back periods up to 20

years. GeoHuddle will install large community systems and then charge homeowners for the use of the system

Because of increasing the size of the system, costs are expected to drop to less than $2000 per ton of capacity and have

payback periods of less than 5 years.

5.1.4 LocationTypically, space is not a primary issue for residential GSHP installations. GeoHuddle plans to install large community

systems requiring larger areas of land, many communities already have sections of public land set aside for green spaceparks, roads and other infrastructure. GeoHuddle plans to locate GSHP loops under these common spaces. Parks and

community green spaces are ideal locations for this system, as the ground surface can be easily restored to its original or

intended state after installation. Ponds or other small bodies of water can provide even more cost effective placement

options because of waters high thermal conductivity compared to soil.

5.1.5 System DesignGeoHuddle will not have the capital to design and build the proposed GSHP systems initially, so design and engineering

activities will be subcontracted to engineering firms that have extensive experience with commercial-scale systems and

related geotechnical expertise. As the resource base grows and with additional capital investment, GeoHuddle wil

develop the internal resources necessary to perform this work.

5.1.6 Revenue ModelThere are two possible revenue models depending on the type of system installed. If a centralized heat pump system is

installed, GeoHuddle can charge homeowners directly for chilled water on a per ton-hr basis. If a distributed heat pump

system is installed, the customers will pay GeoHuddle a monthly access fee for the in-ground infrastructure. Having

explored both models, the founders discovered that either model could provide acceptable profit margins at


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Distribution


competitive costs to consumers. Based on the cost reductions available with current GSHPs, our target annual revenue

is $1000 per customer per year.

5.1.6.1 PricingGeoHuddles business model allows for significant flexibility in its pricing to customers. The cost of a system for a given

home can be affected by a number of factors including: soil temperature, soil moisture conditions, time-of-day demand

seasonal demand, and local electricity pricing. By collecting and analyzing local conditions, GeoHuddle can provide

individual customers with pricing that is competitive to other heating and cooling solutions. This will allow GeoHuddle

to maximize value, profit and energy savings of installed systems.

5.1.6.2 Performance FeedbackData collected from installed systems will provide valuable feedback to GeoHuddle and customers alike. GeoHuddle wil

be able to use this information to measure the performance of installed systems, which may lead to further cost

reductions in future installations as GeoHuddle refines its installation and control strategies. Customers will also benefit

as GeoHuddle will be able to provide precise cost and energy savings compared to non-GSHP systems.

5.1.6.3

Minimal Complications for HomeownersThe GeoHuddle pricing scheme is similar to that of a utility company from the customers perspective. As with othe

utilities, customers will receive a monthly bill charging a flat fee for service or a variable fee for chilled water supplied to

the home. This system is familiar system to nearly all homeowners and therefore adds minimal complexity to a

customers lifestyle.

5.1.6.4 Community FlexibilityA direct-sale model provides the most flexibility in the types, locations, and structures of communities where GeoHuddle

can install systems because there is no requirement for a community to have a homeowners association. It also allows

for the possibility of expanding systems. Installed systems can add capacity and new customers without modifying

agreements made with existing customers.

5.1.7 ScalabilityOne of the most attractive features of GeoHuddles business model is the scalability. GeoHuddle is able to generate

revenue regardless of the number of systems installed annually. Of course, with increased scale comes an increased

capital cost. Since GeoHuddle is covering the upfront cost of a system, it will take several years before the installed

system base is paid off and providing sufficient revenue to offset new system costs.


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Distribution


Source:(U.S. Census Bureau, 2009)

Figure 5.1. Housing Market Sizes

5.2 Market Analysis5.2.1 U.S. MarketThere are two potential markets for community GSHP systems:

new construction and retrofits. New construction is

GeoHuddles preferred market. By working with developers to

install systems before subdivisions have been built, there is a

potential for huge cost reductions. Unfortunately, with the

current housing market, the development of new subdivisions

has significantly slowed. The retrofit market is much larger but

comes with added cost and installation complexity. The

following sections will explore the details of each market.

