When Does a Geothermal Retrofit Actually Conserve Electricity?

Ground-source heat pumps are among the most efficient HVAC systems available. They almost always reduce total site energy, usually reduce operating cost, and generally reduce emissions.

None of that determines Tier II AEC eligibility.

52 Pa. Code § 75.63 issues credits for each MWh of electricity generated or conserved. Not energy conserved. Not cost saved. Not carbon avoided. Electricity.

That distinction decides whether a geothermal project produces AEC revenue or none at all, and it turns entirely on what the new system displaces.

The two cases

A GSHP retrofit changes two things: how the building cools, and how it heats.

Cooling almost always saves electricity. A ground-source system at EER 24 against an aging DX unit at EER 8.5 cuts cooling electricity by roughly two-thirds.

Heating depends entirely on the baseline. Replacing electric resistance heat with a heat pump is an enormous electricity saving. Replacing a gas boiler moves the load onto the electric meter — electricity consumption goes up, even though total energy goes down.

Whether the project nets out to conserved electricity depends on which effect is larger.

Worked case 1 — gas heating baseline

A 45,000 sq ft office building with a 25-year-old gas boiler at 78% AFUE and DX cooling at 8.5 EER. Annual loads: 720 MMBtu heating, 540 MMBtu cooling. Retrofit to a 60-ton GSHP at COP 4.2 heating, EER 24 cooling.

• Cooling electricity
• Baseline: 540,000,000 BTU ÷ 8.5 = 63,529 kWh
• GSHP: 540,000,000 BTU ÷ 24 = 22,500 kWh
• Saving: 41,029 kWh
• Heating electricity
• Baseline: gas-fired — 0 kWh
• GSHP: 720 MMBtu ÷ 4.2 COP = 171.4 MMBtu input = 50,240 kWh
• Change: +50,240 kWh
• Net electricity: +9,200 kWh — an increase.

The project eliminates roughly 9,230 therms of gas annually and would likely reduce operating cost and emissions. Under § 75.63 it conserves no electricity and generates no Tier II AECs.

This is not a marginal outcome. In heating-dominated Pennsylvania buildings, gas-to-GSHP conversion frequently lands here.

Worked case 2 — electric resistance baseline

Same building, same loads, same GSHP. The only change is that baseline heating was electric resistance rather than gas.

• Heating electricity
• Baseline: 720 MMBtu ÷ 1.0 COP = 211,011 kWh
• GSHP: 50,240 kWh
• Saving: 160,771 kWh
• Cooling electricity
• Saving: 41,029 kWh (unchanged from case 1)
• Net electricity conserved: 201,800 kWh = 202 MWh = 202 AECs

At $26 (recent spot), annual AEC revenue would be $4,646. At $26 (RY2025 weighted average), $5,438.

Identical equipment, identical loads, identical building. The baseline fuel decides everything.

How to tell before you model revenue

Four inputs:

• Annual heating load in MMBtu, and what fuel currently serves it
• Annual cooling load in MMBtu, and the existing system's EER
• Proposed GSHP heating COP and cooling EER
• 1 MMBtu = 293.071 kWh for conversion

Then:

A positive result is your AEC basis. A negative result means the project is worth doing for other reasons, but not for Tier II revenue.

Where geothermal reliably qualifies

• Electric resistance heating replacement. The largest and most reliable case.
• Cooling-dominated buildings. Where cooling load substantially exceeds heating load, the EER improvement can carry the result even against a gas baseline. See the large office complex model.
• Aging electric heat pump replacement. COP 2.2 to COP 4.2 is a real electricity reduction.
• Hybrid designs. Where a gas boiler is retained for peak heating and the GSHP handles base load, the electric heating addition is bounded while the cooling saving is fully captured.

Where it usually does not

• Gas boiler replacement in a heating-dominated building
• Buildings where heating load substantially exceeds cooling load and the baseline is fossil-fired
• Any configuration where net metered electricity rises after the retrofit

What this does not say

A geothermal project that produces no AECs is not a bad project. Fuel switching from gas to electric is central to most decarbonization pathways, and it typically improves total energy use, operating cost, and emissions.

It simply does not produce Tier II AECs, because Tier II AECs are issued for conserved electricity and that project does not conserve any. Modeling AEC revenue into a project that will not generate it is the error worth avoiding.

Timing

Where a project does qualify, 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.

Attribute ownership

52 Pa. Code § 75.13(i) provides that a customer-generator eligible for net metering owns the alternative energy credits of the electricity it generates, unless a contract expressly assigns ownership elsewhere.

The default favors the host, but the contract governs. Where a system was installed under a lease, energy services agreement, or performance contract, check whether environmental attributes were assigned.

Frequently asked questions

Does a geothermal system have to be all-electric to qualify?

No. Hybrid systems retaining a boiler for peak heating can qualify — often more readily than full conversions, because the electric heating addition is bounded.

Does the gas saving count toward AECs?

No. § 75.63 issues credits per MWh of electricity generated or conserved. Therms of gas displaced are not part of the calculation.

What if the building has no cooling load?

Then eligibility rests entirely on the heating baseline. Displacing electric resistance heat qualifies. Displacing gas does not.

Who owns the credits if the system was installed under a performance contract?

§ 75.13(i) provides a default in favor of the customer-generator absent express contractual assignment. Review the agreement.

Can loads be estimated rather than measured?

For a proposed system, engineering estimates from the design load calculation are the starting point. For an existing system, use metered data — the difference between estimated and actual is frequently large enough to change the eligibility answer.

Check whether your project qualifies

Eligibility turns on system configuration, baseline, location, and who holds the environmental attributes. Send us the details and we will tell you where you stand.