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Inward Investment Guides

Geothermal Energy: Rising to the Surface

Although geothermal shows promise as a truly renewable energy source, cost and maintenance concerns could hinder the progress of its development.

Dan Calabrese (June/July 09)
It's not a new discovery that buildings large and small can find a plentiful resource for heating and cooling just a few feet below them in the ground. And the technology to do so has really not advanced dramatically in recent decades.

But the use of geothermal heat pumps - also known as GHP or geoexchange - has soared in recent years, with more than 12 million installations in homes, commercial buildings, and industrial facilities. The primary impetus for the explosion, according to experts in the field, is the heightened importance of energy efficiency, whether motivated by a desire to reduce costs or to make a lesser environmental impact.

A GHP system relies on the relatively constant underground temperature within 10 feet of the Earth's surface, which always stays between 50 degrees and 60 degrees Fahrenheit. Using three basic components - the ground heat exchanger, the heat pump unit and the ductwork that performs air delivery - a GHP sends fluid through pipes to absorb or relinquish heat within the ground. During the winter, the heat pump draws heat from the fluid. During the summer, the process is reversed, with heat moving from the indoor air into the heat exchanger.


Geothermal Use and Costs
GHP installations in the United States have risen by a steady 12 percent annually since the mid-1990s, with nearly 100,000 new units now being installed each year - with the greatest growth occurring in East Coast and Midwestern states spanning roughly from North Dakota to Florida. And while GHP systems are viable for commercial and industrial facilities, the more high-profile uses to date have tended to be in governmental, educational and hospitality facilities. A few examples:

the Galt House East Hotel in Louisville, Kentucky, where a 530,000-square-foot facility generates 15.8 megawatts of cooling capacity and 19.6 megawatts of heating capacity, consuming about 53 percent of a similar, adjacent building and saving a reported $25,000 per month in energy costs;

Davenport University in Grand Rapids, Michigan, where a 134,000-square-foot main building and a 75,000-square-foot adjacent residence hall receive heating and cooling capacity from 150 on-site holes in the ground that the university estimates has cut its energy usage by as much as 40 percent;

The U.S. Department of Defense, which has installed GHP retrofits at a variety of its facilities over the past several years.

One of the major sources of geothermal-related research in the United States is the Oregon Institute of Technology, which heats its own campus with geothermal energy, although it does not require a heat pump because much of the groundwater in the western United States is naturally heated by near-surface volcanic activity. This is called direct-use geothermal, and functions in much the same way as a GHP system, but saves electricity because the water is naturally hot.

Toni Boyd, assistant director of the Geo Heat Center at OIT, says growth in geothermal systems is mainly driven by cost concerns and growing environmental sensitivity. The system can make sense for a user if the relatively high capital costs can be recouped quickly enough. "It's based on the cost of electricity [to power the heat pump] or whatever they use," she says. "That's the biggest factor because they always look at payback, and with businesses they usually want better than a five-year payback."

A recent report by the U.S. Department of Energy (DOE), however, indicates that payback periods are more typically running between eight and 12 years for commercial projects, with upfront costs running as high as $7,000 per installed ton of capacity. While GHP system installations are growing, the DOE believes that such high capital costs are preventing even faster growth - as is the general public's still-developing confidence in such systems.

But any system that can move three to five times as much energy as it consumes has to have potential, although the DOE believes GHP systems would be embraced for more commercial projects if it could increase that multiplier to between six and eight. A few developing technology advances could make such a goal feasible, including:


Hybrid systems that reject excess heat from the ground to the building, generally by adding a fluid cooler;

Better organized drilling strategies, which can keep drilling costs on the low end of a spectrum that runs from $5 to $6 per bore-foot to $20 to $24 per bore-foot;

Integration with public infrastructure strategies related to water supply, use, and management, which would put geothermal infrastructure development in the same realm as its counterparts that are widely seen as legitimate public works projects.

Potential Problems
Unforeseen problems can also arise in geothermal heating, particularly in direct-use systems that rely on groundwater that may be heavy in mineral content.

Klamath Falls, Oregon-based REACH Inc., a light manufacturing facility with approximately 80 employees, relies on a direct-use geothermal system to heat its 110,000-square-foot building, with water coming from a 1,520-foot-deep well containing 105-degree water. But while the geothermal system has saved REACH on energy costs, water from the ground can create problems when it interacts with such an intricate system.

"The heater cores were an important part of the radiator system, and the minerals in the water rusted them out," says Gary Kester, safety and environmental manager for REACH. "The newer-style geothermal heating systems have heat plates and a closed-loop system, but this one has never been updated." Kester is not sure when REACH will be in a position to invest in such an upgrade.

By the same token, even leaders in the movement to promote geothermal energy say it's hard to tell when this particular alternative approach - infinitely renewable though it may be - will mature to the point where it is really viable for widespread commercial and industrial use. Tom Chester, director of the Geo Heat Center at OIT, said energy developers are notorious for having exciting ideas for what a new form of energy can achieve, but falling short on the execution. Even so, he is cautiously optimistic on the geothermal front: "There are definitely technologies emerging that will make good use of geothermal energy." 

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