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Jump Starting Minnesota's Green Economy

Jump Starting Minnesota's Green Economy

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Published by: Minnesota 2020 on May 11, 2010
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In high school science we learn that heat or thermal energy is everywhere When heat energy is
concentrated the temperature goes up and we feel hot Wouldn’t it be nice if we could heat our
houses in the winter just by pumping in heat from outside, concentrating it in the home? Sounds

like science fction but it’s not. Most homes in the US have two devices that do just that—pump

heat We call these devices air conditioners and refrigerators The fridge pumps heat from inside
the cabinet to outside The food inside the cabinet cools down, and the back of the fridge, where the
heat is being dumped, heats up The air-conditioner works the same way, pumping heat from inside
the house to the outside

The air conditioner and refrigerator technology are over a century old But they are complex
machines and, with cheap fossil fuels furnaces, were the simplest and most economical way to heat

homes. Rising energy costs and global warming concerns are starting to change this atitude, but

there are still ways to go In March of 2009, a new exhibit called the Smart Home opened up in the

Chicago Museum of Science and Industry. It is a model green and energy efcient house built on
the Museums grounds. It has all the latest energy efciency gadgets and technology except for heat
pumps. Some of the atendants at the exhibit did even know that heat pump technology is viable in

the Chicago cold, let alone Minnesota

The most common type of heat pumps available today is called air-source heat pumps They

are modifed air-conditioners and most air-conditioner manufacturers supply them. The air-

source heat pumps can heat homes in the south, but not in Minnesota The weather in Minnesota
requires a special type of heat pump called ground-source heat pumps They are also called geo
exchange systems and sometimes (inaccurately) called geothermal heating Large manufacturers

are not ofering ground source heat pumps, but a small company has been manufacturing them

in Appleton, Minnesota for the last two decades And yes, a ground source heat pump can heat a
house in Tower, Minnesota in January

TeChnology and IndusTry

Heat pumps work of two physical properties of liquids; evaporating liquids absorb heat and
condensing liquids deposit heat. Gasoline on skin feels cold as it evaporates of. Similarly, steam

burns are much worse than water burns because the steam condensing on skin releases a lot of heat
into the skin Heat pumps leverage these physical properties to cool and heat Heat pumps circulate

a liquid, ofen called a refrigerant, in a closed circuit. In the cool area, there is an evaporation

chamber For the hot area, there is a condensation chamber An electric pump called a compressor
moves the liquid In the evaporation chamber, the compressor reduces pressure and forces the
liquid to evaporate, and in the condensation chamber, the liquid condenses The evaporation
chamber sucks up heat, and the condensation chamber pushes it out, and voila, a heat-pump


Jump Starting Minnesota’s Green Economy

The heat pump consumes electricity to move the heat
around, that’s why fridges and air-conditioners use
electricity But when it comes to heating the house the

efciency equation always benefts the heat pump. To
understand why the system is more efcient, a very
efcient electric heater has a coefcient of performance

COP of 1 0 This means that one unit of electrical
energy will cause the heater to produce one unit of
heat But one unit of electrical energy can cause a
heat pump to move more than one unit of heat from
a cooler place to a warmer place Ground source heat
pumps have a COP that is typically in the range of 3 5
to 4 0 The same argument applies when comparing
to gas furnaces So even though gas energy is cheaper

than electricity, the heat pump is still cost efective

because of its high COP

The biggest challenge in designing useful heat pumps

is achieving high COP, i.e. high efciency. There are two types of heat pumps. The more common
type, called air-source heat pumps are essentially air-conditioners that have been modifed to run

in reverse In the summer, they run to pull heat from inside the house to outside the house In the

winter, the refrigerant fow is reversed and heat is pulled inside the house. When the outside air

temperature drops lower than about 25oF, they cannot handle the heat load needed But there is a
source of constant temperature that is very close for each and every house About eight feet below
the ground, the temperature is a constant 50oF, summer or winter Ground-source heat pumps
work by exploiting the earth’s constant temperature Ground-source heat pumps circulate the
refrigerant through piping buried eight feet or lower into the ground These underground piping
loops serve as a heat source in the winter and a heat sink in the summer A well-designed heat
pump can concentrate the ground heat even in the middle of a Minnesota winter And yes, in the

summer the very same heat pump will cool the house, at efciencies much higher than a regular


