In this episode, Joselyn Lai of Bedrock Energy describes hardware and software improvements that enable geothermal heat pumps to be installed more quickly and less expensively, even in large commercial and industrial buildings in tight urban spaces.
Text transcript:
David Roberts
The most efficient way to heat and cool an individual building is with an electric heat pump, for the simple reason that, instead of generating heat, heat pumps harvest it, which turns out to be a lot easier. And the most efficient form of heat pump is a ground-source heat pump — sometimes called a geothermal heat pump — which harvests heat from below the earth’s surface via a network of pipes circulating water.
The advantage is that, beneath a certain depth underground, it's always roughly the same temperature, no matter what's going on above the surface. The system just chugs away at a steady, predictable level, returning three to five units of heat for every unit of electricity used to run it. Reliability is rock solid and ongoing operational costs are negligible.
The disadvantages, which have kept geothermal heat pumps from catching on more widely, are twofold: 1) they’re expensive to install, in equipment, labor, and time, and 2) they require a relatively large swath of land that can be disturbed by relatively large machines. There aren’t a ton of customers with available capital, a chunk of unused land, and lots of patience.
Several companies are working to solve these problems, some in the residential space, like Dandelion Energy, and some, like today’s guest, in commercial and industrial buildings. I'm talking today with Joselyn Lai, the CEO of Bedrock Energy. We're going to get into how exactly to shrink the physical and capital footprint of geothermal heat pumps so that many more buildings can use them to go carbon-free.
All right then, with no further ado, Joselyn Lai, welcome to Volts. Thank you so much for coming.
Joselyn Lai
Thank you so much for having me, David.
David Roberts
This is exciting. Love heat pumps. Everybody knows I love heat pumps. I'm practically the heat pump guy. So before we dive into specifically what Bedrock is doing, let's spend just a minute or two hyping up geothermal heat pumps. So I don't know if you had anything to do with this report or if you even knew it was coming, but let's talk a little bit about the report that just came out from — is it the Oak Ridge National Lab?
Joselyn Lai
That's right.
David Roberts
Was that just like a Christmas present for you, or did you, were you involved in some way in that report?
Joselyn Lai
We were not involved, but we were really pleased to see it because what that report from the Department of Energy, Oak Ridge National Lab and NREL reported on was the incredible benefits on both sides of the meter, so to speak, of geothermal heating and cooling. You help the property owners, the building occupants save money and go green on their heating and cooling. And it has tremendous benefits for the grid because of the immense efficiency and reduction in power requirements for heating and cooling. And we just love to see it because we really need society to see how valuable geothermal can be in an increasingly electrified world.
David Roberts
Yeah, I found this really interesting, and this is a, I've got a direct quote from the study here. It says, "Ground geothermal heat pumps coupled with weatherization in single family homes..." because this was a study of the sort of entire nation's building stock "...coupled with weatherization of single family homes are primarily a grid cost reduction tool and a technology that when deployed at a national scale, substantially reduces CO2 emissions even in the absence of other decarbonization policy." So, I think that's just a really interesting, I mean, we're mostly going to be talking about the nuts and bolts of getting these in buildings and the benefits for building owners. But it's just worth noting as a context that heating a lot of big buildings with very little electricity is a boon to the electricity grid, too.
If we're electrifying everything, you know, everybody's worried about these giant loads coming, especially with big buildings. Especially with big buildings in cold climates. Right. The fear is that if you electrify all heat, all these big buildings in cold climates are demanding heat at the same time in winter when renewable energy is at its kind of lowest ebb. There's a lot of freak out happening about this. But if they all go geothermal heat pumps instead, it's just a much lower electricity burden.
Joselyn Lai
That's right. And David, it's also for cooling as well.
David Roberts
Right.
Joselyn Lai
Because the worry about electrification of heat is, unfortunately, it's a little bit of a worry about the future. You know, I wish we were electrifying heat faster, but the worry about meeting peak power demands for air conditioning is a problem of today and of recent history. If we can think about, you know, the brownouts or the blackouts in California through, you know, my early adulthood and childhood, that's a problem that we already face today because air conditioning is the predominant driver of peak demand increases in hot summers.
David Roberts
Yeah. So, it's worth noting here that these things are also air conditioners and are much more energy efficient than traditional air conditioners. Let's just say briefly, I know there's also some research on this out of DOE about the sort of relative merits of geothermal heat pumps versus air source heat pumps. They're both, I think, more efficient than combusting fossil fuels, obviously. But what do we know about the comparison?
Joselyn Lai
Yeah, so with the comparison of geothermal heat pumps and air source heat pumps, where geothermal heat pumps really shine is their performance advantage, so to speak, when the weather is more extreme. So, in very high temperatures and in very low temperatures, that efficiency improvement can be double or even more. In very, very cold climates, air source heat pumps actually go basically down to electric resistance heating. Now, there are amazing people who are doing great work to improve cold climate heat pump performance. But even so, broadly speaking, just the fundamental physics of trying to capture heat out of zero degrees Fahrenheit air is difficult.
David Roberts
Right. You could say that even air source heat pumps will work in the cold, but to do so, they have to work a lot harder.
Joselyn Lai
They have to work so much harder that —
David Roberts
They just use a lot more power.
In those times of year or those times of the evening, the ground source heat pumps or geothermal heat pumps might actually be four times more efficient than an air source heat pump. And that's why those grid benefits come into play, because you don't have that peak power jump in times when it's very, very hot or very, very cold.
Right, right, right. So this is, as I said in the intro, it's always the same temperature down there. So, you do not, you basically, you don't get any spikes of electricity use, really, in either direction, do you? I mean, it's pretty much steady year-round, is it not?
Joselyn Lai
Exactly, it is steady year-round. And so, broadly speaking, you keep that performance year-round. And your energy bill as the building owner may be pretty much the same every single month of the year using thermal heat pumps.
David Roberts
Yeah, this is a theme I always try to emphasize: just the difference, never mind the sort of level of price, but just the predictability of energy bills is alone a huge advantage for companies, for countries, building owners, you name it.
