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Trying to bring geothermal heat pumps to scale
In this episode, I chat with Kathy Hannun of Dandelion Energy about ground-source heat pumps, which are twice as efficient as air-source units but still more expensive up front. Dandelion has designed its own drills and heat pumps, and with a new 1,500-home partnership with a developer in Colorado, it’s looking to scale up and bring costs down.
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David Roberts
Hello everyone, this is Volts for May 9, 2025, "Trying to bring geothermal heat pumps to scale." I'm your host, David Roberts. As Volts listeners undoubtedly know by now, the most efficient way to heat a building is with a heat pump, for the simple reason that it takes much less energy to harvest heat, as a heat pump does, than it does to generate heat, as a combustion furnace does. A heat pump that harvests its heat from the air, AKA an air-source heat pump (ASHP), is about twice as efficient as a gas furnace. A heat pump that harvests its heat from the ground, AKA a ground-source heat pump (GSHP), is twice as efficient as that.
Indeed, ground source heat pumps, sometimes called geothermal heat pumps, are the most efficient available way to heat and cool a building — to get any more efficient, you have to start heating and cooling multiple buildings at once, as with ageoexchange system. So then, why don't you see more of them? The simple answer is that, while they save money over time, they are extremely expensive up front to install.
Dandelion Energy is a company that spun out of Google's X shop back in 2017 to try to address that problem and increase geothermal heat pump deployment. It has installed tens of thousands of its systems, developed its own drills and heat pump, and recently announced a partnership with a builder called Lennar that will see geothermal heat pumps installed in some 1,500 new homes in Colorado in the coming two years.
I've been meaning to talk with the Dandelion folks for years, and the Lennar announcement seemed like a good excuse, so I'm delighted to welcome Dandelion's president and co-founder, Kathy Hannun, to the pod today. We're going to discuss how geothermal heat pumps work, their advantages, and the way their costs can be brought down.
With no further ado, Kathy Hannun. Welcome to Volts. Thank you so much for coming.
Kathy Hannun
Thank you. I'm delighted to be here.
David Roberts
It's been a long time coming. I swear we talked years ago about something, but I searched on Volts and I can find no sign of it. So, it must have been pre-Volts.
Kathy Hannun
But it was. You wrote a really helpful overview of the different types of geothermal.
David Roberts
Oh, right.
Kathy Hannun
And you were thoughtful enough to actually include geothermal heat pumps, and we use that pretty often to help explain what the technology is to people. So, it's great to speak with you again.
David Roberts
Yeah, that was my own crash course, learning about geothermal. I guess that was back in 2018. Good grief. Well, anyway, good to have you here. So, I'm going to ask you a bunch of questions that I'm sure you've answered a gajillion times. But just as a treat for you to do a nice thing, let's start by talking about the news that I'm sure you are actually excited to talk about, which is this Lennar deal. Tell us a little bit about how that deal came about. And, are you aware of anyone else in the US installing geothermal heat pumps in numbers like this?
Kathy Hannun
I'm not aware of any other project to install a similar scale of residential geothermal heat pumps. So, it's a special opportunity for Dandelion and the industry. I thought your introduction was great. And it is true that the main thing holding geothermal back is the upfront cost. And when you have a chance to install 1,500 of something at once, that alone can go such a long way to bringing down the cost. But the deal came together because Lennar has a reputation among home builders for always looking at new technologies and new products they can offer their homeowners.
And they're also, like many builders, facing some pressure to electrify in various states where they make new homes.
David Roberts
Worth noting, this is taking place in Colorado, which has all kinds of building code things, building laws, and laws about decarbonization of various sectors. There's a lot pushing in Colorado.
Kathy Hannun
That's right. And one thing in Colorado — I mean, there are many factors which we can get into later — but now, builders have to pay, for example, to extend gas if they want gas to a new development. It's no longer a socialized cost. So, the state is taking real steps to level the playing field and even boost the chances for electrification through some nice incentives there. But yeah, so anyway, they were interested in finding alternatives to air source. And we explained, "Yes, there is the upfront cost and sort of need to put in a ground loop, but when you do it 1,500 times in a row on a brownfield construction site, it's actually not that expensive."
