Developers and Builders Going All In on Geothermal Heating and Cooling

Developers and Builders Going All In on Geothermal Heating and Cooling

The North Village of Norton Commons in Louisville is all geothermal heating and cooling. Photo Credit: Chris Witzke/Witzke Studios, 2016

A growing number of homebuilders and developers are using geothermal HVAC to differentiate their homes and neighborhoods in the tight new home market.

Some custom homebuyers may specify geothermal to reach a green building certification goal or have some experience with it. But most buyers of single- or multifamily homes don't really want to make complicated choices about complex home systems like HVAC.

That's why developers are turning to all-geothermal communities or neighborhoods to give buyers the benefits of geothermal and taking the choice out of the equation.

Geothermal systems offer up to 70 percent energy cost savings – that's more than $200 off a $300 electric bill – and are more durable and long-lasting, with underground components potentially lasting more than 50 years compared to around 12 years with traditional systems.

In addition to environmental benefits, geothermal systems provide significant aesthetic advantages. Because there are no outdoor compressor units and the underground systems are virtually silent, residents can relax and enjoy inspiration from the natural environment and surroundings of their home and spend and time with family and friends without the distraction of noise or unsightly industrial equipment. Also, the systems typically have a longer life because they are located inside the house, so there's no outside unit exposed to the weather.

New Urbanism communities such as Pinewood Forrest and Serenbe in Atlanta, Whisper Valley in Austin, and Norton Commons in Louisville are designed with small setbacks and outdoor living in mind and are tapping geothermal as part of the development's design and marketing strategy.

"When you densify housing, with conventional HVAC you have a landscape littered with condensers and you get visual and noise pollution, so geothermal takes care of those problems," said Lew Oliver, a master planner with New Town Homes and the designer of Pinewood Forrest.

Geothermal Basics

Geothermal is a clean, renewable energy source generated and stored in the Earth. To access this energy, loops of piping are run through holes or trenches drilled into the ground to reach the level where there is a consistent underground temperature of approximately 58 degrees year-round.

Geothermal underground heat pump systems take advantage of this stable temperature to more efficiently heat and cool homes compared to traditional HVAC systems, which are above ground and exposed to more variable and extreme conditions.

It's showing up in the spectrum of residential and commercial projects, from Habitat for Humanity homes to multi-million dollar super luxury homes to multifamily projects, as well as historic home retrofits.

Home Builder/Developer Buy-In

Housing developments are trending toward higher density due to the cost of land and infrastructure. And buyers are willing to live in smaller homes on smaller lots without sacrificing amenities and build quality. That means neighbors are closer than ever, and more attention has to be paid to making it easier to live closer together.

"So when you put all those things together geothermal just makes all the sense in the world," said Jim Beveridge, a partner with McKinney Builders in Atlanta.

McKinney Builders erected about 30 homes with geothermal systems in the Serenbe development, which was a prelude to being one of four builders in the Pinewood Forrest development, and opening The Gardens at Arbor Springs project in Newnan, Georgia.

At the Gardens at Arbor Springs, an active 55-plus community, McKinney Builders is both the developer and the builder. So they made the decision to make it a 100 percent geothermal community.

"It really takes the developer to make the conscious decision to go geothermal, and the builders have to buy into the concept," Beveridge said.

In Oklahoma, the Avondale community is all geothermal, as is the 400-home SouthCliffe development in Kennewick, Washington.

Josh Kitchen, co-owner of McAlister Construction building the 46-home Avondale community near Oklahoma City, said geothermal reflects his company's commitment to building better houses.

“We’ve been placing a strong emphasis on energy efficiency since 2007, and creating an all-geothermal development like Avondale made sense,” Kitchen said. “As builders, we want to build the most efficient houses in the most cost-effective way. Geothermal adds a dimension of energy efficiency that we are really excited about.”

Financing Models for Ground Loops

In a standard single-family home installation, the homeowner bears the cost of installing the ground loop and ground source heat pump. In a new home, the cost can be rolled up into the mortgage. For a retrofit, the homeowner can pay outright or with financing.

Depending on the system design, the region and market, the ground loop may cost $10,000-$15,000.

As developers are moving to all-geothermal projects, new financing is emerging. To offset the cost of the ground loop, developers are using a utility model for the geothermal system. The developer provides the installation of the loops and the homeowner a monthly fee for the service. The developer, or a third party, acts as a separate utility provider for the thermal energy provided by the geothermal system. The homeowner owns the heat pump and other equipment in the home.

The homeowner doesn't have to pay the cost of the ground loop in the mortgage. The monthly fee is usually less than the cost of the energy savings

At the Whisper Valley development in Austin, homeowners will incur no upfront costs for the geothermal system, as the ground loop infrastructure is pre-installed throughout the community. Homeowners will receive an extended warranty and no maintenance costs for the first three years.

Their energy costs will be fixed at approximately $175 a month, which covers the costs of the geothermal infrastructure equipment, a solar PV system, LED-lighting package, appliances, and other technologies, and includes maintenance service. The savings in utility electricity costs can be equal to or greater than the monthly energy fee.

Google spinoff Dandelion is testing a geothermal venture in New York for homeowners still using fossil fuels delivered by truck during the heating season.

Dandelion’s low-cost geothermal installations are available for zero down for qualifying homeowners, enabling many homeowners to begin saving on monthly heating and cooling expenses immediately by switching to geothermal. The system will provide homeowners with renewable heating, cooling, and hot water and include monitoring and a smart thermostat. Dandelion is now operational in the New York Hudson Valley and Capital Region.

Financing packages will give homeowners predictable monthly payments under $200 with no down payment. Dandelion estimates its $20,000 system, fuel-free after installation, pays for itself in about 10 years (the ground system lasts as long as the house, and heat pumps must be replaced every 25 years).

In contrast, at The Gardens at Arbor Springs development, the 71 home sites will use geothermal heating and cooling, but the ground loop cost will be borne by the homeowner. Developer McKinney Homes decided to include the costs in the price of the home, which will result in a nominal increase in monthly payments but will be lower than geothermal utility payments.

"We wanted to add geothermal to the price of the house and give our buyers the additional savings and have them realize the ongoing benefits," Beveridge said.

Making the Sale

Builders are finding that making high-performance home features such as geothermal HVAC or upgraded insulation part of their standard package keeps buyers from decision fatigue.

For its homes Pinewood Forrest and Gardens at Arbor Springs, McKinney Builders include a one-page insert about geothermal in its sales package.

Builders must train their sales force to understand the articulate the true product differential that geothermal offers. The sales staff can help the buyer understand about the low noise and long life equipment life that geothermal offers compared to conventional HVAC.

"On top of that you save a $100 a month on the energy bills, so all of the sudden a builder has a compelling advantage," Beveridge said. "Geothermal is a real competitive differential that can set builders apart."

Bundling geothermal as a standard feature of home addresses a homebuyer's fear of spending more on a technology they may not fully understand. Most home prices break out the cost of specifics such as flooring or kitchen cabinets only when there' an upgrade available.

"One of the problems with green features has been the positioning and the marketing of those features. No one would ever go into a house and ask for the line item cost on the hardwood floors," Oliver said. I think we have to learn to market green features a lot less painfully and pair it with great design and quality because we can't pair mediocrity with green building and have it take off."

Topics: Building Green, Certification / LEED, Energy Star, Geothermal Heating & Cooling, Indoor Air Quality, Maintenance & Repair, Proud Green Home of Louisville, Rebates / Tax Credits, Sustainability Trends & Statistics, Sustainable Communities

Companies: Serenbe Sustainable Community

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