Energize Your Company With Renewable Energy Offerings

Posted on:

May 6, 2014

Air conditioning contractors are venturing into renewable energy sources for several reasons: To set themselves apart from competitors and to help their customers save money—and maybe even the planet.

Hal Smith, president, Halco Energy, Phelps, NY, expanded into geothermal 20-some years ago, adding solar and wind about five years ago. Today, his company, which employs 150 people, has annual sales and service of $25 million, of which renewable energy accounts for 10 percent.

“It was a natural progression,” he explains. “We do a lot of energy audits. We help people tighten up their homes and make their homes more energy efficient. Once you do that, the next natural progression is to get involved in renewable energy. You’re doing the right thing for the consumer and the right thing for the environment.”

Smith thinks jumping into renewable energy—if done correctly—can boost a company’s business. He cites the example of customers buying in a new construction project who prefer to power their home with solar. “Typically, we don’t compete in the new construction arena,” he says. “Because they want solar and we can offer the traditional HVAC, plumbing, and electric package, we end up doing the whole thing just because it makes sense for them. Otherwise, we probably wouldn’t even take a look at the job because we don’t go after the low-priced new construction work.”

His company is just completing a job on a 1700’s farm home retrofitted to a net-zero status. “We tightened up the home and added geothermal for heating/cooling,” he says. “The owners have a small horse farm with an indoor riding arena so they have a large roof space. We were able to add enough solar to power the geothermal, power the base load electric for the horse farm, and power their two Chevy Volts. These people will never have another electric bill, propane bill, or gasoline bill.”

Of course, that kind of energy savings does come with a price—$137,000 to be exact, which these customers withdrew from their retirement account. “We showed them about a 9 percent rate of return, which was better than they were getting in their retirement account. It made great sense,” Smith says. “This couple is very focused on the environment and take pride in doing the right thing. Twelve or 13 years down the road, when it’s all paid for, they will be ahead of the game.”

Tax Credits Matter

Anthony Maynor, president, A. Maynor Heating and Air Conditioning, Inc., Apex, NC, first got involved in geothermal back in the late 1990s, but business didn’t really ramp up until the past four years or so. “When the tax credits kicked in, that was a big boon to our business,” he says. “Geothermal is a really strong foothold for us, particularly here in North Carolina, because on top of the 30 percent federal tax credit, there is also a 35 percent North Carolina state tax credit. That has made geothermal very attractive.”

An admitted fan of sustainable energy and high-efficiency options, Maynor moved into geothermal to give his company a leg up from the hundreds of HVAC contractors that can be found in the phone book or on the Internet. “You need something that sets you apart from everybody else,” he says. “Geothermal really sets us apart. There are only a handful of local companies in our area that are actively engaged in installing and servicing and working with geothermal systems.”

The availability of contractors to drill wells and handle some of the earth portion of geothermal jobs has improved dramatically, he says. “Back in the ‘90s, it was almost impossible to find somebody with the knowledge and equipment to come in and drill a well for geothermal, even though it’s the same rigs that are used for water well systems,” he recalls. “Like a lot of new things, people were afraid to get involved in something they didn’t know. Today, it’s become very mainstream.”

At this point, Maynor estimates that geothermal accounts for less than 10 percent of his business, but he hopes to increase that percentage. ““Every year, we try to push deeper and deeper into it,” he says. “The biggest resistance, in many cases, is still the first cost. The costs to install the ground loops are still substantial. Even with the tax credits, a lot of people are excited about it, but they still have a hard time writing that big check upfront to cover everything, even though they realize they will get it back over the next several years.”

Despite the upfront cost, Maynor believes geothermal holds tremendous promise for the HVAC industry. “As we become more energy dependent and the cost of energy continues to rise, more people are looking for ways to save on long-term energy costs and consumption. Geothermal, in my opinion, is one of the single most energy-efficient options for your home and can have a significant impact, not only on your electric bill, but on your carbon footprint for the world.”

Let The Sunshine In

Located in sunny San Marcos, CA, Action Air Conditioning, Heating & Solar has been offering solar photovoltaic for going on four years. “Southern California has been a leader in photovoltaic,” insists Greg Gill, president and CEO. “We’ve got a great capacity for sunlight, pretty good weather, and not a lot of clouds. It’s an optimum application for it.”

In addition to the federal tax credit, the state offers solar incentives, making it cost effective for consumers who might otherwise face ever-increasing utility bills. “Right now, better than 30 percent of our business is renewable energy,” Gill explains. “We see that portion continually growing because more and more people are looking at it. We have one of the highest utility rates in the nation, and we already know about a future increase. With rates going up, people are looking at alternatives to reduce their energy demand. If you can save money and help the environment, it’s a win/win.”

With 56 employees, the company averages about $8 million annually in sales and service. Unlike traditional HVAC, solar offers the company a steady source of revenue, according to Gill. “Solar is pretty consistent all year long. It’s not driven by the weather. It’s driven by utilities. You don’t have that on and off that we have in the heating and cooling business. It picks up those flat areas that we typically had in years previous. It’s been a real winner because it’s something else that differentiates us from our competition. When we’re competing head to head against another HVAC contractor, we have that card that we can slip in there.”

Any time you can differentiate yourself from your competition, Gill emphasizes, you put yourself in a better spotlight and give yourself more opportunities. “That’s what solar has done for us, besides making a lot of people energy self-sufficient and a lot happier.”

Smith echoes that same thought, adding that HVAC contractors are well positioned to move into the renewable energy arena. “For the most part, they have the skill set to do it. If they want to expand their businesses, they should seize the opportunity.”

Avoid Two No No’s

Size matters in renewable energy installations. HVAC contractors point out two situations to avoid:

Don’t undersize the earth loop in geothermal installations. “The earth loop is the single biggest factor that will dictate system performance,” cautions Maynor. “If the earth loop is not adequately sized and designed, the homeowners will never reap the benefit of the system and are more likely to develop problems with the system down the road. When you hear about people complaining about their geothermal systems or higher-than-expected energy bills, almost always the equipment has not been sized adequately or the ductwork and related systems have not been well designed to distribute air.”

He thinks some contractors, to keep first costs down for their customers, don’t get enough loop in the ground. “That’s the recipe for disaster,” he emphasizes.

Don’t oversize solar equipment. Gill’s mantra is simple: “Reduce before you produce.” The president of Action Air Conditioning, Heating & Solar advises contractors to examine a home’s energy performance prior to a solar installation.

“Some contractors sell customers more than they really need,” he says. “They’re not addressing the rest of the house. Customers may have a lower utility bill but they still have the same inefficient heating and air conditioning system with leaking ducts, poor delivery, and improper comfort level in the house. Our idea is to address how the home energy use can be reduced while getting the benefit of increased comfort level and better indoor air quality. Now let’s see what size we need after we reduce that.

“There’s a right way and a wrong way of doing this,” he continues. “You tell me, ‘What is the better solution?’”