According to the Environmental Protection Agency (EPA), geo-exchange heat pump systems are

the most energy efcient, environmentally clean and cost-efective space conditioning systems
available. Even in the coldest climates, heat pumps are still cost efective compared to alternate

systems While the initial purchase price of a residential system is higher than that of a comparable

gas-fred furnace and central air-conditioning system, it is more efcient, thereby saving money
every month. For further benefts, in the summer cooling period, the heat that is taken from the

house can be used to heat the water, also for free


Minnesota 2020 - www.mn2020.org

Geo-exchange systems in both new
and existing homes can greatly
reduce energy consumption 50 to
75 percent compared to older or
conventional replacement systems
and thus has a corresponding
decrease in emissions Annual
operating costs are lowest with
geothermal heat pumps Heat
pumps are a viable option for
current and to-be homeowners

busIness and fInanCIals

While heat pumps are cost efective, people are scared of because the upfront price for a heat pump
appears to be steep. There are two cost pieces to geting a heat pump installed; the costs of the heat

pump and secondly, burying a length pipe into the ground that will act as a heat source or sink

This buried length of pipe is analogous to piping that you fnd on the back of refrigerators and

freezers For existing homes where there is not much open land this pipe has to be buried very deep

and usually requires a well-digging rig. The cost of laying and burying the pipe is ofen larger than

installing the equipment

For an existing 20-year old 2500 sq foot home in Minnesota, the following table represents a

typical cost beneft analysis for installing a heat pump versus furnace and AC combination. This

information is from a web-based calculator from the Center for the Energy and the Environment, a

Minnesota based nonproft.


heat Pump







Heat Pump Rebate


Utility Rebate


Other Fed Rebates



Total outlay



Annual (Gas $1.10 therm)



Annual (Gas $2.00 therm)




Jump Starting Minnesota’s Green Economy

When the time comes to replace the 20-year- old furnace, the homeowner will spend about $7000
more to get a ground source heat pump However, he will save about $600 per year in utility costs,
giving an 11-year payback If natural gas prices rise to $2 per therm, what they were in July 2008,

the home owner saves $1500 per year, with a payback time of less than fve years!

But there is more The most expensive piece of the heat pump, the piping, is very durable, lasting
more than 50 years Studies show that houses with renewable sources of energy or savings can sell
for up to 20 times the annual energy savings Installing a heat pump could increase the value of the

house by $15,000 to $20,000. The increase in value of the home by itself can pay for the heat pump!

Of course, if heat pumps are installed in new construction, the buried piping costs are much lower
and pay back times correspondingly shorter Heat pumps and heat pump installation are still niche
markets As the market grows, the costs will come down


Heat pumps have traditionally been marketed for large
scale projects such as the Roseville Mall Community
centers, schools, malls, even universities like Ball
State in Indiana, use heat pumps for their heating
and cooling needs The breadth of implementation

speaks to its fexibility in application and is a testament

to its soundness In the past 10 years geo-exchange

heat pumps have fnally started to move into private

residences But they are still quite rare in homes This
is despite that fact that an Appleton, Minnesota-based
company has been making cold climate heat pumps for
the home for over 20 years

But the heat pumps have a lot going for them Residential heat pumps are a green industry where
the core skills and technology are already in the market place The technology has been around for

many years and can be retrofted in most existing homes. Diverse skills such as HVAC technicians

and well diggers can be leveraged for this industry The federal government is already providing

fnancial incentives. Promoting a heat pump industry would be an excellent way to push the
green economy, create jobs and develop a new industry. Retrofting only 10 percent of the houses

in Minnesota with heat pumps can generate $3 billion in direct economic activity This does not
include the new housing As housing starts improve, popularizing heat pumps in new homes can
jump start the industry

Promoting a heat pump industry
would be an excellent way to
push the green economy, create
jobs and develop a new industry.

Retroftting only 10 percent of the

houses in Minnesota with heat
pumps can generate $3 billion in
direct economic activity.


Minnesota 2020 - www.mn2020.org

PolICy reCommendaTIons

So what’s stopping Minnesota from enjoying the benefts of a tried and tested technology in their

homes? Our own personal experience shows that the primary issue is lack of awareness Most
consumers are not aware of the value of heat pumps But perhaps even more important, the
heating and cooling contractors are not aware, not trained, or interested in installing heat pumps

Part the problems is a very legitimate fear of installing something new and then fnding out that

it does not work Also, heat pump installation bring groups of contractors together who never
worked together, HVAC contractors and well diggers Like any nascent industry, inertia and lack of
knowledge can stall growth

The key to developing a residential heat pump industry is disseminating knowledge The state and

local government organizations can do just that very cost efectively.

