Renewable Energy – how is it affecting the heating and air conditioning business and what is the outlook for the future?
April 19, 2013
As contractors in the heating and air conditioning business, we are frequently looking at various kinds of renewable energy. As consumers become increasingly aware of the impact our choices make on the environment, everyone is looking for the next piece of technology. We look at not only the carbon footprint, but also the reliability, capital cost and how familiar we are with it.
You will note, we do not spend much time evaluating government incentives. In Southwestern Ontario alone, we have seen how lucrative incentives have initially created a large boost to the technology only to see it dwindle over time as the various shortcomings are exposed. Specifically, we have seen geothermal heating and Photo Voltaic skyrocket then dwindle.
In the case of geothermal, we have found it to be an excellent technology –for a very small number of homeowners. For Geothermal to make economic sense, we say that the customer has to have 4 critical components. Geothermal heating is the best choice for homeowners that do not have access to natural gas, have enough land to lay a ground loop that satisfies 100% of the heating load horizontally, a large heating envelope (either big or porous), and plan to stay in the house for over 20 years. (I would be happy to share the reasoning for those that are interested – comment on the post) Unfortunately, this eliminates a large number of homes.
More recently, the Southwestern Ontario countryside has seen a proliferation of Photo Voltaic (PV) panels (solar panels that produce electricity). While these appear to be a very good investment (ROI > 10%) relative to public market returns they pale in comparison to the early returns. One of our more savvy customers jumped on the PV wagon early and appeared to be making 18%. Unfortunately, the success of the investment had little to do with the effectiveness of the technology. It was solely based on the provincial government’s decision to compensate these investors at a rate that was roughly 10 times more than what we were paying for the electricity (and to promise to keep doing it for 20 years). While the subsidy has shrunk significantly (as has the cost of the systems), without the subsidy, the investment fails entirely.
There was an interesting article in the Wall Street Journal today (click here) that discussed the state and promise of various forms of renewable energy. I encourage you to read this. Don’t be offended by the analogy at the beginning of the article…
If you have any questions, concerns or require additional information please feel free to comment below or contact us at any of the sources provided. firstname.lastname@example.org, 519.579.5330, Twitter @HoggMechanical, Facebook Hogg Mechanical
Have a spectacular weekend!
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