Statement of Blue Mountain Energy

Thank you for the opportunity to submit testimony regarding energy efficiency tax credits and inclusion in upcoming legislation.  My name is Paula Young representing Blue Mountain Energy (BME).  BME is a consulting company who provides professional scientific and technical expertise for research and development projects. We are working in conjunction with our local distribution company, Southwest Gas Corporation, to develop and demonstrate gas-fired heat pumps in the Southwest United States. 

We are pleased that H.R. 1385 and S.822, the EXTEND Act includes investment tax credits for both residential and commercial gas fired heat pump purchases.  We have worked extensively with the Natural Resources Defense Council, the American Council for an Energy Efficient Economy and the Alliance to Save Energy to ensure that these credits are for only very high efficiency equipment and that they move us towards a cleaner and more efficient energy future.

Tax credits for gas fired heat pump technology is included in the EXTEND act in Sections 102 (for Residential equipment) and in 204 (for Commercial equipment).  The credit would be only for those systems with a coefficient of performance of at least 1.1. Two types of small gas-fired equipment are expected to be eligible for the credit.

1)      Absorption Heat Pumps use a refrigerant, absorbent and heat to create a cooling effect.  Simply put, the cooling effect is accomplished with the removal of heat through evaporation of a fluid (refrigerant) at low pressure and the rejection of heat through the condensation of a fluid (refrigerant) at a higher pressure.  In the chiller unit, heat provided by a gas burner boils the ammonia out of the water and condenses it in an outdoor coil.  The ammonia is then evaporated at low pressure, cooling a circulating water system.  The chilled water circulates through the area to be cooled via a piping system eliminating the need for ductwork and making the system well suited to a variety of applications.  The ammonia is then reabsorbed into the water (the absorption process) and the cycle repeats.  In heat pumping mode, the cycle is reversed.

2)      Natural Gas Engine Driven Heat Pumps utilize proven, built-for-purpose natural gas engines, robust compressors, and standard air conditioning components. In heating mode, the technology is able to take advantage of waste heat from the engine for extremely high efficiencies.  The technology runs very much like electric equipment; however, the engine running the compressors operates on natural gas directly instead of electricity. 

Gas-Fired cooling (air conditioning) is currently used in approximately 3% of buildings nationwide with all of that being in the large tonnage arena (medium size to large size commercial buildings). There are only a couple manufacturers building packaged gas-equipment for the small commercial and residential market with sales being in the less-than 500 per year range.  The greatest advantage of increased national use of natural gas-fired cooling is the more efficient use of our natural gas and the reduction in peak electricity loads in the hot summer months.  Gas heat pumping is entirely new technology that is significantly more energy efficient than current gas heating technologies. 

Societal Benefits of the Technology that warrant the credit

• Energy Efficiency:  These technologies are at least 50% more efficient in heating mode than existing natural gas heating.  In cooling mode, there is little to compare to except incumbent technology, which runs on electricity; however, overall use of natural gas is reduced when it is used directly at the unit. Additionally, in cooling mode, the COPs are better than those currently being achieved by large sized gas cooling technology.
• Conservation of our nation’s natural resources:  Electric generation power plants are generally less than 50% efficient, with many plants having significantly lower efficiencies.  The direct use of natural gas will can achieve a two to three-fold increase in efficiency.  Additionally, combined cycle power plants use approximately one third of a gallon of water to produce one kilowatt-hour of electricity, whereas these technologies require either no water (in the case of the engine technology) or very little (in the case of absorption).   
• Reduction of Peak Electricity Demand:  Summer air conditioning has lead to higher peak demand in the summer increasing electric rates substantially.  In addition, during the summer, the electric peaking plants tend to generate both the most inefficient and the most expensive power.  Increasing direct use of natural gas in the summertime will significantly reduce this peak demand for electricity and even out the demand for natural gas.
• Cost savings for consumers:  Utilizing natural gas directly at the gas heat pump will provide meaningful year round energy cost savings.  Thus, the lifecycle costs are lower when installing gas fired equipment.  Natural gas heat pumps use natural gas during the “off peak” summer months, which in turn, reduces the customers overall electric demand charges by significantly reducing their electrical requirements during the times when electrical prices are the highest. A natural gas heat pump is also a more efficient heating system; consequently, the amount of natural gas used in the winter months is less than a conventional gas furnace, providing even more energy savings and conservation benefits.  Additionally, when manufacturing volumes increase, first cost could be on par with the incumbent technologies.
• Low Environmental Impact:  The direct use of natural gas provides a two to three-fold increase in efficiency.  This increase in efficiency saves both natural gas and water over the long run.  The technologies also do not use harmful refrigerants.
• National Security: Natural gas is primarily a domestic resource and our overall energy security is enhanced through the reliance of this abundant domestic energy source. The natural gas industry’s underground pipeline delivery system is very efficient and reliable and not as vulnerable to attack or natural disasters as electricity delivery systems.
• Fuel Diversity: Consumers currently do not have fuel choice in their air conditioning needs. These products would be the first to offer that choice
• Consumer benefits:  Unlike most electric technology, the systems can have multiple zones for comfort control, they are very quiet and safe to operate with minimal moving parts

We urge inclusion of the equipment provisions under sections 102 and 204 of the EXTEND act by included in any energy tax legislation moving through the congressional process this year.  Thank you for the opportunity to comment.