Joselyn Lai
It's kind of insurance in a world with volatility in fossil fuel prices, when there's volatility because of just the commodity prices alone. But even worse, if there's volatility because of, say, conflict in Europe, when you are relying on natural gas or conflict in the Middle East, these things drive changes that kind of are felt all the way at the pocketbooks of tenants and occupants. And so this is kind of future-proofing, that kind of disturbance in prices down the line or in even the near future.
David Roberts
And volatility, we should also say, in weather driven by climate change.
Joselyn Lai
Exactly.
David Roberts
It is, in some sense, immune to those, too, since it's tucked away underground. The other thing I wanted to touch on is just maintenance costs. What do we know, sort of? Have there been studies done? What do we know about maintenance costs and just performance? Because I know, like, I threw this open for questions on Twitter, and one of the things that came up is, you know, some entities have had bad experiences with these things, with ground source heat pumps in the past, and I know there were some scars out there. So, what do we know about the maintenance costs and the performance of existing systems?
Joselyn Lai
Yeah. So, when ground source heat pump systems are installed correctly, they are pretty well established to be lower maintenance costs and easier to handle than alternative air source or fossil fuel combustion HVAC equipment. And this is data from ASHRAE, which is the leading society on HVAC systems design, engineering, and construction globally. So, this is data pretty well established over multiple decades on the maintenance improvements for geothermal heating and cooling. And it's in large part because the heat exchange system is sitting underground. Nothing is affecting it like the saltwater of coastal cities in the air.
David Roberts
Right.
Joselyn Lai
It's not being affected by the freeze that is going to frost over the top of an air source heat pump's outside condenser. It's all very safe, and stable, and protected, and as a result, these systems can actually last longer for that reason. The problem with some of these scars you mentioned is because, in past decades, since geothermal heating and cooling is a relatively nascent industry, you will have less sophistication in how a system is designed. And so, an undersized system based on insufficient data may degrade in its temperature conditions underground, and it doesn't have the thermal performance it should.
And then, as a result, it might get too hot or too cold in that underground geofield over time. And then you have a customer that's thinking, "Wow, this is not only not saving me money, but it might just not even be doing any of the cooling or heating it's supposed to be doing at all." But that is a result of mis-sizing or incorrect construction, and it isn't a fundamental challenge with the technology of geothermal heating and cooling itself.
David Roberts
So, these, you know, you have this buried network of pipes, basically, and they're taking heat out of the ground, more or less. So, it is possible, if you're taking too much heat, to cool that ground on a, on a, like you can, you can cool it over time, like you can, you can draw down its total heat over time. I'm trying to —
Joselyn Lai
You can impact that thermal gradient if you are using too little ground for what the building needs. And this can happen if you're drawing heat for a heating dominant use case, or if you're rejecting heat into the ground for a cooling dominant use case. And essentially, the key to geothermal having its performance indefinitely is thermal equilibrium. You want to draw or reject heat in the amount that is balanced with what that subsurface system can equilibrate itself over time. And that kind of equilibration ability is in part based on size of the system you put into the ground, but also based on what is the groundwater flow and what are the conditions of the rock.
"How permeable is it for that groundwater flow? What kind of rock, what kind of soil do you have?" And without a detailed understanding of that subsurface, there is that risk of sizing something that isn't able to balance itself. And therefore, if you do have a more heating dominant load or a more cooling dominant load, you can encounter thermal degradation if not properly designed with the right data.
David Roberts
Interesting. Okay, so that's enough about geothermal heat pumps. Generally, they're incredibly efficient and, when properly installed, work incredibly well and involve incredibly low maintenance and operation costs. Sounds great. So then, let's talk about traditionally, why have they been so expensive to install? What are the big cost centers?
Joselyn Lai
Yeah, so the number one cost center is the drilling of those boreholes. Essentially, today, the way drilling is done is with fairly conventional water well drilling technology that is not necessarily the fastest. And therefore, when you have lower average rates of penetration, you're just utilizing the equipment and having drilling labor on site for longer. And that utilization and that time just racks up costs and makes the construction of the borefield typically the most expensive part of a geothermal heat pump or geothermal heating and cooling installation. That's one of the main barriers. And in that cost of drilling and costs of subsurface construction is also packaged in what I would say, kind of like risk, because there's so much heterogeneity in subsurface conditions across different cities, across different states, especially in the United States.
When people aren't sure what might happen while they're drilling, if they have technology, a drill rig, or drill bits that can't always handle all conditions, what do they do? They price up in order to capture that risk. And so, generally speaking, this somewhat, I would say, legacy industry of drilling. While there are amazing drillers who have been doing this for decades and decades, they're relying on their personal knowledge. They're relying on expertise in a particular geography. And if you are worried about that knowledge not scaling to the town or the county next door, you increase prices to cover that.
David Roberts
Right. Got it. Okay. So, Bedrock's trying to solve these problems, and it seems to me like it is trying to do so at the highest difficulty level, i.e., it is trying to solve these problems specifically for very big commercial and industrial buildings in urban environments. So, you need more boreholes, more pipes, more surface area, right? To handle the large interior space in environments when you have less land to work with. So, you're trying to do a bigger job with less land. Walk us through how it is you're trying to make that work. How is it you're trying to bring down those costs and make that possible?
Joselyn Lai
Absolutely. So, we are a technology-focused company, and so our technology value proposition is to bring in software, automation, and robotics in order to get as much load as possible as optimal for that particular site and that particular building in the space that is available, and to reduce the risk and the difficulty of drilling and constructing these systems in whatever geographies you're in, whatever subsurface conditions, soil, rock, water, whatever you have. By bringing technology with subsurface data and sensors and software to play, we can reduce the time and therefore, the costs of constructing these systems. So, broadly speaking, all of that difficulty that I mentioned with people who are essentially manually making decisions about how to drill in a particular area and then pricing up if there's risk about different subsurface conditions, we actually bring software and data and advanced hardware technologies in order to reduce that risk, in order to make decisions automatically and intelligently about how to drill in a particular area so that those costs can come down. And all at the same time, we are also improving the speeds so that that also brings down the costs of construction.