5.2.1.1 New ConstructionNew construction is the most desirable market for GeoHuddle.

By installing systems with other subdivision infrastructure, the

founders anticipate large cost reductions compared to retrofit

installations. In 2009, 455,000 homes were built in the U.S.

(U.S. Census Bureau, 2009). Assuming potential revenues of

$1000 per customer, this represents a potential market of $455

million dollars annually.

As most people are aware, the U.S. is currently in the largest

housing slump of the last 50 years. To account for this, GeoHuddle also considered the potential market using a 10-yea

average from 1997-2007 of 1.35 million homes started each year. This equates to an annual market of $1.35 billion

dollars and a market of $13.5 billion dollars over the entire decade. It is important to note that the new construction

market is completely refreshed every year, which makes it different from many other sales or services markets.

5.2.1.2 RetrofitThe retrofit market is much larger than the new construction market, but also brings additional costs. Installation costs

for underground components will be much higher, and there will be a need to work around existing underground

utilities and structures. More effort will also be required to determine the eligibility of a subdivision. Space constraints

and existing utility complications may prohibit the use of a community GSHP system. Regardless of the barriers to

retrofits, it should still be considered because of the extremely large market size. As of 2007, there were 40 million

existing suburban homes representing a potential market of $40 billion dollars (U.S. Census Beaureu, 2008). This is

roughly 40 times the size of the new construction market.

80 MillionHomes inthe U.S

40 MillionLocated in

the Suburbs

1.35 MillionNew Homes

Built Each

Year (10Year

Average)


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Distribution


5.2.1.3 Long Term PredictionsBased on current economic and market conditions, the EIA releases an Annual Energy Outlook (AEO) report every year

This was the prediction for GSHP installations by 2030:

The stock of ground-source geothermal heat pumps reaches 2.25 million units in 2030 in the AEO2010 reference

case, 44 percent more than projected in the updated AEO2009 reference case. Even with the relatively large

increase in the number of ground-source heat pump installations, the 2.25 million units represent only 2.2percent of the heating market for single-family homes in 2030.(EIA, 2009)

The founders of GeoHuddle believe that this demonstrates how underutilized GSHPs are in the U.S. We hope that this

number will actually be much higher in 2030, but in order to remain realistic, we have used the AEO estimates for all

financial models.

5.2.1.4 Market BarriersTwo DOE studies on GSHP markets found that the largest barrier to entry was the high initial cost to the consumer

(Hughes, 2008), (DoE, 2009). A February 2009 study commissioned by the U.S. Department of Energy found three

secondary barriers to the widespread application of GSHP systems (DoE, 2009):

Cost and difficulty of evaluating the suitability of individual installation sites Generally requires installation-specific design and engineering of the ground loop Space requirements for ground coupling can be problematic in densely built areas

GeoHuddle will overcome these barriers by:

Working with consulting firms with extensive GSHP design and installation experience Designing systems specific to community requirements Placing ground loops under parks, green, spaces, and other public areas of a development

5.2.2 International MarketThe founders choose to focus their initial work on the U.S. market but are aware that there is a thriving international

market for GSHP installations. In the long term, it is our hope to expand GeoHuddle operations internationally. A

collection of international GSHP market statistics follows:

100,000 GSHP units were shipped in Europe during 2006, with a 30% growth since 2004. Sweden leads all of Europe with 66% of the installed European GSHP base. GSHPs have over 75% penetration

for the Swedish retrofit market.

Swiss public utilities have used a system called energy contracting to effectively provide an incentive forthe adoption of GSHPs, which involves planning, installing, operating, and maintaining GSHP systems at

their own cost and selling the heat (or cold) to the property owner at a contracted price in cents per

kilowatt-hour.

GSHPs have 75% market penetration for new construction in Switzerland. Since 2001, China and South Korea have both seen exponential growth in the market for GSHPs with the

creation of new government subsidies and incentives.


