2010 National Geothermal Meeting November 2-3, 2010 Atlanta,GA

1. 2010 National Geothermal MeetingNovember 2-3, 2010Atlanta,GA Tony Landers Director of Marketing

2. State of the Industry John Bailey, Jr. Sr. Vice President of Sales and Marketing

3. 2007 to 2009 • AC and Heat Pumps shipments decreased by over 23% • GSHP shipments increased by 45% This has created an opportunity for all of us

4. Buildings Dominate U.S. Energy Use and Carbon Emissions with Heating, Cooling, and Water Heating being the Largest Contributors Thermal Loads Heating 9.2% Cooling 4.3% Hot Water 3.8% Total 17.3% ~ 20% of all U.S. Carbon Emissions

5. Levelized Cost of Energy Comparison Average price for U.S. Grid Electricity is $114 LCEO Data Source:

6. Geothermal Heat PumpResidential Tax Incentives • Federal Income Tax Credit • 30% of total GHP system cost • No cap on maximum credit • Can be used to offset AMT tax • Can be combined with other tax credits • Can be used in more than one year • Eligibility • Home must be located in the U.S. • Includes houses, cooperatives, condos, mobile homes • Does not have to be your main home • GHP must meet Energy Star requirements • Placed in service before 2017 • Cost need to be reasonable and necessary for the installation

7. Geothermal Heat PumpBusiness Tax Incentives • Federal Income Tax Credit: • 10% of total GHP system cost • No cap on maximum credit • Can be used to offset AMT tax • Can be used in combination with subsidized financing • Can be used in more than one year • Accelerated Depreciation: • 5 year MACR depreciation for entire GHP system • Eligibility: • Building located in the U.S. • Original use begins with taxpayer • Placed in service before 2017 • Can be used by regulated utilities • Must be claimed by the owner of the property (effects non-taxable)

8. Geothermal Heat PumpEnergy Star 3.0 Specification • SUCCESS: New Specification Effective December 1, 2009 • New Manufacturer Commitments • Use trained loop installers that offer 2 yr warranty • 2 yr all parts and 5 yr major parts warranty with labor • Promote use of GHP hot water heating capabilities • but no longer a mandatory requirement • New Definitions • Broad and clear definition of a GHP • Broad and clear definition of loop configurations • Water-to-water added

9. Geothermal Heat PumpEnergy Star 3.0 Specification • GHP Definition • Provides space conditioning and/or water heating • Water-to-air, water-to-water, GDX • Provided in one or more assemblies • Can incorporate pumping, storage, air cleaning, humidity controls • System consists of GHPs, GHX, distribution system, controls, storage • GHX Definition • Horizontal, Vertical, or surface water closed loops • Ground water, surface water, or reclaimed water open loops • GDX loops buried or submerged in surface water

10. Geothermal Heat PumpEnergy Star 3.0 Specification

11. Current Federal Policy InitiativesJobs Bills • Home Star (Cash for Caulkers) • Silver Star would provide up to $4,000 in instant rebates • Currently GHPs are left out – working hard to correct • Does fund many envelope upgrades that complement GHP retrofits • Gold Star would provide up to $8,000 in instant rebates • GHPs are eligible • These rebates are in addition to current tax credits • Rural Energy Savings Program • Administered through electric co-ops • 10 year very low interest (max 3%) financing for EE retrofits • Paid on electric bill • Strong bipartisan and bicameral support • GHPs eligible

13. Example Commercial GHP Economics Depreciation reduces 7 yr payback to 1.5 yrs!

14. Geothermal Heat PumpState Incentives • 37 States have Financial Incentives for GHPs • Many are new • Sales tax and property tax exemptions, income tax credits, grants • 17 States have tax credits or grants • 28 States have Regulatory Incentives for GHPs • Green public building requirements • 36 States have Utility Incentives for GHPs • Voluntary DSM • Mandated RES and EES • loans and rebates • Utility support is coming back!

15. www.dsireusa.org

16. Geothermal Heat PumpMarket Perspective

17. North American Geothermal Industry Shipments

18. New Technology Adoption

19. Geothermal Heat Pump 4% of US new single-family home HVAC tons in 2008 and projected to reach 7% or more in 2010 USA:

20. Geothermal Heat PumpDOE Industry Roadmap Growth Goal • 1 million GHPs annually by 2017 (39% CAGR) • Results in 3.3 million cumulative GHP installations by 2017 • 26 MMT annual CO2 reduction • 520 MMT lifecycle CO2 reduction over 20 yr GHP life • Creates 100,000 new jobs • Conventional A/C and heat pump market is 6 to 8 million units annually

21. Geothermal Heat Pumps 1300 Sq. Ft. Low Energy Habitat for Humanity Homes

22. Habitat for Humanity Site Energy Consumption by End Use – Std and Low Energy Homes 55% to 80% Reduction in Total Energy Use