David Roberts
So better and more fine tuned and faster are the two basic value propositions for the building owners point of view?
Joselyn Lai
Exactly. I would say, from the building owners' point of view, all they really care about is that the cost comes down so that, on a CapEx basis, they're either putting less money down or they need to finance less intensive upfront cost. However, for us to drive down that upfront CapEx better, more fine-tuned and faster is indeed, those are the levers that we use.
David Roberts
Right. I want to talk about the software and the hardware. Let's talk about the software first. So, you know, this is kind of a theme that comes up with virtually every company I talk with these days. They're bringing these kinds of things to bear, sort of machine learning and sensors, etc. So, tell us how all that applies here. Like, what can you — say, I'm a building, I'm in a mid-sized city, and you're going to assess. What does it mean to look underground and find out what kind of rock is down there?
Like, are you literally, is it microwaves, sonic? Like, what, how do you get that information? And what do you do with that information?
Joselyn Lai
Yeah, there's are two levels of it. The first is prior to starting construction. When you're in the design phase, Bedrock is building a dataset that gets better with every project we do about subsurface conditions in cities. So, that when we simulate, when we model and design the geofield, which is this subsurface system that you drill and construct underground, when we do that design, we're actually getting a lot of data that we already know, and that might also be public data. We combine it, and we use that to produce really long-term, multi-decade models of how the subsurface energy will perform in interaction with the building's thermal energy needs.
And so, with that first level, we're just giving a really sophisticated version of what design engineers already do for buildings. But we give a lot more confidence on the subsurface element of, you know, how much heat can you draw or how much heat can you reject into this ground and ensure that it stays in that thermal equilibrium so that the building, for its lifetime, can have a high-performance geothermal.
David Roberts
When you find out about the subsurface conditions in one area, how much of that knowledge transfers to other areas, like, if you move over, you know, 100 yards, is that knowledge — does that knowledge transfer? Or, like, how bespoke are subsurface conditions?
Joselyn Lai
They can be pretty different across different parts of town, and definitely across different regions. And so, it is important to have some data, whether that be from water well reports in that region, or just from geotechnical reports that are gathered through normal construction activity. We gather that information because that stuff does change site to site. But what doesn't change site to site is how the overall physics of subsurface energy transfer works. Our software model can take in that different data and make projections on what the energy performance will be, enough to do a starting design of the subsurface geofield that will go into the ground.
Because then, the second part that we bring to the table is that while we drill, we then get incredibly granular data from the borefield from every single hole that we put into the ground. We are gathering data on the temperature gradient, on the rock type, and the groundwater conditions. And it's very, very granular to the point that if you have 100 boreholes, you might have many, many thousands of data points across several subsurface parameters. And all of that goes back into our software model to remodel and make sure that what you are putting into the ground is indeed the most energy optimal system that will perform for the lifetime of that building.
David Roberts
So there is a little bit of redesign on the fly happening as data comes in?
Joselyn Lai
That's right. It's primarily remodeling and confirmation. There can be some remodeling redesign if you need, if, you know, the subsurface condition is different. But that redesign, if it does happen, is exactly what building owners need in order to allay their concerns about system degradation. And that's how we hope to introduce in the coming years this concept of financially guaranteed borefield performance. Because, as you know, there's not any distributed energy asset class or any kind of asset class that really scales in the world without guarantees and without that ability to financially back it, because it's credit worthy.
And that's a big thing that we want to introduce, so that geothermal can be as scalable as, say, rooftop solar is.
David Roberts
Oh, so the idea here is you bring a degree of performance certainty to projects that is going to attract bigger capital.
Joselyn Lai
Exactly. Exactly.
David Roberts
The knowledge you're gathering, is it cumulative? You know what I mean? Like, in other words, are you going to be better equipped for your next project than you are for this one?
Joselyn Lai
Yes, it is cumulative. Now, of course, the next sites, in situ, soil, rock, and water conditions are important as well. But the data set we build on subsurface conditions and how they then feed into energy performance, all of that continues to refine our algorithms so that we can keep training it, keep making it more precise, so that with every future project we do, we have even more confidence and precision on what we are estimating for the new building, the next building, and the next building's performance.
David Roberts
So, that's the software piece. Big piece of this. Let's talk about the hardware. You said that part of what takes a long time with traditional geothermal heat pumps is that they're using water well drills, basically, drills meant for other purposes used for this. Are you building your own drills?
Joselyn Lai
We are, yeah. So, the way water well, and, you know, most geothermal drilling rigs work is that in order to get to a certain depth, you are basically stacking a bunch of drill pipes. So, different joints of drill pipes that are all different segments, and then as you go down, you stop to a standstill, you screw on the next drill pipe, and then you keep drilling and then you stop. And so, let's say you're going to 500ft and each drill pipe is 20ft long. Well, you have, you know, a couple dozen pipes that you are drilling, stopping, screwing, and then continuing on all the way down and then all the way up.
You have to stop and go every time you change a drill pipe. So, that really reduces the overall rate of penetration, as we say in the industry. But, in addition to just having a slower rate because of all the stopping and going, these are different segments of pipe. And so, it is way less feasible to get high-quality data from what is going on down the hole because, how are you going to send up data through a bunch of, you know, segmented steel pipes, right? So instead, what we at Bedrock are focused on is building the technology stack around something called coiled tubing.
And this comes from the oil and gas industry. This is a good moment to comment that my co-founder was chief scientist of pressure pumping at Baker Hughes for about a decade.
David Roberts
Ah, an oil and gas guy, a drilling guy.
Joselyn Lai
Yeah. So a lot of our team, about 60% of our team is former oil and gas, including the majority of our technologists, or at least half of our technologists. And as a result, we are building technology tools that are around this concept of a singular steel pipe that in our case is 3000ft long and spooled on itself like a garden hose on a reel. But because it is a singular pipe, as it drills, it doesn't have to stop and go. And as it drills, it is more able to stay straight. And it is able to hold technologies that send up data up through a wire, through that continuous pipe.
