What You Need To Know To Succeed In Geothermal Contracting
Energy conscious consumers and businesses alike are turning to geothermal systems for their heating and cooling needs. Geothermal reduces energy bills, qualifies clients for tax incentives, and is largely looked upon as the far more eco-friendly option. Contractors who offer geothermal systems in addition to other products and services find that it is tremendously beneficial to have another tool at their disposal. But what do you need to know before potentially offering this option to clients?
The History of Geothermal Systems
While geothermal systems may seem like a fairly modern development in the United States, an early version were utilized more than 10,000 years ago with the use of hot springs by Native Americans. European settlers were highly interested in these springs when they arrived in the “New World.” Some spas were commercialized, such as The Geysers Resort Hotel, which welcomed some of history’s greats including Theodore Roosevelt, J.P. Morgan and Mark Twain. Pioneering regions like Boise, ID, and Klamath Falls, OR, have been using geothermal water to heat buildings for more than 100 years.
Increasingly, today’s businesses and homeowners are getting excited about what geothermal resources have to offer for both heating and cooling. According to the U.S. Energy Information Administration, about 60,000 new ground-source heat pumps are installed each year to handle climate control in buildings and homes.
What are Geothermal System Users Seeking?
Tulsa, OK-based K&M Shillingford, Inc. is a proven innovator in this field. The company was one of the very first pioneers in green systems. More than 30 years ago, company owner Jay Murphy was already in the green market, installing solar systems for clients. Soon thereafter, he began installing geothermal systems years before these services were being offered in most of the United States.
Today, the company handles a wide range of residential systems and commercial geothermal projects at locations including everything from schools and museums to manufacturing facilities. Murphy and his company primarily deal with the end user. This has given them the opportunity to spot some common themes in what their customers are truly seeking at the end of the day.
A Good Return on Investment
By providing geothermal systems, K&M Shillingford, Inc. is able to provide their customers with heating and cooling costs that are up to 60% less than conventional equipment. Plus, as a side benefit, geothermal heating and cooling systems increase a home’s resale value.
Another cost saving benefit of geothermal that clients appreciate comes in the form of longevity. A geothermal system can last twice as long as other systems. The equipment has an expected lifespan of 25 years, which is higher than that of conventional equipment.
Other key geothermal benefits include the fact that geothermal is green and energy conscious. Geothermal is the lowest solution in terms of CO2 emissions.
A High Level of Convenience
Users need not worry about outdoor noise due to the fact that there are no outdoor units. Murphy explained how things have truly changed over the years, stating, “In the old days, there was no literature available. We had to literally draw it out for people.”
Now that organizations are involved, such as International Ground Source Heat Pump Association (IGSHPA) and trade organization for engineers, and extensive research has been done, it’s much easier and faster to get consumers on board. There is a wide variety of printed and online information at people’s fingertips as well as incentives like tax credits for those who adopt geothermal systems.
In terms of advice for contractors interested in entering the geothermal system space, Murphy points to the importance of exceeding client expectations and garnering referrals. He says, “We do no marketing and rely on referrals. Most of our sales come from customers who love geothermal. They sell our jobs for us.”
Geothermal for Commercial Applications
One benefit of offering geothermal technology is that it is often in demand for commercial applications and could potentially open up a major new revenue stream. This is typically the case due to the fact that regional competitors are far less likely to be offering geothermal systems.
Las Vegas based Climate Control Experts offers geothermal in addition to more standard services, such as heating, air conditioning, and refrigeration.
While the company has found that geothermal hasn’t completely caught on with homeowners in their region, this is not the case for commercial applications. Geothermal systems are very popular in the Las Vegas high-rise market. Offering geothermal has provided a new and very competitive niche for the company.
After an architect or mechanical engineer opts for a geothermal system, Climate Control Experts is brought in to handle the arrangements. Company President Christopher Roth says, “The energy savings are there. We wouldn’t install geothermal systems if they weren’t cost effective. In addition to the energy savings is the fact that geothermal systems require a lower skill set to service and maintain. All of these factors combine to make geothermal a real winner for us.”