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Project Timeline


6 PROJECT TIMELINE6.1 One Year6.1.1 OrganizationGeoHuddle will initially have two co-founding employees. Steven Faulkner will hold a majority equity share and act as

Chief Executive Officer. Steve will work full-time over the next year for GeoHuddle. Mike Major will hold a minority

equity share and act as Chief Technical Officer. Mike will remain with his current employer and commit a minimum of

25% of his time to the company. After a few months, Mike will transition to a full-time employee of GeoHuddle.

6.1.2 Pricing and Cost AnalysisGeoHuddle will need to develop more in-depth pricing and cost models before any contracts can be signed with

developers. In this report, we have shown that the basic model for GeoHuddle is economically viable, but a much more

rigorous analysis will need to be completed before we can approach developers.

6.1.3 Website and Visual DevelopmentWhen promoting GeoHuddle to developers and investors, having high quality graphics, literature, and websites will becritical. It is very important investors and customers see GeoHuddle as a professional company. The creation of

professional media will establish GeoHuddle professionalism through solid first impressions.

6.1.4 Contracts DevelopmentGeoHuddle will actively work with an outside attorneys office to develop contracts for system installation and billing

customers.

6.1.5 Meeting with Home Builders and InvestorsAfter the initial contracts and presentation media are complete, GeoHuddle will begin meeting with builders and

investors. We will attempt to complete installation contracts with developers and secure additional capital from

investors. By performing these activities at the same time, we hope to be able to achieve our first installation in less

time than if we only tried to find additional investors. We also hope that initial developer contracts will be an advantage

in investor meetings.

6.1.6 Seed FundingWhile the CLC prize of $50,000 will be sufficient to start GeoHuddle, there will be much larger investments required

once contracts are signed with developers. In the first year, we hope to close a seed round of financing valued at a

minimum of $500,000. This will provide enough capital to meet installation goals for the first year. The founders hope

to receive this financing from the community of venture funds, angel investors, and private investors in Madison and the

Midwest.

6.1.7 System DesignAs we find suitable communities and developers willing to work with GeoHuddle, we will begin to design the systems.

We have accounted for this cost in the funds provided by the CLC, but we hope to start system design near the closing of

our seed round.


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Project Timeline


6.1.8 System InstallationsIn the first year, GeoHuddle plans to sign contracts for $300,000 in system installations. This is an estimated three

distributed systems of 20 homes each or two centralized systems of 20 homes each. The founders will attempt to instal

one of each system. Initial systems will also have the following desirable attributes:

20 homes or more. New subdivisions at pre-infrastructure installation stage. Developed in states with large financial incentives. Largest potential savings for consumers (electric, oil, and no natural gas infrastructure).

6.2 TimelineTable 6.1 GeoHuddle Timeline

2010 2011

5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12

Company Activities

GeoHuddle Founded

Cost and Price Model Development

Website and Visuals Development

Contracts Development

Seed Round Investor Meetings

Home Builder Meetings

System Design

System Installations

Employees

Steve Faulkner - Full Time

Mike Major - Part TimeMike Major - Full Time

Funding

$30k from CLC

$25k from CLC

$500k from Seed Round

6.3 Long Term PlanAfter the first year, GeoHuddle will focus on these areas:

Increasing system installations. Hiring additional employees and bringing design services in-house. Additional venture capital funding. Expanding to international markets.


20/23

Team


7 TEAM7.1 Climate Leadership Challenge TeamSteven Faulkner CEO and Co-founder of GeoHuddle

Steve is a current student at University of Wisconsin taking classes in energy and sustainability. Steve completed

his degree from UW-Madison in December 2008 and graduated with a B.S. degree in Mechanical Engineering andMathematics. After graduating, Steve travelled to the South Pole to work on the construction of the IceCube

neutrino detector. Since returning, he has started his own engineering consultancy, Red Frame Engineering LLC

Through Red Frame, Steve has consulted for several local companies and now consults exclusively for SolidWorks

education and marketing divisions. In 2009, Steve also briefly lived in Kuwait where he was working on military

vehicle suspensions with Oshkosh Defense Corporation.