And all of this enables us to gather and utilize data in real time for things like drilling faster, knowing what you're encountering down hole so you can make decisions to improve your rate of penetration, knowing if you are encountering something that is making you go awry and therefore correcting it so you don't go crooked and hit a subway station or hit somebody else's property line. And all of this is on top of gathering that in situ data that informs the energy performance and that energy guarantee.
David Roberts
I mean, this strikes me — what do I know about business? — but this seems like a pretty big deal that you are getting in the hardware business and building drills. Like, have you built a bunch? Do you now have a fleet of these drills? I assume you're working with some manufacturing company.
Joselyn Lai
Yeah. So we have one drill rig right now that we are deploying into commercial work. I will say, yes, hardware is a bit of a big commitment to get into, especially as an early stage venture backed startup. But the great thing is that the core technology that is really specialized for us is not the heavy, heavy, heavy duty hardware. Right. Our software is very powerful and specialized. The data acquisition tooling that goes down the hole is very specialized. But in terms of the drill rig itself, you know, it sits on a chassis that could be supporting any other, you know, truck mounted equipment.
A lot of the other parts of the drilling rig are not dissimilar from what is in the oil and gas industry. So, we are able to finance those pieces of equipment and take it off of our balance sheet as a startup company.
David Roberts
So, the drill itself is not particularly bespoke, in other words. It's mostly — you're not having to invent some brand new kind of machine.
Joselyn Lai
Yes, that's right. So, the core concepts are not brand new. There are design elements that we bring to it that are proprietary and that do require, you know, our team's mechanical engineering design for it to be as robotic, efficient, and compact, and, you know, multi-purpose as we want it to be at Bedrock. But because a lot of the parts are not that dissimilar from the oil field. And as you know, in the oil fields, booms and busts, they are constantly, you know, monetizing the scraps of different pieces of equipment when oil prices change. As a result, there is clear market value of a lot of that equipment.
And so for that reason, it takes the financial risk off of our shoulders for the core heavy machinery parts.
David Roberts
All right, I have a million little questions that we can go through, maybe quickly. One is, what about earthquakes? Do these things survive earthquakes?
Joselyn Lai
They do. In fact, there is good data that plastic pipes typically have way better resilience in earthquakes compared to, you know, metal pipes. And it's because they're somewhat flexible. And so —
David Roberts
But didn't you just say you're using steel, though?
Joselyn Lai
Great clarification. So, steel is the pipe that is used for drilling. You use it to drill, you take it out of the ground, you put it back on your truck, and then you can keep using it over and over again. But the pipes that go into the ground to move the heat exchange fluid and basically move heat in and out of the ground, that's plastic, which is on one hand more cost-effective and therefore scalable because, you know, plastic pipe is abundant, but also it is flexible in earthquakes.
David Roberts
I'm assuming your drill that you're building, that you've built, is also smaller. Because I'm trying to figure out how to, like, when I see residential ground source heat pumps being installed, I'm always sort of struck by like, that's just a lot of land. It looks like half a football field, you know, filled with pipes, which is fine if you're like out in a suburban nowhereville, but you're operating in cities where they do not have half football fields sitting around next to their buildings. How are you? Are you just going deeper? How are you solving the land problem?
Joselyn Lai
Exactly, you got it. We are drilling deeper. A big value prop of our software plus hardware together is that we go to the optimal depth of a particular location based on its climate, whether it's mostly heating or mostly cooling, and based on its geology. And so there are locations where we might say the deepest optimal depth is 900ft, but it's a location that historically drills to 200 to 300ft. And in those cases, you are reducing the space required by about two thirds or more. And then there are locations where historically they've drilled to 850ft. But we would actually, given our hardware and software capabilities, suggest that the optimal depth might be 1500ft or more.
And in those locations, we are reducing the space by about, you know, half. Those space reductions are pretty critical to expanding the serviceability of geothermal heating and cooling.
David Roberts
Interesting. How deep can you go? I mean, I guess you don't need to. At a certain point, it's pointless to go deeper. But what's the deepest like? How deep are you going?
Joselyn Lai
Yeah, we are focused on the depth range of 1000 to 2000 ft. And broadly speaking, geothermal heat pumps today are around the range of 200 to 850ft in the bore depths. And so that's —
David Roberts
So, pretty substantially deeper —
Joselyn Lai
Yes, exactly.
David Roberts
than normal.
Joselyn Lai
That's right.
David Roberts
And that's partly because of your drills and your software enable you to go deeper?
Joselyn Lai
Exactly. It enables us to go deeper and enables us to know when deeper is better for a site. And that knowledge is critical.
David Roberts
What does that mean "better"? Are you just looking for a stable, like "How far down do we have to go to find a stable heat?" Or like what, what is the differentiator between different depths?
Joselyn Lai
Good question. So you're trying to balance two things. One is you actually want to go as deep as possible to reduce the number of boreholes you need, because space is at a premium in urban locations.
David Roberts
Right.
Joselyn Lai
But as you mentioned, you don't want to just unilaterally go all the way down because then costs go up. And then also, if you are trying to do air conditioning, the deeper you go, it does get warmer. And so there is a sense of diminishing marginal returns on going deeper because marginal costs get higher and because it's just not as useful if you have any sort of air conditioning cooling requirement.
David Roberts
Right. So, you're kind of looking for cooler earth in that case, I guess, because you're trying to dump heat into it.
Joselyn Lai
Exactly, exactly. So, you don't really want to go so deep that the earth is starting to get to 80, 90 degrees, a couple thousand feet down. And as a result, that's why 1000 to 2000 is this kind of sweet spot in which at the lower part of that range is useful for places that do air conditioning. And the deeper part of that range, it is better for places that are heating dominant. And within that range, we can generally keep costs pretty consistent so that it makes sense for the CapEx and payback periods required for geothermal heating and cooling in real estate.
David Roberts
Interesting. The term around heating and cooling is COP, or Coefficient of Performance. And just for listeners' benefit, that nerdy term just means how much heat or cool are you getting out per unit of energy put in? And so, sort of, you know, sort of legendarily with fossil fuels, if you're combusting them, the COP is less than one because you're not going to get more energy out of a fuel than is in the fuel. So like, you know, really good natural gas boiler, you get to like 0.92 or something like that. But with heat pumps, because they're harvesting rather than generating energy, you can actually get more heat out, more heat or cool out than you put in, in energy, which is I've always just found mind-blowing.
