Geothermal startup Dandelion Energy aims to bring 'geo-as-a-service' nationwide

Four months after launching the country's first geothermal leasing program, Dandelion Energy Inc. is targeting a nationwide expansion of its financing offerings geared toward scaling the renewable heating and cooling alternative.

Dandelion has entered a strategic partnership with Canadian geothermal company Diverso Energy Inc., the companies said March 10. Diverso is majority owned by CVC DIF, the infrastructure platform within CVC Capital Partners PLC, an alternative investment manager with €200 billion in assets under management.

The partnership will give Dandelion access to the investment capacity needed for a nationwide rollout of its leasing option and new financing models, including an offering similar to energy-as-a-service structures, Dandelion CEO Dan Yates told Platts, part of S&P Global Energy.

That will in turn help Dandelion expand leasing beyond its initial focus on states within the PJM Interconnection region to areas with the strongest homebuilding activity, Yates said.

"If you look at Texas, the Carolinas, Florida — basically all the Southeast starting as far west as Texas — that's where the huge mega-production is happening," Yates said. "And we want to get a piece of that."

From standard leasing to 'geo-as-a-service'

Dandelion recently pivoted from retrofitting single homes to working with production homebuilders to install single-loop geothermal systems in dozens of new residences at a time. It has since leveraged a change in federal policy, which for the first time allowed leasing of geothermal systems subsidized by commercial energy tax credits. Geothermal loops are essentially plastic pipes filled with water and anti-freeze, which absorb the consistent heat needed to efficiently fuel electric-powered ground-source heat pumps.

Under the model, Dandelion's lease partner owns the geothermal loop and harvests federal tax credits, worth 30% to 50% of the project cost. Consequently, homebuilders do not shoulder upfront costs for installing the systems.

Dandelion and Diverso plan to continue offering that leasing model. However, Yates said Diverso has the appetite to own geothermal loops long-term, opening the door to a model that the partners have branded "geo-as-a-service."

In both cases, homeowners pay a monthly fee designed to be offset by energy cost savings that result from using high-efficiency ground-source heat pumps. The geo-as-a-service model would feature a lower monthly rate structure than the existing lease program. That creates less incentive for homeowners to buy out their lease, leaving Diverso as the long-term asset holder of the geothermal loop, Yates explained.

Value seen in long-term asset ownership

Diverso pioneered the energy-as-a-service model for geothermal heating and cooling in Ontario, according to the company's website. Diverso designs, builds and owns geothermal systems with a focus on apartment complexes and commercial buildings.

"Dandelion's operational scale combined with our expertise in managing long-term renewable assets creates a turnkey solution for the industry," Diverso CEO Tim Weber said in a March 10 press release. "Together, we are de-risking geothermal for the biggest builders in the country."

Operating geothermal loops and thermal energy networks as utility-like assets remains a nascent business model. However, Yates said the appeal of owning the assets long-term is fairly straightforward: They pair the predictable revenue stream of infrastructure investments with very low maintenance costs over a roughly 100-year life.

"Ground loops are borderline infinite duration and zero-service," he said. "So on those fronts, you can't beat them."