Contribution: Steve is the author of the GeoHuddle CLC entry. All information, figures, tables, and data were a

direct result of his research, analysis and writing.

7.2 Major ContributorsMike Major CTO and Co-founder of GeoHuddle

Michael "Mike" Major is an Energy Services Engineer with Wisconsin's Focus on Energy. In this role, he analyzes

energy conservation and renewable energy measures for technical and financial merit. He has experience with a

wide variety of space conditioning and building systems and has determined grant amounts to make cutting edge

technologies cost effective to the end user. Mike is also the founder and president of another energy

conservation startup, Puri-3, LLC, which is developing a water treatment system. The Puri-3, LLC system is a clean

sheet design that will improve upon the savings claimed by competing systems. Prior to his work in the energy

conservation field, Mike was a Performance Development Engineer for Toyota Racing Development, Inc. He

designed optical and thermodynamic combustion optimization experiments for the NASCAR and IndyCar V8

programs. In addition to his practical experience, Mike completed a thesis based Masters degree at the UW -Madison Engine Research Center in 2009 and earned his J.D. degree from the University of Wisconsin Law Schoo

in 2009. Mike is admitted to practice law in WI and before the USPTO as a registered patent attorney.

Contribution: Mike was instrumental in reviewing Steves research, ideas, and writing. Mike was also responsible

for a large amount of technical advice, fact checking, proof reading, and idea brainstorming.
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Award Budget


8 AWARD BUDGET8.1 Office Space$0 has been allocated, as the GeoHuddle founders plan to utilize the UW Research Park office space provided to winners

of the CLC.

8.2 Travel$15,000 has been allocated to travel for the founding team. This includes taking advantage of the additional $5000

offered by the CLC for conference and promotional travel. In the first year, the founders will perform two trave

intensive activities: meeting with developers and presenting to early stage investors. We are also considering the

possibility of traveling to Europe to study the energy contracting model used by GSHP utilities in Switzerland.

8.3 Legal FeesGeoHuddle anticipates incurring significant legal fees in the first

year of operation. $2000 has been allocated for legal expenses in

starting up GeoHuddle. $10,000 has been allocated for

developing contracts with homeowners and developers to cover

the installation and payment for use of GeoHuddle systems.

8.4 Web and Graphic Development$8,000 has been allocated for the purchase of graphic design and

web services.

8.5 ConsultingIf GeoHuddle is able to contract with a developer before securing

seed funding for an initial system, we may need to cover some of

the initial design consulting fees. Including design, simulation, and

architectural consulting fees, the total cost is estimated to be less

than $10,000. This will allow GeoHuddle to move forward with a

developer without having to acquire large amounts of capital in

advance.

8.6 Salaries$0 has been allocated for salaries. Both founders have sufficient personal funds saved to cover a minimum of one yea

of operation. GeoHuddle plans to acquire seed stage funding to cover minimal salaries for the founders after one year.

8.7 Office Equipment and Supplies$4000 has been allocated to office equipment and supplies. This will cover purchase of one desktop computer, one

laptop, a projector, a printer, and other miscellaneous office supplies.

8.8 Miscellaneous$6000 is allocated to miscellaneous expenses. This will cover any unplanned costs as well as over budget expenses in

other areas. Consulting for an in depth pricing analysis will fall under this category.

GeoHuddle Award Budget

Item Amount

Office Space $0

Travel $15,000

Legal Fees $12,000

Web/Graphic Design $8,000

Consulting $10,000

Salaries $0

Office Equipment $4,000Misc $6,000

Total $55,000


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References and OUside ConsuLtants


9 REFERENCES AND OUSIDE CONSULTANTS9.1 Works CitedDoE. (2008). Energy Efficiency Trends in Residential and Commercial Buildings.U.S. Department of Energy.