It's the one thing I try to tell people about heat pumps when I talk about them, but, but that, so the COP is how many units of heat per unit of energy put in. And so, my impression is that air source heat pumps are in the like two to three range. And I've heard ground source heat pumps boasted in the three to five range. What is the COP of your actual installed systems, and how much does that vary from subsurface to subsurface?
Joselyn Lai
Broadly speaking, and this is not just our systems, but the geothermal heat pump literature for many decades is that the COP can be three to five and sometimes even higher. And when it's higher, it's often because you might have a district system where you're pairing heterogeneous loads and, you know, have other conditions at play. But essentially, you know, it can be in that four to six range. And critically, as we had mentioned earlier in our conversation, it is at that range even when it's very cold, which is when air source heat pumps are actually going down closer to the one to two range.
And so, you're essentially getting, you know, close to three to four x improvement in those worst and coldest times of the year. So that's all correct. And it is because when you have a heat pump, you will always have efficiency because that's just kind of how the heat pump mechanism works. But the geofield that you are connecting to the heat pump is serving in more heat when you need it and serving as a better heat sink when you need it, respectively. That's for heating and then for cooling.
David Roberts
But do you have measured COP at an actual installed system to point?
Joselyn Lai
We are, you know, we're so early and so our systems right now, we're still gathering that data. And I think it's important for us that we want, like, you know, a couple of years of data to monitor just because you get that seasonal differences. So we're not sharing right now kind of like, you know, set COP outcomes just because we don't have the timeframe of data that we'd like yet.
David Roberts
Do you have a COP you aspire to or expect or think you can hit if things go well?
Joselyn Lai
Yeah, we'd really like to always be above four. And then in a great scenario, especially in places where the climate is more conducive, we'd like to be above 4.5. We're still validating that and proving it out. But the value of our software model is in order to enable that kind of consistent performance advantage precisely because if you don't design something right and your system is undersized, that's when efficiency goes under, you know, under three, because you're not actually serving as much heat as you need or you're not serving the heat sink you need.
David Roberts
That sort of raises the question, like, where are you now, Bedrock? Like you have a, you've built a drill and you are installing systems for money now, like you're out operating, selling this service — what's the state of things?
Joselyn Lai
We are installing systems for money. We are not aggressively scaling yet. And the reason is, we think we still have another really important threshold to reach in terms of cost compression of constructing these systems. And so, actually today, we're already cost competitive with the market while drilling, you know, much deeper. We're already cost competitive with the market while drilling faster and producing more certainty on the subsurface energy performance.
David Roberts
Wait, you mean cost competitive with other geothermal heat pumps or cost competitive in HVAC, generally?
Joselyn Lai
With other installers of geothermal heat pumps, including that subsurface system, that geofield, that is the most expensive part. So, we're already advantageous in a number of things in terms of being able to drill deeper and reduce the space, in terms of having visibility to where we're drilling so that we don't go into your neighbor's property and get you sued. And we're also competitive on just overall speed of drilling. But we'd like to be at a point where we have further cut costs by another 50% to 70%, so that we are actually, you know, two to five times cheaper than other folks who are drilling and constructing these geothermal systems.
And that's the price point at which pretty much any real estate owner can have a one- to five-year payback period on geothermal, which is what we think really needs to happen for this kind of distributed energy type to scale.
David Roberts
Right. Because now it's like 20 or 30 years or something crazy like that.
Joselyn Lai
It can be. It can be. You know, sometimes it's better if it's new construction and their alternative was to be all electric anyway. But even so, being able to bring the cost down by three to five x would significantly improve adoption among not only new construction that needs to be all electric, but even among retrofits, HVAC upgrades, and among people who don't care at all about the sustainability impact.
David Roberts
Well, I mean, that's the obvious next question, which is if you achieve this 50% to 70% further reduction in price, get the payback period down to one to five years, where does that put you competing with conventional fossil heating systems? I'm sort of wondering, are you ultimately going to need policy or subsidies or something to make up that difference? Or is it conceivable that these things could compete directly with natural gas without subsidies at some point in the future?
Joselyn Lai
It's a good question. So, they can compete with natural gas on a long enough time scale. Now, I do want to put a finer point on this question of subsidies, because geothermal heat pumps do currently have a 30% to 60% investment tax credit in the United States, similar to solar and wind and whatnot. And I would caution here to think of it as like, "Oh, it's a subsidy, like a handout," because as we spoke about at the top of our call, there's this tremendous grid benefit to geothermal heating and cooling. So, in my view, it's not so much that this is a subsidy because a Democratic administration really just wants to be really green.
It's actually that, whether or not you believe in moving society to net zero, there are operational energy resilience, energy security mandates as a society, as governments, as regulated utilities that have to serve their communities. There are expectations that you are able to meet demand. There are expectations that people get heating and cooling when they want it, even when everybody in the world is turning on their air conditioning at the same time. And so, I really see the incentives, whether they be federal tax incentives or state and utility level rebates, I see them as actually just capturing the grid value and having utilities or states actually, like, put money into a non-wires alternative that can reduce demand, that can help maintain operational uptime for communities without needing to wait for the crazy permitting timelines of new distribution and new transmission and generalization.
David Roberts
So this positive externalities is what we're talking about.
Joselyn Lai
Exactly. Yeah. You're actually capturing something that they quite strategically need as utilities.
David Roberts
Another question ahead. I'm jumping around a little bit here, but what about all that stuff under the ground already in urban environments? You know, it's like anyone's ever seen those pictures of like in Manhattan when they go down and try to fiddle with the pipes. You know, it's just like a — it's like the ultimate nightmare behind your desk of, you know, tangled wires and like from different centuries and everything stacked on one another. There's all sorts of pipelines and wires and who knows what else. How do you deal with all that in an urban environment? Can you, is there public information about where all that stuff is?
Or do you have to go down and look for it? Can you look for it without digging? How do you think about that?