And then, you know, the homeowner can benefit from this really premium, high-performance, low-cost system forever. And Lennar benefits as well in a lot of ways. Specifically in Colorado, because the incentives are so favorable for geothermal, it's actually more cost-effective for them upfront as well. So everyone's incentives were aligned to make this happen.
David Roberts
Obviously, doing this 1,500 times at a single site will mean that each one of those individual installations is cheaper than the average, you know, sort of standalone installation for obvious reasons. You can share drills and share labor, etc. But the second part of that question is, do you expect doing this at scale at 1,500 homes, do you expect that to lower costs going forward? In other words, is the 1,501st installation going to be cheaper because of learning through doing, or I don't know, like buying equipment in bulk? How do you expect costs to come down and if so, how?
Kathy Hannun
Yes, well, you know, first to clarify, the 1,500 homes will be across 14 different communities in the suburbs of Denver. But your point is still absolutely correct. Nonetheless, you do have the ability to just stand up drilling resources in that area and the overhead is very low when you're doing so much volume, which is why commercial drilling tends to be cheaper than residential drilling in general, one-off residential. It's so much cheaper because a lot of the cost of drilling is getting the rig there, setting it up, figuring out what you're drilling into, taking it down, transporting it to the next site, and you're able to amortize all of those costs.
But to your question, you know, it already has lowered the cost of geothermal for the 1,501st home. Our manufacturing partner is able to invest in more automation and sort of a higher scale line.
David Roberts
You mean the company manufacturing the heat pumps that you install?
Kathy Hannun
Thank you for clarifying. Yes, exactly. That's just one example. And also, another supplier, just for another example, who's supplying the parts used to connect the heat pump to the ground loop, has also invested in new equipment that allows him to make these parts much more cheaply than he was doing before. I mean, one takeaway is just the geothermal industry, the geothermal heat pump industry, has been operating at a relatively small scale to date.
David Roberts
Yes, it's all very bespoke. It's all very sort of one-off. It's not set up currently for modularity and cost reductions.
Kathy Hannun
That's correct. So, even at a 1,500 home scale — which is really small compared to every other HVAC product that's used mainstream in the United States — even at that scale, we're seeing significant cost decrease. And to me, it's very exciting because it's like, "Okay, there's so much low hanging fruit here." When we get to 15,000 homes, imagine.
David Roberts
Right. Well, I was going to ask about that. I mean, this is 1,500, which is big, as you say, relative to the previous geothermal heat pump industry, but relatively small in the HVAC game. Does Lennar have plans beyond that? I mean, if Lennar did this and they're like, "Wow, this is awesome. We're going to do this on all new homes." Like, what kind of scale is that? I have no idea what the numbers are. You know, like, how many homes is Lennar building a year-ish?
Kathy Hannun
Lennar builds tens of thousands of homes each year, I think north of 70,000. They're operating at a very large scale. And everyone wants this to not just be the only time. Like, Lennar would not be doing this if they intended to just stop at 1,500 because it would not be worth it for them to learn and put in the work to make this happen. And of course, Dandelion, we exist to try to make this geothermal heating and cooling a mainstream way that Americans heat and cool their homes. So, this is exactly what we exist to do.
And so, we talk regularly with Lennar about how we can, and other home builders, how we can work together to continue to bring the cost down and continue to make it scalable in different markets. Like in Colorado today, the costs are such that Lennar is actually not paying a premium upfront to put geothermal in, which is amazing. But that's not the case in all the states.
David Roberts
My next question was sort of like, how crucial are Colorado's incentives in this? Like, in the absence of these incentives in Colorado, would Lennar be doing this?
Kathy Hannun
The incentives that exist, just to be specific, the incentives that exist right now that are supporting this project include an Xcel Energy incentive. They have both an all-electric homes incentive and clean heat incentive. There are two different incentives; you can't take both, but some of our homes are taking one, some are taking the other. Both are quite helpful. And we can talk more about why utilities are motivated to make geothermal work. And then there's also a $3,000 Colorado state tax incentive. And there are code requirements that really incentivize geothermal because it's such an efficient technology.
And there's the fact that I gave earlier about how in Colorado, the developer would have to pay to extend gas. So, it's a savings if you don't have to do that, which always helps to be competing against something that's free.
David Roberts
Are you getting federal tax incentives, too?
