Minnesota is home to a growing number of networked geothermal systems — essentially massive ground-source heat pumps providing low-emissions heating and cooling to a group of buildings.
Now, state legislators have introduced bills that aim to support further adoption of the technology, which advocates say is a key tool for cutting emissions in the building sector, especially in cold-weather states.
The legislation builds on what’s already happening in the state. Thermal energy networks have been installed in Rochester’s city hall and will be extended to a library and civic center to create a system serving more than one million square feet. Carleton College built a networked geothermal system and The Heights, a development on St. Paul’s East Side where more than 1,000 people will live and another 1,000 will work, will be heated and cooled by a networked thermal system.
“There’s a lot of excitement building around networked geothermal,” said Luke Gaalswyk, president and CEO of St. Paul-based Ever-Green Energy, a utility system operator and advisor with an expertise in district energy.
The state’s two major gas utilities, Xcel Energy and CenterPoint Energy, included networked geothermal pilots in plans submitted under the Natural Gas Innovation Act to the Public Utilities Commission. At least one legislative initiative calls for devoting 15% of the Innovation Act budget to networked geothermal. The federal government has several initiatives underway, too.
Joe Dammel, managing director for buildings at policy nonprofit Fresh Energy, said the state’s goal of becoming net zero by 2050 means shifting away from natural gas for heating.
“We think that there’s tremendous potential from network geothermal,” he said. “The studies being considered and the number of bills at the Legislature right now are only going to help us understand the technical and economic potential of geothermal.”
Fresh Energy also publishes the Energy News Network.
The proposed laws encourage geothermal in a variety of ways. One (HF 4759/SF 4849) offers planning grants to cities, counties and planning agencies to examine the feasibility of geothermal systems. A second (HF 4689/SF 4686) creates rebates related to geothermal. A third (HF 4688/SF 4687) requires the Public Utilities Commission to set up a workgroup. A fourth (HF 4423 / SF 4760) builds a framework for thermal energy network pilots and instructs the Commerce Department to study the potential for geothermal networks in Minnesota.
State Rep. Larry Kraft, a co-author on several of the bills, said buildings in Minnesota represent around 40% of carbon emissions and more than 60% in his suburban community of St. Louis Park. He believes municipalities that receive grants for geothermal and build systems will demonstrate, by example, the technology’s ability to decarbonize heating.
Kraft said ground-source systems, while expensive, are more efficient at heating than air source heat pumps. New developments may be easier to build with geothermal energy, or when streets are being reconstructed, neighborhoods could be retrofitted for it.
He imagines utilities that distribute natural gas will move to operating geothermal networks someday.
“How we decarbonize heating is going to be a big challenge for us here in a cold climate, but geothermal has great potential,” Kraft said.
Geothermal of any sort, however, remains expensive because the most common application, ground-source systems, requires drilling hundreds of boreholes and installing significant amounts of piping. There aren’t many contractors who can do this job, and financing institutions have little familiarity with it. Utilities may remain skittish because it threatens the natural gas business model.
Advocates believe more adoption will drop costs, create a robust contractor pool and enable more financing. Minnesota’s new Climate Innovation Finance Authority appears poised to be a potential financing source, having just provided $4.7 million for planning a networked geothermal for The Heights development in St. Paul.
What is networked geothermal?
Networked geothermal systems serve several buildings or homes with centralized heat or cooling using the same principle as district energy systems. A central heating and cooling source — typically borefields or aquifers — to serve many buildings while employing economies of scale to decrease costs through shared infrastructure.
Trade unions view networked geothermal as increasing employment opportunities for pipefitters and other contractors. Gas utilities could potentially transition toward geothermal as fossil fuel demand diminishes, Dammel said.
Clean energy advocates meanwhile like geothermal’s efficiency and ability to operate on electricity for heating instead of natural gas or propane. Lawmakers see thermal systems as providing a path to meeting the state’s goal of being net zero by 2050, Kraft added.
The Inflation Reduction Act incentivizes thermal networks by offering tax credits and direct reimbursements to government agencies and nonprofits.
“The [IRA] is contributing to an explosion in interest and adoption of geothermal,” said Ryan Dougherty, president of the Geothermal Exchange Organization.
Schools and other nonprofits can now receive 30% to 50% of the installed cost of a geothermal system, Doughtery said. The surge in commercial and institutional installations has grown so significantly that the industry has begun to face a labor shortage.
Geothermal’s advantages
For the electric grid, networked thermal systems could bring relief because they use substantially less electricity than competitive solutions. Ground source heat pumps operate more efficiently than air source heat pumps, which now outsell fossil gas furnaces. And although ground source heat pumps use electricity, they consume less energy than heating alternatives, Gaalswyk said.
Such systems could even tap sources such as waste heat from wastewater facilities or data centers to warm buildings, he said. Another benefit is the ability to shift heat on a sunny day from a south-facing building, for example, to a north-facing one needing it.
Audrey Schulman, co-founder and co-executive director of the nonprofit climate solutions incubator HEET, said utilities with networked geothermal can begin heating water a week before an expected cold snap to avoid stressing the system — for instance, taking advantage of excess electricity from wind farms.
“There’s a lot of different options available,” Schulman said.
The role of utilities
Massachusetts has required utilities to direct a growing percentage of funding allotted for replacing natural gas piping to networked geothermal, Schulman said. The fastest way to move away from natural gas and toward geothermal, she argues, will be by maintaining the financial health of natural gas utilities.
Utilities would socialize the cost of the capital expenditures to networked geothermal and then potentially pay it off by charging customers for the operations and maintenance, depending on the size of their homes or businesses.
“No one’s quite figured out how the charges will be structured,” she said.
Dammel said natural gas utilities have a long history of innovation and changing their business models. Initially, they provided natural gas for streetlighting before transitioning to a delivery service for natural gas.
“We certainly see that gas utilities could play a significant role in providing heat to customers and maintaining that longstanding customer relationship gas utilities have with their customers,” Dammel said.
Obstacles and opportunities
Dammel and Schulman say regulators, utilities and others will face inevitable challenges in moving thermal systems into the mainstream. One is getting utilities onboard. Schulman said one Massachusetts utility, Eversource, fully embraces networked geothermal as the future, while others have taken a wait-and-see approach.
Dammel said utilities and clients must learn through pilots the upfront costs of the systems and how they could save money over time. Helping state residents and lawmakers understand the potential for networked geothermal and how it could benefit communities will be another task, he said.
Developing a geothermal workforce remains critical to growth. Minnesota has existing tradespeople capable of building geothermal systems, but the potential to create a much bigger workforce remains, Dammel said.
“There’s a huge opportunity,” he said, not only for installers but for companies developing new geothermal technology, financing, design and other aspects of the business.
Schulman agrees. Contractors drilling boreholes for geothermal in Massachusetts have become “overtaxed” with all the projects underway. The adoption speed will increase once regulators, utilities, and customers see the advantages.
“I can’t imagine any reason a customer would not want lower heating and cooling bills,” she said.
Legislative committees have heard several of the geothermal bills. Minnesota’s legislative session ends May 20.