Joselyn Lai
Yeah, this is the same, I think, you know, utility review and subsurface infrastructure review that needs to happen in any construction. So we rely on the same providers and the same, you know, like "call before you dig," you know, providers who go and look at what is already there, mark it out so that we make sure that in that first, say, 10, maybe 20ft of the ground, we are aware of subsurface utilities and avoid them in the design and the drilling of our systems.
David Roberts
And most of that stuff is relatively close to the surface?
Joselyn Lai
It is relatively close to the surface, yes, that's right. Now, if there's something deeper, such as, you know, you're in a really urban environment and there are subway stations that go a few stories down. That's all also marked by MTA or whoever is the authority of that transportation system. And so it is information that we do need to gather. I will say that one of the key things about Bedrock technology stack around being able to gather that data while drilling, and being able to send that data up while drilling, that we are the only folks in the geothermal space who can get that data and use it to ensure that you are not drilling into something that you should not drill into, and to make sure that you can have the verticality you need or the control that you need to not hit that subsurface infrastructure, to not go crooked into somebody else's property.
So, that's actually something that I think is quite of interest for folks in the most urban and dense cities that we're able to introduce. And I think it's particularly valuable because some of these utilities in Massachusetts and New York are required by mandate to explore utility thermal energy networks and to talk about large geothermal district systems. And if those utilities need, in the coming decades, millions and millions of feet of borefield in urban environments to serve these thermal networks well, they will really need technology that can drill with that kind of subsurface visibility.
David Roberts
Yeah, yeah, semi-related to that. The way I sort of put it in my intro, and the way I put it to people is, if you're just heating and cooling an individual building, electric heat pumps are the most efficient way to do it. But obviously, the ultimate in HVAC, the ultimate in efficiency, is doing multiple buildings at once. Is hooking multiple buildings up to a system at once. Is there such a thing as like, say, two adjacent buildings that can share a borehole field? Is that financially something you ever see? Is that something you would ever do? Is that a thing?
Joselyn Lai
Yeah, absolutely. And there are, you know, providers of geothermal today, engineering firms, and contractors who already do geothermal district systems. It's actually pretty common in parts of East Asia and parts of Northern Europe.
David Roberts
For new build, right? For new build.
Joselyn Lai
For new build. I think in the US, you see these kinds of systems with multiple buildings on the same geothermal network in universities and in military bases. So, it's actually been pretty well established, not common, but known for decades now that this is indeed, as you said, the most efficient thing that you can do. Because not only are you capturing the free heat or the free heat sink value of the ground, but you might also be getting free heat from the sewage waste heat of a community plant, or you might be getting the free waste heat of a data center and funneling that to the building nearby that needs it the most, which is a multi-residential building that needs a lot of heat for its domestic use.
And so, those are really, really good opportunities to get even higher efficiency than what a unitary geothermal heat pump could accomplish.
David Roberts
Yeah, I know that geothermal district heating systems exist. I guess more of my question was just like, that requires a lot of planning and thus is very much more often done with new build communities because obviously, you need to coordinate a lot of things. But say I have two existing buildings somewhere in New York and I'm trying to retrofit them with a geothermal heating system. Could you do a shared one there? Or does it require a sort of like green field planning type of thing? Or is this something that the two building owners could just handshake on, be like, "Hey, let's put some boreholes in between us and share them." Is that, is anybody doing that?
Joselyn Lai
So, it is happening in terms of these utility thermal energy network pilots. I believe the one that Eversource in Massachusetts has recently been constructing as one of their pilots is indeed existing buildings where not only is the utility paying for the shared borefield and connected district piping, but also they are paying for, I believe, the interior retrofit of these buildings so that they can all get onto geothermal heat pumps that connect to the shared system. In terms of private owners doing it, it's definitely something that we'd like to, you know, keep nurturing. Especially, there's just so much, you know, new green bank financing for clean energy projects.
If you can connect, let's say, multi-residential affordable housing with a, you know, private sector business that produces a lot of heat. You know, that is absolutely the kind of thing that green banks want to finance, especially, especially with the greenhouse gas reduction fund really targeting low-middle-income communities and recipients. And I think that would just be such a phenomenal way to create essentially kind of like public-private-nonprofit partnerships for clean energy transition. I don't know, off the top of my head, completed projects, but I do know the Department of Energy put out 13 community geothermal grants last year across the country. And that's definitely what the federal and state governments want to see.
David Roberts
So, you guys could theoretically get involved in that. Your technology would work for those.
Joselyn Lai
That's right. Especially if they have space constraints in relatively urban environments. We would love to bring down the costs and the risk of doing those systems for retrofits.
David Roberts
Well, about the space. So, like I said, when I see one of these going into a big suburban house, I see like a half football field-sized installation, and that just gives me a little bit of a sense of what surface area you need for the size of the building. So, when I think about a, I don't know, ten-story building, that's just a lot of pipes. So, even if you're going deeper, like, say you had a ten-story building and you were trying to make a field with the smallest possible footprint. So, you're utilizing going deeper to use less area.
What does the resulting area look like? If you're heating and cooling a ten story building, how much land do you need?
Joselyn Lai
It is a great question. That depends on the load of that property. First, I want to confirm, though, David, when you're looking at these suburban buildings, are they doing very vertical closed loop?
David Roberts
No, this is all horizontal.
Joselyn Lai
Okay. Okay, great, good, great.
David Roberts
But even if I imagine that half football field turned up on its side and going deep, it's still, even on the other dimension, still relatively large.
Joselyn Lai
It is. I will say, though, that, you know, a suburban house — and Dandelion does suburban houses in the northeast, right, Dandelion Energy — they really shouldn't need more than one or two if it's kind of a normal-sized house. And then, you know, of course, you have the really, really large homes in, say, Martha's Vineyard or Aspen, Colorado, and those places. Yeah, maybe you'll have, you know, four to six bores. But really, a house, you generally should think of it as a house probably needs one or two bores. So if you're looking at a, you know, larger building, choose a size, maybe a 60,000 square foot building.