DoE. (2009). Ground-Source Heat Pumps: Overview of Market Status, Barriers to Adoption, and Options for Overcoming Barriers. U.S. Departmen

of Energy.

DoE. (2009). Ground-Source Heat Pumps: Overview of Market Status, Barriers to Adoption, and Options for Overcoming Barriers.U.S. Departmen

of Energy.

DoE. (2010, January 14). Rebates, Tax Credits, & Financing. Retrieved March 15, 2010, from Energy Efficiency & Renewable Energy- Energy Savers

http://www.energysavers.gov/financial/70010.html

DoE. (2010, January 4). Zero Energy Goals. Retrieved March 24, 2010, from U.S. Department of Energy

http://www1.eere.energy.gov/buildings/goals.html

DoE/EPA. (2009). Heat Pumps, Geothermal for Consumers. Retrieved March 15th, 2010, from U.S. Department of Energy/ Environmental Protection

Agency: http://www.energystar.gov/index.cfm?fuseaction=find_a_product.showProductGroup&pgw_code=HP

Econar GeoSystems. (2009). Frequently Asked Questions about Geothermal Heating and Cooling Systems. Retrieved Match 15th, 2010, from

ECONAR GeoSource Geothermal Heat Pumps: http://www.econar.com/faq.htm

EIA. (2009, December 8). Emissions of Greenhouse Gases Report. Retrieved March 25, 2010, from U.S.Energy Information Administration

http://www.eia.doe.gov/oiaf/1605/ggrpt/carbon.html

EIA. (2009, December 14th). Energy Consumption by Sector. Retrieved March 15, 2010, from U.S.Energy Information Administration / Annua

Energy Outlook 2010: http://www.eia.doe.gov/oiaf/aeo/overview.html#consumption

EIA. (2010, February 26). February 2010 Monthly Energy Review. Retrieved March 21, 2010, from U.S.Energy Information Administration: February

2010 Monthly Energy Review

EIA. (2009, October). Geothermal Heat Pumps. Retrieved March 24, 2010, from U.S. Energy Information Administration

http://www.eia.doe.gov/cneaf/solar.renewables/page/heatpumps/heatpumps.html

EIA. (2007). Voluntary Reporting of Greenhouse Gases. Retrieved March 23, 2010, from U.S. Energy Information Administration

http://www.eia.doe.gov/oiaf/1605/pdf/Appendix%20F_r071023.pdf

EPA. (2010, January 5). Greenhouse Gas Equivalencies Calculator. Retrieved March 23, 2010, from U.S. Environmental Protection Agencyhttp://www.epa.gov/cleanenergy/energy-resources/calculator.html#results

Grand Valley State University. (2008). What is a geothermal heat pump, and how does it work?Retrieved March 22, 2010, from The Green House

on Watson: http://www.engineer.gvsu.edu/house/altenergy.html

Hughes, P. J. (2008). Geothermal (Ground-Source) Heat Pumps: Market Status, Barriers to Adoption, and Actions to Overcome Barriers. Oak Ridge

National Lab/ U.S. Department of Energy.

International Energy Agency Heat Pump Centre. (2008). Heat pumps can cut global CO2 emissions by nearly 8% - HPC-BR6. Retrieved 25th 2010

March, from International Energy Agency Heat Pump Centre: http://www.heatpumpcentre.org/

IPCC. (2007). Climate Change 2007: Synthesis Report. Retrieved March 25, 2010, from Intergovernmental Panel on Climate Change

http://www.ipcc.ch/publications_and_data/ar4/syr/en/spms5.html

Lienau, P. J., Boyd, T. L., & Rogers, R. L. (2008, November 17). Geo-Heat Center. Retrieved March 16, 2010, from Oregon Institute of Technology

http://geoheat.oit.edu/pdf/hp1.pdf

Madison Gas and Electric. (2010). Clean Power Partner Program. Retrieved March 21, 2010, from Madison Gas and Electric

http://www.mge.com/Home/rates/CleanPower.htm

Major, M. (2010, March 16th). Wisconsin Focus on Energy Incentives. (S. Faulkner, Interviewer)