23. Habitat for Humanity Total Energy Consumption and Carbon Emissions

24. Geothermal Heat Pumps are everywhere! Black Point Inn - Prouts Neck, ME Galt House Hotel - Louisville, KY Statue of Liberty Gift Shop ASHRAE Headquarters - Atlanta, GA Harvard Library – Cambridge, MA Whistler Village - BC, Canada French Laundry Rest.- Napa, CA Alta Condos, Washington DC Gaillardia Offices – Okla. City California University of PA Hirschfeld Towers – Denver, CO Yale Art Bld. – New Haven, CT Commercial Buildings

25. Existing Housing Stock -2005

26. Existing Housing Stock - 2005 Gas – 5.3 million Electric – 1.0 million Propane – 800k Heat Pump – 400k Oil – 200k Other – 200k Gas – 13.1million Electric – 1.3 million Propane – 1.1 million Heat Pump – 800k Oil – 700k Other – 700k Gas – 5.7 million Electric – 4.3 million Propane – 800k Heat Pump – 900k Other – 400k EIA 2005 Residential Energy Consumption Survey

27. Drilling Developments

28. Drilling Industry Developments Goal: Have 1,200 rigs doing geo loops by 2013 Target markets by need and potential Involve distributors in the process so you can build business for you and your dealers Assumptions 1 rig = 100 residential units/year

29. Drilling Industry Developments • Strategic Partnerships • American Ground Water Trust • National Ground Water Association

30. Drilling Industry Developments • Strategic Partnerships • International Association of Foundation Drilling • Geo Drill Manufacturers • Drilling Schools, Universities, Trade Schools

31. Drilling Industry Developments • Again working with the American Ground Water Trust on a series of general market development 1-day workshops that also serve as a loop contractor recruiting effort

32. Drilling Industry Developments • Completed 2010: • Austin, TX • Atlanta, GA • Jacksonville, FL • Tampa, FL • Asheville, NC • Columbia, SC • Scheduled 2010: • Chicago, IL • Louisville, KY • Minneapolis, MN • White Plains, NY • Seattle, WA • Richmond, VA • Los Angeles, CA • Nashville, KY • Salt Lake, UT • Philadelphia, PA

33. Drilling Industry Developments • In 2009 we made an agreement with the American Ground Water Trust to provide back office support for a series of 2-day Driller Geo classes designed to introduce local drillers to the opportunities available in the residential geothermal industry.

34. Drilling Industry Developments • The drillers who pass the end of class test will letter of completion • We are averaging over 15 drillers per class and expect to have over 300 attendees by year end

35. Drilling Industry Developments • Baroid / Halliburton is providing grout training segment • We are in discussions to add the our geo drilling class to their “mud school” effort

36. Drilling Industry Developments • Drilling training with universities & trade schools • Early Discussions • Texas Tech • Oregon Institute of Technology • Humboldt State University • The stimulus bill has $10,000,000 for geothermal work force development

37. Utility Industry Update

38. Utility Programs • Demand side management (DSM) is back • The 2010 -2011 White House budget removed $2.5 billion from the Rural Utility Service (RUS) budget • As they have disallowed funding for coal plant construction and for operating and maintenance expenses

39. Peak Clipping

40. Utility Programs • Increasing interest in: • Consumer education • Rebates and higher rebates • Loop leasing/tariffs • One-Bill financing • Marketing programs • PACE financing • Property assured clean energy

41. Create Opportunities with Allies • Are you having a dialog with your local Allies?

42. Basic Geothermal 101 Titian Burris Residential Product Manager- Geothermal Products

43. Earth is a Vast Solar Collector 17% reflected by clouds. 100% 6% reflected by surface. 19% absorbed by water vapor, dust 4% absorbed by clouds. 46% absorbed by ground Earth Solar energy maintains a nearly constant temperature throughout the year just below ground

44. The Earth is a Source of Heat in Winter… Outdoor air design temperature: -5°F 72°F 50°F Geothermal heat pumps transfer underground heat into buildings to provide heating

45. …and an Efficient Place to Reject Heat in Summer… Outdoor air design temperature: 95°F 74°F 50°F Geothermal heat pumps transfer heat from buildings into the ground to provide cooling

46. …using Heat Pump Technology Geothermal heat pumps circulate water through a sealed underground piping loop where it is naturally warmed (or cooled) by the Earth

47. Heat Pumps Are All Around Us…

48. Residential Site EnergyConventional System • Over 70% of the energy consumed by a typical home is used to meet thermal loads

49. Residential Site EnergyGeothermal Heat Pump System • Total site energy consumption is cut in half

50. System Basics Parts and Pieces