Conventionally, you might need 60 to 70 bores, 60 to 80 bores for that. Bedrock would be looking to serve a building like that for under 25 bores. And in that case, you might need a parking lot that's 10,000 sqft. Or, depending on the layout of the site, you might be able to put some of it in a perimeter around the building and then reduce the overall kind of like, grid area that you need for this borefield.
David Roberts
Right.
Joselyn Lai
But, you know, half a football field for a single-family home is absolutely if they're just doing the horizontal pipes.
David Roberts
Right, right, right. So, you can squeeze these in around buildings. I mean, it occurs to me, obviously, what you'd really like to do is get in there before the building is built so you can put it under the building, right? I mean, is that what they do when they're doing new build?
Joselyn Lai
Yes, a lot of folks do that already. There's a really prominent project that just went up in Brooklyn where they did, I think, 300 and something bores under the foundation before the foundation. Now, this will push off your foundation schedule in terms of construction time, but it is ingenious and, you know, it's something that folks are increasingly turning to in places like New York, where there's, you know, efficiency and carbon requirements, but you have really tight spaces.
David Roberts
It's actually something that came up a couple of times and it occurred to me that I did not know how to answer it, which is, once you've got the borer holes dug and the system installed, are there any limitations on what you can put on top of it? Would you want to avoid planting trees because the roots might go down, or could you put another building on top of it? Could you put a parking lot on top of it? Is there any restrictions on what you can plop down over it?
Joselyn Lai
The most common thing is to put a parking lot back on top of it. And in retrofits, that's what we prefer to drill in the parking lot and then just pave it back over and give you your parking lot back. Green space is also common if you have it. Not everybody has it, but if you already have landscaping or green space, it's, you know what, it's easiest to then go remediate afterwards. Trees, so usually you are putting these lateral pipes at somewhere maybe five, six feet down, maybe seven, eight feet below surface, depending on your frost line. And trees do tend to not have roots that go that deep.
So, it is fine to replant trees, but it probably is better to make sure that if it's new trees and you're kind of not choosing a type that's going to have roots beyond six feet.
David Roberts
Are there any subsurface types that are off limits to you that you can't work with, like rock that's just too hard or too sandy or too silty, or is there any kind of geography that you can't deal with?
Joselyn Lai
We're focused on being able to drill cost-effectively and fast in any type of geology. And so, very hard rock is actually great because it's very consistent and you can keep up a pretty good —
David Roberts
I guess that's what you'd want, really. Is consistently hard drilling.
Joselyn Lai
Yeah, and we have been drilling in Austin, which is actually really difficult. There's sticky clay and holes in the ground, little caverns and voids in the ground that are actually quite difficult. And we still do that. So really, the magic of geothermal heating and cooling is that it is available everywhere. You don't have this crazy exploration risk that might impact your location, limitations for other types of renewables, it can be done pretty much in any kind of location. I would say that if there's a really high presence of hydrocarbons, we obviously don't really want to be drilling through, like, gas deposits. Right. But that's actually not occurring that frequently in urban areas.
David Roberts
Right, right. So, you're willing to say pretty categorically, like any urban area in the United States, you can go do this?
Joselyn Lai
That's right.
David Roberts
And how often — or do you deal with projects where you have to retrofit the building too? Like, say, the building has, I don't know, steam radiators or a boiler? Is that in your business case? Like, we'll come do the field and tweak your building so that you can use geothermal heating?
Joselyn Lai
It's not our focus. And I do think that, like many heat pump retrofit businesses in the climate and energy space — those high-temperature steam and high-temperature water delivery systems, which you do see in older cities where, you know, they're using hot water at 180 Fahrenheit or they're using steam — that is a challenge for installing heat pumps because heat pumps really only go up to about 140 Fahrenheit. So there's a couple of things here: The first is in the earlier parts of our commercialization as a company, we are focused on buildings where the customer is already planning to retrofit that interior because they need to, they need to get off of, you know, their fuel or gas boilers and, you know, steam heating anyway.
And you need to do heat pumps. So, they are already putting out the capital expectations for the interior retrofit.
David Roberts
Are most buildings that are doing that doing it for policy?
Joselyn Lai
If they are doing it, it's for policy. Or, you know, a university might because they have such long time horizons that it makes sense. And the maintenance of steam boilers can be very expensive, you know, if it's a hundred-year-old steam system. So universities are doing it because they can. And, you know, maybe their student base or alumni are demanding it, but private businesses in cities are doing it usually because of something like New York's Local Law 97 or similar.
David Roberts
And also, on the money front: So, you say your software gives you more certainty. Are you in the business of offering different kinds of — because one of the things that cracked solar open was new financing models, right? Like the notion that you could just get solar for no money upfront and pay it back through your savings was a big chapter in solar's development. Are you thinking about financing models that can help defray the sort of upfront, the scary upfront number?
Joselyn Lai
Absolutely. And there are folks who have been doing geothermal for some time now who have already started to introduce those kinds of financing or geothermal as a service offerings where the customer doesn't need to pay for or own this big system in the ground, but they can just pay for access to it or they can pay for the efficiency that comes from it. And so, we think that that is a smart model, just given the fact that solar has really depended on that kind of financial product to scale and a geothermal borefield is an upfront cost that a lot of folks do not necessarily want on their balance sheet or in their developer pro forma. So, what we believe is that by bringing that guaranteeability and that precision on the energy performance, we can accelerate the adoption and accelerate the improvement in confidence in products like that.
David Roberts
So just make that third party more willing to own the thing and basically rent it out to the building.
Joselyn Lai
Exactly. Exactly. There is a good amount of clean energy deployment capital that is looking for more deal flow. Right. More projects to put money into. And so, I think geothermal comes up fairly often in our conversations as, "Wow, we would love to be putting in a big facility around geothermal deployment," but there aren't really players out there where there is somebody who's willing to go like provide that guarantee and bring really good data that shows that what's going into the ground is something we would like to underwrite and we want to change here at Bedrock, we want to change that.
David Roberts
Two final questions: One is you're getting a pretty substantial investment tax credit, or did you say production?
Joselyn Lai
This is an investment tax credit?