North Caronlina State University. (2009). Financial Incentives for Energy Efficiency. Retrieved March 15th, 2010, from DSIRE: Databse of State

Incentives for Renewables & Efficiency: http://www.dsireusa.org/summarytables/finee.cfm


23/23

References and OUside ConsuLtants

Supple, D. (2007, April 15). Units and Conversion Factors Fact Sheet. Retrieved March 24, 2010, from MIT Energy Club

http://web.mit.edu/mit_energy/resources/factsheets/Units&ConvFactors.MIT%20EnergyClub%20Factsheet.v8.pdf

U.S. Census Beaureu. (2008, December 19). American Housing Survey National Tables: 2007. Retrieved March 24, 2010, from American Housing

Survey: http://www.census.gov/hhes/www/housing/ahs/ahs07/ahs07.html

U.S. Census Bureau. (2009, November 4). New Residential Construction (Building Permits, Housing Starts, and Housing Completions). Retrieved

March 22, 2010, from U.S. Census Bureau: http://www.census.gov/const/www/newresconstindex.html

UBM Built Environment. (2009). Building Sustainable Design. Retrieved March 21, 2010, from United Business Media

http://www.bsdlive.co.uk/story_attachment.asp?storycode=3110158&seq=1&type=G&c=1

Walser, M. L., & Nodvin, S. C. (2008, August 23). Carbon Footprint. Retrieved March 15th, 2010, from Encyclopedia of Earth

http://www.eoearth.org/article/Carbon_footprint#Home_heating_and_cooling

9.2 Outside ConsultantsSteve consulted two major outside sources for the project, Damon Bresenham and John Nelson. Damon and John have

been very helpful and we hope that they will continue to act as advisors to the founding team during GeoHuddles

infancy.

Damon Bresenham

Damon develops and operates early stage clean power businesses through Nomadic CleanTech Ventures, LLC. Damon

has a strong interest in commercializing clean energy technologies especially technologies spun-out of universities and

US Department of Energy national laboratories as early stage firms. Damon is the President of Rotating Sleeve Engine

Technologies, Inc., a University of Texas developmental diesel engine technology which improves fuel economy and

reduces air emissions. Previously, Damon performed market development activities at Virent Energy Systems and DCH

Enable Fuel Cell. Damons academic background includes an MBA and M.S. in Mechanical Engineering (University o

Wisconsin-Milwaukee) and a B.S in Chemical Engineering (University of Tennessee).

Contribution: Steve consulted with Damon on business and technology development for new ventures. Damons

previous experience with clean energy ventures made him an extremely valuable resource.

John Nelson

John Nelson is a consultant to the design and construction industry, and an adjunct professor in the Department of Civi

and Environmental Engineering, College of Engineering at the University of Wisconsin Madison. John consults with

both public & private organizations. During his tenure in industry, he served as Project Engineer, Department Head,

Project Manager, Vice President and Chief Executive Officer at Affiliated Engineers. His background includes design,

applications and research experience with dynamic building systems, along with business and project management.

Contribution: Steve consulted with John on the business and technical feasibility of GeoHuddles business model.

9.3 Climate Leadership Challenge ConsultantsThe GeoHuddle team consulted with several of the 2009 CLC participants about general information about the

competition and keys to a successful entry. They are:

Andy Braasch Grand Prize Winner of the2009 Climate Leadership Challenge

Sean McMaster Grand Prize Winner of the 2009 Climate Leadership Challenge

Ted Holby Winner of the 2009 Climate Leadership Challenge

Timothy Miller Finalist of the 2009 Climate Leadership Challenge

Documents

GeoHuddle - Community Geothermal Heating and Cooling Systems