Roth went on to note that out of the pool of contractors in Las Vegas, perhaps only 20 are involved in geothermal; this provides for a distinct competitive advantage.
Marketing to Homeowners
Princeton Air based in Princeton Junction, NJ, is a 44-year-old company that has been selling geothermal systems for more than six years. Unlike Climate Control Experts, their clientele is primarily homeowners. They were excited about getting into the geothermal space and felt the market was untapped, quite literally.
Princeton Air’s CEO Joseph Needham says, “Most of our customers come to us already knowing what they want. They either have a friend or neighbor that owns a geothermal system or they are a finance person. For the most part, our customers are trying to figure out who to partner with to see them through a complex process.”
He points out that there are 3 major factors that contractors should be aware of before venturing into geothermal.
1. Invest in upfront training
Companies should obtain proper certifications including building and installing loop systems in the ground as well as IGSHPA licensing.
2. Create a strategic alliance with drilling companies.
A big piece of the puzzle is aligning with a good drilling company. It is important to note that some drilling companies offer geothermal systems, so be sure to select one that is interested in being your partner, not your competitor.
3. Consider offering financing to customers
A third major consideration is capital and the issue of offering clients financing to make adopting geothermal a more attractive proposition.
It has been Needham’s experience that the customers see the biggest advantages of geothermal to be the cost savings and the ability to reduce their dependency on the grid, which, in the process, helps the planet. In terms of dealing with any potential sticker shock, Needham stresses that communication is key.
Customers should understand the benefits of air sealing and insulation and that geothermal will help them save money on their energy bills over the long haul. Having this conversation with customers early on in the process is of vital importance.
Homeowners must realize that purchasing a geothermal system is a long-term investment that will pay cost saving dividends. Customers should understand that there is currently a 30 percent tax credit on the entire job and that will help defray the cost of the loop in the ground. Successfully working with clients means that you need a sophisticated financial calculator where one can factor in financing, rebates, home performance programs, and other incentives. Lay out all the numbers in the right way to homeowners, and the sticker shock can be greatly reduced.
Needham also had some excellent marketing tips for contractors. While Princeton Air employs newspaper, television, cable, digital marketing, and direct mail, they have found that the best advertising results come from free geothermal seminars that also offer a dinner. The company offers this event two to three times per year.
A Proven and Viable Alternative
Metro Heating and Cooling in Des Moines, IA, has been servicing the area for over 30 years. The family owned company provides residents with a range of HVAC services including geothermal.
General Manager Joseph Tollari noted that about 70 percent of their geothermal customers are currently new construction private homes. Builders typically approach Metro Heating and Cooling with a keen interest in geothermal, because they no longer view geothermal as “new,” but instead see it is a proven and viable alternative. Builders and homeowners alike have researched geothermal and are satisfied and encouraged by what they have learned.
The single largest advantage for builders is that geothermal systems allow them to be more eco-friendly without much additional effort. Builders also realize that geothermal is extremely efficient, and that factor gives them a powerful selling point.
Tollari recommends that contractors interested in the geothermal market realize that builders and homeowners alike should understand the cost benefits of geothermal upfront. The reason is that some customers may suffer from sticker shock when the numbers are presented out of context.
He also noted that it is important that contractors design the system properly for the house, as every house is unique. The right equipment for the size of the property is essential when it comes to geothermal system longevity. Proper equipment and duct sizing for each particular home should not be overlooked. These factors are essential for successful results.
Geothermal Systems Offer Big Benefits for Contractors, Businesses, and Homeowners
Geothermal system experts agree on the importance of communicating with customers regarding what to expect from geothermal systems. Addressing the price difference, as well as the longevity of the system and the cost savings that geothermal systems bring to the table is a prudent move.
Contractors looking to enter the geothermal market should realize that there are a range of considerations and factors that should be carefully evaluated. In the end, the benefits of geothermal for contractors and consumers alike are nothing short of substantial. Currently, there are fewer players in the geothermal market, which provides contractors with a great opportunity.
- What You Need To Know To Succeed In Geothermal Contracting - May 25, 2015
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- Contractors Moving Into The Commercial Sector: What You Need To Know - November 1, 2013
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