Community Colleges:


Installing heat pumps does not require fundamentally new training
Custom-designed short courses could rapidly bring HVAC technicians, general contractors
and well diggers up to speed

State Government:


The state through DEED Workforce Centers and county resources is

already helping people fnd work by leveraging their existing skills. In difcult economic

times the state can follow the federal government’s lead and try to direct people in the
housing and related industries towards the growing renewable industries like heat pumps

Public Ofcials:


Legislators and state’s constitutional ofcials have a powerful bully pulpit
that can efectively legitimize this new industry.

Local Government:


Installing new green technologies can ofen get caught up in a code
ambiguity zone and slow the process down. Sometime all that is needed is clarifcation of the


Minnesota should also strongly encourage all new homes built in Minnesota to use heat pumps

Minnesota can lead in heating homes from the ground up using heat pumps!


Jump Starting Minnesota’s Green Economy

Suburb-to-Suburb Bus Transport

A family moves to Minneapolis from Houston. They fnd a nice house in Plymouth where they

like the school district and they’re near one spouse’s job in NW Minneapolis But the other’s job
is in Eagan The commuting spouse has steeled herself for the 40-minute stressful commute and

afer living in Houston she is ready for it. But this is Minnesota and there is a TCRCD or Twin

Cities Rapid Commute District The commuter just has to sign up on the TCRCD website and is
then directed to park at a nearby church to start her commute There, a bus with assigned seating

and Wi-Fi internet picks her up and drops her at her ofce complex. The commuter spends the
40-minute commute geting work done. Afer moving to Minnesota, the commuter suddenly
recovers an extra hour per day of time. That’s Minnesota nice!

Unfortunately, this scenario is still hypothetical The Twin Cities Metro area, like most metro areas
in the United States, has become poly-centric with jobs being distributed all over the suburban
regions Many commutes originate from one suburb to another suburb And for the typical two-
income families, there is no option of moving close to both their jobs Ring routes like I-494/I-694
have become critical commuter thoroughfares These long commute times have become the bane of

modern times. That’s why, whenever viable public transport is ofered, commuters fock to it.

One of the best ways to get commuters out of their cars is to develop transportation options from
suburb to suburb Custom point-to-point bus routes can be economically set up In addition to

being beter for the environment, the bus system can be made

very desirable for commuters However, the buses would need
to pick up people from parking lots near their homes and drop

them of very close to their work. The buses would need to

be equipped with internet and enough seating to ensure that

commuters could use their commute time efciently.

Dedicated bus commute systems can be done for as litle as $40 million upfront costs and $10
million a year operating costs for a 5000 commuter system. Since the system will start afer
individual commuters have signed up, initial ridership fgures will be very high. There is also a

high likelihood that the private sector and/or individuals will contribute to costs With the right

fnancing model, the fscal impact on the public purse could be non-existent to very low.

The suburb-to-suburb bus transport is not an alternate for traditional public transport, bus or light
rail systems The traditional public transport systems deliver complete transportation functionality
in high density population areas or highly traveled corridors worldwide The suburb-to-suburb bus
idea is a narrowly focused approach to replace single occupancy cars going from suburb to suburb
twice a day during the weekdays It is a new approach that is geared toward a typically American
commute in a typically American city

One of the best ways
to get commuters out of
their cars is to develop
transportation options
from suburb to suburb.


Minnesota 2020 - www.mn2020.org

Efective public transport usually results in a virtuous cycle improving the economy, house prices

etc Public transport also reduces gasoline consumption and America’s dependency on foreign oil

Releasing millions of wasted man hours on labor cost will be another beneft. This system has the
beneft of being both green and cost efective.

ProduCT and servICe

Public transportation systems in most cities are the hub and spoke routes that are geared to

bringing commuters from the suburbs to dense downtowns. Routes are based on aggregated trafc
fow paterns and change only very slowly. The routes are decided and then commuters follow

the routes This approach does not work for commutes between lower density suburbs It is not

fnancially prudent to put in the minimum density of routes between suburbs that would make

daily commutes feasible However it should be possible to design suburb-to-suburb bus commutes
based on the following ideas

Identify and target specifc employment areas e.g. ofce park complexes.

Design bus routes based on individual commuter needs

Focus on longer commutes

Limit the number of pickup / drop-of points.