Kathy Hannun
It's an interesting one because there is a federal tax credit, but it goes to somebody who owns the home for five years or more. And because Lennar's model is that they build the home and then they sell it, or often it's sold even before it's built, the homeowner is actually getting that tax incentive, not Lennar. So there's a bit of a split incentive problem there where Lennar doesn't value that tax credit as much because it's going to the homeowner. And often, the homeowner, you know, isn't making the decision about whether to buy the home...
You know, it's a little complicated for them. They might be surprised in a very positive way to be receiving —
David Roberts
It would be great to buy a home and just discover a $5,000 tax credit lying between your couch cushions.
Kathy Hannun
Totally. So, it's great, don't get me wrong, but it's not as integral to the sale as the other ones today.
David Roberts
Okay, well, let's back up just for listeners maybe who aren't familiar with the general idea of what's going on here. Let's just talk a little bit about ground source heat pumps in general. So, air source heat pumps, they pull heat out of the air, they dump heat into the air. Pretty straightforward. Ground source heat pumps, they do it with the ground. And the way they do that is with a network of pipes. And this is, I guess, the main reason that it's more expensive than alternatives is you have to do this digging and laying of pipes.
So, just to start with, are you mostly doing this in suburbs? Like, how urban of an environment can you do this in? Because I'm just guessing that urban environments, even underground, have more stuff in your way, more existing infrastructure and other kinds of pipes and things. Whereas, like a suburban yard, I'm guessing, is an easier target. Is it mostly suburban single-family homes that are getting these?
Kathy Hannun
What you're saying is correct, that it is more challenging in many ways to drill and install ground loops in an urban environment. And yet, I don't know that it's more common today to see geothermal in the suburbs than in urban environments. There's a lot of geothermal being installed in colleges and university settings, commercial buildings, that type of thing. There's also quite a bit going on in more urban communities. Multifamily buildings. There's some utilities experimenting with thermal energy networks.
David Roberts
Yes, we're very familiar with those over here.
Kathy Hannun
Yes. Okay, great. And then Dandelion has been mostly focused on suburban residential, but I don't think it's the focus of many others in our industry. For new construction, you have the advantage of sort of the easiest drilling conditions that you can imagine, because it's just a blank slate with nothing. So that's helpful to make it very cost-effective in that scenario.
David Roberts
How do you, if you're just going to a house in the suburbs, Dandelion, how do you know if there's stuff buried under there? Like, are there city records? Do you have to dig and look like, how big of a problem is that?
Kathy Hannun
Yeah, you have to file a sort of request for information from the utility. There's a standard process for doing that. Then they come out and mark where the underground utilities are. And then, some utilities are private, like septic systems, that type of thing. So, you have to work with the homeowner to understand what the private utilities that are under your yard are and where they are. And then, of course, it's tricky because sometimes people don't know exactly what's under there, you know, so that is a challenge, but you can kind of look like, where do the pipes look like they're exiting the home in the basement.
And then, like, where would they likely be going to the street? And so, let's just avoid that general area. You do a lot of stuff like that as well.
David Roberts
So, how much yard or just open space do you need? I mean, I know there are variations. Like, you can go horizontal with sort of shallowly buried pipes, in which case you need a lot of sort of area, yard area. Or you can go deeper, which you can use less yard area and go deeper. But, like, what's the minimum amount of space I need if I want one of these systems? Like, I need a patch of ground X big minimum to make it work.
Kathy Hannun
Well, as you said, there are many different types of geothermal systems. Dandelion's whole mantra is "simplify and standardize." If we can just, like, do the same thing over and over, it will be cheaper. And that has led us to embrace the vertical closed-loop system. It's a vertical hole, so we're just going straight down. It tends to be 300 to 500 ft for a typical house. And then you put what's called a ground loop in the hole. The ground loop is an inch and a quarter plastic pipe. You can imagine it goes straight down, then it makes a hairpin turn at the bottom and comes straight back up.
So, it's actually kind of like two pipes next to each other, connected at the bottom.
David Roberts
And it's just a single loop, it's just one of those?
Kathy Hannun
Typically, I mean, if you have a very large home, you would have two or three or four, it scales. But typically for a home, you can get away with one. And to answer your question, one of the things that was a real bottleneck for the company when we first started back in 2017 was that the drilling rigs that were being used to install vertical geothermal boreholes were just water well rigs. So, you would just call somebody who was usually installing water wells and ask them to install a geothermal well instead. But these water well rigs, you know, they typically serve more rural customers by their nature, the people who tend to need water wells.
