Geothermal Retrofit AEC Revenue Model: 200,000 Sq Ft Office Complex

This is a worked model for a 200,000 sq ft Class A office complex in southeastern Pennsylvania with 25-year-old centrifugal chillers and gas boilers. The building profile is cooling-dominated: roughly 400 tons of peak cooling against 2.5 MMBtu/hr of peak heating. Baseline cooling is electric and inefficient. That combination is what makes a ground-source retrofit produce conserved electricity — the credit basis under 52 Pa. Code § 75.63.

The modeled retrofit is a hybrid 400-ton ground-source heat pump: 120 vertical bore wells to 400 ft, water-to-water and water-to-air heat pumps distributed through the building, sized to handle roughly 85% of peak loads geothermally with a small condensing boiler for the coldest hours. Installed cost in this model is approximately $2.8 million, offset by $420,000 in utility rebates and a 30% federal Investment Tax Credit ($840,000). Net investment: $1,540,000.

Energy profile

Annual HVAC electricity would fall from 1,680 MWh to 840 MWh — a 50% reduction. Natural gas heating would drop from roughly 18,500 therms to about 1,200 therms for supplemental heat during the coldest weeks. The 840 MWh reduction in electricity consumed is what the Tier II AEC calculation runs against.

Why this retrofit conserves electricity

The credit basis under 52 Pa. Code § 75.63 is MWh of electricity generated or conserved. For a heat pump retrofit, that turns on what the new system displaces.

This building is cooling-dominated — 400 tons of peak cooling against 2.5 MMBtu/hr of peak heating. Its baseline cooling was electric and inefficient. Replacing it with a high-EER ground-source system produces a large reduction in electricity consumption, and the modest heating load added on the electric side does not offset it.

Annual HVAC electricity would fall from 1,680 MWh to 840 MWh — a genuine 840 MWh reduction in electricity consumed.

Not every geothermal retrofit produces that result. A heating-dominated building replacing a gas boiler can end up consuming more electricity after the retrofit even while saving energy and money overall. See when a geothermal retrofit conserves electricity for that analysis.

AEC revenue

840 MWh of conserved electricity would produce 840 Tier II AECs per year. At current market pricing that is:

• 840 MWh × $26 = $19,320 per year at recent spot pricing
• 840 MWh × $26 = $22,613 per year at the RY2025 weighted average

AEC revenue is separate from utility bill savings, which in this model would be on the order of $175,000 per year from reduced electricity and near-elimination of gas consumption.

Seasonal pattern

AEC generation would not be uniform month to month. Cooling months carry most of the electricity saving because the EER improvement (roughly 8.5 to 22+) is applied against the largest baseline load. Winter months still produce savings but at a smaller monthly volume because heat pump compressors partially offset the eliminated gas heating on the electric meter.

Payback

Combining bill savings and AEC revenue against the net investment:

• Net investment = $2,800,000 − $420,000 rebates − $840,000 ITC (30%) = $1,540,000
• Annual benefit at $26 = $175,000 utility savings + $22,613 AEC revenue = $197,613
• Simple payback = $1,540,000 ÷ $197,613 ≈ 7.8 years

At $26/AEC the annual benefit is $194,320 and simple payback is approximately 7.9 years.

Metering

Tier II AECs are issued against measured performance reported to GATS. That means submetering of the heat pump circuits, ground loop pumps, and building-level electric feeds — enough resolution to isolate HVAC electricity from the rest of the building load. The metering plan is part of the PennAEPS submission and is what makes 840 conserved MWh a verifiable number rather than an engineering estimate.

Timing

AECs are issued from the PennAEPS certification date forward. Generation or savings occurring before certification do not produce credits. An existing geothermal system that remains operational and verifiable may still be certified — issuance begins at certification, not at commissioning. For a system at this scale — 840 AECs a year — that is roughly $1,884 per month at the $26 weighted average for every month between commissioning and certification. Not recoverable later.

What this model does not cover

The figures above are a modeled example for a facility of this type and size. Actual eligibility, savings, and AEC revenue depend on the building, the equipment, the operating profile, the documentation, and the PennAEPS certification outcome. A geothermal retrofit in a heating-dominated building with a gas baseline can look very different — see the linked analysis on when a geothermal retrofit conserves electricity.

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