Design routes that are point to point and without transfers

What we get will be the 21st century version of the company bus, an open service provided for the
decentralized employment that is today’s America

This idea for a suburb-to-suburb bus commute is based on the Google Bus service, an employment
perk that Google initiated to keep its workforce happy Google has a well-deserved reputation
for being one of the best companies to work for Many of its employees put a high premium
on a comfortable commute Google developed bus routes that would pick up daily commuters
in comfortable and green buses This is the old company bus idea brought up to date Google
developed customized bus routes for its widely distributed work force that opted into the program
With 32 buses, Google was able to serve 1200 employees The buses have comfortable seating
equipped with Internet connections The bus allows many of the employees to get up to 1 ½ hours
per day back into their lives and has received rave reviews from its employees

The Google bus idea can be modifed for a public system. The key is in developing a system that
identifes specifc commutes and then designs the routes for them. For the idea to be successful, the

routes have to be like express bus lines with a limited number of stops That means both pick up

and drop of points have to be clustered close together.

Most workplaces are part of large ofce parks. The morning drop of points can easily be clustered
together in ofce parks and complexes. For example, there could be several drop-of points in Eden
Prairie ofce complexes near the Vikings ofces.


Jump Starting Minnesota’s Green Economy

The challenge is morning pick up points Suburban housing does not have enough density to have
a few pick up points that are within walking distance from each commuter’s residence Therefore,
street corner pickup points will not work, it will require too many of them Some of the commuters

could get dropped of, but many will need to park their cars. However, there is another under-used

physical resource found in most suburbs that can be leveraged for this system; a very large number
of empty parking spots found in churches and in strip malls These spots normally sit empty for
most of the week and are only used on the weekends These spots can be used during the week and
can help in avoiding large park and ride building structures By repurposing existing infrastructure,
commuters can enjoy convenient public transportation with minimal capital costs Already existing

Park and Ride ramps, like the one in Eden Prairie, use local church parking for overfow parking.

To be cost efective the routes will have to be highly targeted. Most suburban commuters are geting
onto the freeway and then geting of the freeway in a diferent suburb. No public transport system

duplicates this behavior but it is possible to automatically design such routes from commuter data
These routes will have to be designed like the express bus routes, picking up commuters from a

group of close pick up points and dropping them of at another close set of points. See atached
diagram. The drop-of points are the various ofce complexes that the commuters are headed


potential bus routes


Minnesota 2020 - www.mn2020.org

The key technology enabler for suburb-to-suburb bus comes from advances in the sofware

industry The main technical hurdle is developing bus routes from individual commuter data
This would have been a major technical hurdle even a decade ago but is quite feasible now It will
require two systems:

1) A system for collecting and collating commute data from thousands of commuters spread all
over the city Today’s web based systems can easily handle this type of activity A system can

easily be constructed from of-the-shelf sofware.

2) A system for designing custom routes from very large data sets Advances in logistics

algorithms for delivery companies and routing sofware found in GPS systems can be
modifed for this purpose.

This approach produces a new approach to public transport. Routes are designed afer ridership
has been confrmed by identifying specifc named individual commuters. The system is highly
focused and only geared toward commuters. Because of its personalized nature, there are beter
opportunities to get private partnerships for fnancing the system.

The buses themselves would have to be comfortable and green To entice professional commuters
out of their cars, the buses should allow them to work, that means Wi-Fi access and proper seating
Most professional commuters have experience working in airplanes GPS locating of buses with

web-based and cell-phone notifcations of bus arrivals will deliver the customer service aspect of

the system expected by professional commuters

The buses acquired for the system can be the greenest feasible The system can use plug-in hybrids

with the latest efciency features such as bio-diesel capability or even the higher efciency gas

turbine and electric motor hybrids Since the system is using the existing infrastructure of roads,
freeways and parking spaces, startup capital needs are drastically reduced, and bus costs are the
only upfront capital costs

The objective of the system is to move single occupant commuters out of their cars by providing

them with a beter alternative.

busIness and fInanCIal Case

Over 70 million people drive alone to work each day in the US Based on national trends, the
Twin Cities metro area has an estimated half a million commuters who drive alone each day The

key reason for driving alone is convenience and fexibility. There is plenty of evidence that many

commuters would leave their cars if they can get a fast, reliable and comfortable public transport

The ridership of the Hiawatha flled up very fast. In the Twin Cities even a 20 percent market
penetration for single occupancy cars would get 100,000 cars of the freeways every day during

commute hours


Jump Starting Minnesota’s Green Economy

Consider a simple costing model using the following assumptions

Bus cost: $250,000

Maintenance cost: $0 55 per mile Typical industry standard

Diesel costs: $3 per gallon

Bus mileage: 4 mpg: Will be beter for greener buses.