David Roberts
Investment Tax Credit from IRA. Are there other policy changes that you would like to see that you think would be helpful, like maybe at the city or even, or even municipal level? Are there policy barriers that you would like to see kind of removed?
Joselyn Lai
Yeah, there's barriers, as you mentioned. And there's probably other ways that the value of geo could be further captured in terms of grid benefit and infrastructure benefit. On the barrier side, it's less that there's really, really hard and fast barriers. It's that regulation is often not very clear because it is a relatively nascent industry and it's very fragmented. And so, I think what the industry is really focused on and will need to move the needle a lot on in the coming years is to get geothermal closed loop bore requirements more streamlined across counties, across states. Help educate city, county, waterboard and state regulators on like, "Yep, this is simpler than a water well. You're not injecting anything, you're not extracting anything."
Most jurisdictions that are familiar with it realize that a closed-loop system is absolutely the most stable thing you can do and make sure it is not being misregulated as something much more risky or, you know, environmentally impactful. So that's the first thing —
David Roberts
It occurs to me. Just on that note, I go back and forth about whether it's wise to adopt the word geothermal here. You know, sort of like the nerds, the technicians in this space say ground source heat pump, you know, because the geothermal heat that deep bore geothermal power production is tapping into, it has a different source than the heat you're tapping into. The heat up near the surface is just mostly solar, is just stored solar heat. So I mean, but on the other hand, ground source is a mouthful and people vaguely know what geothermal means, but on the other hand, if you invoke geothermal, people start thinking about rejection and deep stuff and earthquakes.
So like how do you, how do you think about just that in the marketing?
Joselyn Lai
Yeah, there's folks who are trying to make "geo exchange" the cool word.
David Roberts
Also, a bit of a mouthful.
Joselyn Lai
It is a bit of a mouthful, and it's a new word that no one — lay people don't know. The challenge with ground source is that you're right, the first 20ft is basically just stored solar. Actually, when we're talking about, let's call it 500, 800, 1,000, 2,000ft, you are actually using what is termed the geothermal gradient and you are using that full gradient as a heat sink and source. You are not using the stored solar in that first 20ft that is kind of evoked when you say ground source. So there's a little bit of a nomenclature challenge there.
I will say that Bedrock may not be able to solve this terminology challenge on our own, but you're absolutely right that evoking the deep geothermal power production stuff is not super helpful for the category we're in for heating and cooling.
David Roberts
A lot of education to be done.
Joselyn Lai
Yes, which is why it's great that you are educating your listeners on what this category is.
David Roberts
So, what about utilities though? States, I think, and municipalities can just make regulations a little more uniform, a little more clear, a little across jurisdictions. What about utilities? What's your sort of relationship with utilities? What do you need or want from them?
Joselyn Lai
We are in good touch with several big utilities across the country, either because they have those mandates to look into underground kinds of these utility thermal energy networks or because they have power constraints. Just back to the point of not being able to build distribution, much less transmission and generation fast enough to meet increasing electrification.
David Roberts
Looking for non-wires alternatives, as they say.
Joselyn Lai
Exactly. And so, there is a general awareness that geothermal heating and cooling, especially district systems, could really scalably bring down demand, especially at peak times, and electrify heat in an efficient way. I think the ask with utilities of any technology company looking to partner with them is, how do we move faster? And they have good reason to comply with regulators and be thoughtful and maintain operating stability as their absolute, first and foremost strategic requirement. But it is on our mind often, how do we tap into working with them so that either rebates or other types of programs that incentivize doing the more power efficient thing can be rolled out more quickly so that customers can reap that benefit.
Because it is, at the end of the day, the customers, the real estate owners, who have to make those choices about the more energy-efficient thing to install.
David Roberts
You basically said this, but I'll just restate it because I think it's important. Lots of utilities are facing this sort of gauntlet of rising electricity demand, or at least the prospect of rising electricity demand. They're kind of panicking, and a bunch of them are groping immediately for new coal plants, which is like —
Joselyn Lai
So sad.
David Roberts
The first thing utilities think of. So, this is spreading geothermal heating and cooling is very directly an alternative to doing that. An alternative to new gas plants.
Joselyn Lai
Yeah, an alternative to peaker plants, which are by and large today, the most dirty of fuels.
David Roberts
Yeah. Okay, final question, which is just tell me a little bit about what's next for Bedrock. So you're sort of like still in quasi-stealth. You have a drill, you're installing systems, sort of low key, but you're still trying to bring down costs more before you expand. What's next and what are the kind of big challenges that you have to overcome?
Joselyn Lai
The biggest thing on our mind strategically is continuing to bring together all of the pieces of our technology stack so that we can achieve that really stellar cost of construction that gets to that one to five-year payback period for the most ornery of non-green real estate owners out there. And of course, the other technology-related elements of gathering that data to introduce guaranteeability on the subsurface. So those are very much kind of like product development focus areas. I think that we are lucky to nonetheless have a lot of interest in demonstration work with partners for paid work where they need the geothermal, and they need our ability to put geothermal in a smaller space, or they need our ability to put geothermal into an urban space where real-time visibility of the drilling is valuable.
We'll continue to do projects like that, but as you likely know from talking to venture-backed companies, venture equity dollars are not the thing you spend to go build out a big commercial construction operation. And so, we want to hit those really critical thresholds on costs and product offerings around guarantees and finance ability for third-party developers. Before we then say, "All right, let's bring in the equipment capital. Let's bring in the project capital to leverage the cost thresholds we introduce."
David Roberts
Fascinating stuff. It's fun covering energy these days because I frequently have the experience of sort of thinking like, you know, what someone should do, and then like days later they're in my inbox, someone's doing it. This was definitely one of those things. I was like, "Oh, good, someone's beavering away on this." So, I'm really happy you've honed in on this area, and thanks for coming and talking us through it.
Joselyn Lai
Yeah, thank you for, you know, being really thoughtful about what the energy transition needs and then going and telling the stories about those levers.
David Roberts
Thank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's volts.wtf. So that I can continue doing this work. Thank you so much, and I'll see you next time.
Making geothermal heat pumps work for big buildings