Bus driver pay: $25 per hour

Commuters per bus: About 60 to 80 for 3 to 5 trips one-way

Sofware development: $15 million.

Parking spot rental: $300 per annum

Assuming reasonable administrative and other overhead gives:

Initial outlays: $6,000 - $8,000 per commuter

Operating costs: $2,000 - $3,000 per commuter per year

A pilot system for 5000 commuters can be initiated for as litle as $40 million dollars and $10 million

a year Compare this to $700 million to start the Hiawatha line

This simple cost model does not include any revenue; it is only intended to legitimize the need for
a full-scale feasibility study It is important to recall that this idea is inspired by a private system,
the Google bus There are short term direct reductions of costs to the commuter Each commuter
will probably save easily $1200 per year in fuel costs And the one hour to one and a half hour time
recovery easily translates into $6000 to $10,000 of labor savings in the target commuter market

In designing the fnances for the system, the cost savings for the commuters should be leveraged.

The system should be a public-private partnership Individual commuters will contribute because

they fnd the system very convenient and low cost. That includes reducing the wear and tear on

their cars and gas savings Many employers will consider contributing because, like Google, they
will be providing a fairly desirable perk


Minnesota 2020 - www.mn2020.org

benefITs from The busIness and IndusTry

Well-designed public transport systems usually have a positive economic impact, beneft the

environment, and improve the quality of life for the community There is tremendous pent up
demand for public transport systems as is evidenced by the fact that new commuter light rail lines

such as the Hiawatha tend to fll up very fast. This has been true nationwide.

A bus system has several unique benefts:

For Society:

Saving gas (National Security and Global Warming benefts)

Reducing impact on infrastructure

For the State: A Low Cost System

Can start on a small scale

For Businesses: Employee productivity improvement

For Commuters: Easy stress-free commute

Gas Savings: Like all public transport systems, the suburb-to-suburb bus system will reduce gas
consumption For each commuter signing up, gas consumption will be reduced by about 250
gallons per year And if the buses are running on fully renewable sources, then each commuter
being signed up will result in a savings of 500 gallons of gas a year Gas consumption reduction will
reduce global warming as well as reducing America’s dependence on foreign oil

Infrastructure Expenditures: Reducing the number of cars on the road will reduce wear and tear on
the road and mitigate the need to expand roads The savings in road maintenance and expansion by
itself could be substantial

Cost Efective: This system has a very narrow purpose and can be built very cost efectively. And
just as important for geting the project launched, this system can be piloted on a very small scale.

The system co-exists very easily with the cars The system also does not require major upfront costs

Time Savings: The single biggest beneft is recovery of time for individual commuters. Commuters

can save 250 to 400 hours per year It is important that this value be captured and one way to do
that is to ensure that it is possible to work on the bus, like airplanes However, some commuters
may choose the commute time as their stress free down-time in which case it is a high value fringe

beneft for them.

Once people start using public transport, the support for other more expensive but beter systems

like light rail line also increases The network of buses does not compete with light rail lines or

traditional rail but once a system is setup, commuter corridors would emerge. Afer the commuter
corridors are identifed, it is more likely that that there will be support for expensive but dedicated
beter public transport options like light rail.


Jump Starting Minnesota’s Green Economy

PolICy reCommendaTIons

Suburb-to-suburb transport is a case where the greatest barrier for a private or public entity to setup

a pilot project is lack of information. Traditional trafc paterns studies will not help in designing
the types of routes that are described in this report. The frst step is to commission a pilot study.

The study should partner with companies to promote people to signup The target would be to get

enough people to sign up so that proftable routes could be constructed for a pilot program of 1000

or 5000 commuters

Afer the study, the state can facilitate the project:

1) Minimize confict with existing transportation infrastructure.

2) Ensure that there are no problems with churches or shopping malls participating in the
parking program

3) Identify ways for employers to subsidize the program

Finally, it should be remembered that the system was inspired by a business trying to provide

fringe beneft to its employees in a competitive employment. It should be possible to create public-

private partnerships where there is good potential for demand for the service


Minnesota 2020 - www.mn2020.org

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