And they tend to be very large; they're truck-mounted. So the rig is mounted on a big truck. And they're very messy. They create a lot of mud and debris. So, about half the homeowners who were interested in getting our product in those early years, we had to disqualify because the rig would not fit in their yard.
David Roberts
Oh, interesting.
Kathy Hannun
And we ended up going to Sweden because Sweden has a very high penetration of geothermal heating and cooling systems. About a fifth of buildings in Sweden are heated and cooled with geo, and it's like 70% of new construction. So, it's really a mainstream product over there. And so, we just went to learn. And it was a transformative trip. The rigs they were using were tiny. They were simple. They were more lightweight. A single man could operate the rig and did so in Sweden. He could carry the pipe; it wasn't too heavy. They had sort of ancillary products that they used that were simple, that would keep the site clean.
David Roberts
Like a bulldozer?
Kathy Hannun
Yes, like a bulldozer, exactly.
David Roberts
Not what you want to call to mind.
Kathy Hannun
No, it's a good example. That's exactly right. So, when you have a piece of equipment mounted on tracks, it has a very tight turning radius and it also doesn't disturb the ground as much because the weight is more evenly distributed. So anyway, the Swedes basically took us under their wing. Not kidding, they really did, they taught us their ways. And we couldn't copy exactly what they were doing because Sweden has different laws and highway rules, and they use different trucks. Everything's slightly different than in the US. So, we had to Americanize it.
But we basically took the concepts that they were using in Sweden and built them over here in the US, and created a very residentially friendly, much less expensive, much cleaner approach to installing those ground loops. So, this is a very long-winded way of answering your question: So today, in a retrofit, you really don't need much patch of ground at all. Like, we very, very rarely disqualify somebody today for not having enough land. I can't think of the last time that happened. If you lived on a very steep slope or something like that, that might be a problem.
David Roberts
So, you just need a pretty small patch because you're going straight down.
Kathy Hannun
That's right.
David Roberts
I don't know that I had put that together. And so, one of the big advantages of ground source heat pumps is they're more efficient than air source. What are the numbers on that? I said 2x in my introduction, but I think that's very rough.
Kathy Hannun
That is right.
David Roberts
What are the actual numbers?
Kathy Hannun
I mean, of course, it depends on the weather, right? The colder the winters, the warmer the summers, the more geo will excel.
David Roberts
This is the question I was going to ask. So, this is kind of what I thought. The more extreme your weather on either end, hotter and colder, the more geothermal is going to be advantageous over air source, basically.
Kathy Hannun
Yep, that's right. And it is about twice as efficient. Like in our Lennar project, for example, homeowners will pay about half on their utility bills of what they would be paying if they had adopted air source. So that's about right.
David Roberts
That's interesting. And back on the drills, briefly, it occurred to me, since you're only doing one loop, I guess maybe this doesn't apply. But I just wonder, like, anytime you talk to anybody, geothermal, it's always sort of better to go deeper. It's always hotter, deeper, and you can always get more energy the deeper you go. So, is there talk or innovation around that side of the drilling? Like, would it be meaningful for you to be able to drill much deeper, or do you feel like you're going the right depth?
Kathy Hannun
The idea that you get exponentially more energy as you get hotter for geothermal electricity, it's not as applicable to heat pumps. Going deeper isn't necessarily better. If we hit a geology that has a lot of water production, for example, we might decide to put in multiple shallower holes because it's just easier. It kind of depends on the conditions at a given site, whether it makes sense to do a greater number of shallower holes or fewer deeper holes. But the impact of the change in temperature, we're only going 300 to 500 ft, so it's not a gradient that makes a big difference.
And the deeper you go, the more pumping energy you actually need, the greater your head loss; these factors are more significant for us.
David Roberts
Well, speaking of pumping, these systems mostly use water, or as I understand it, in very cold climates, there's a little bit of antifreeze in the water. Is there any innovation around that? Is there any thought that like some other kind of fluid might carry heat more efficiently? Is there any looking into that or is water, you know, good enough here?
Kathy Hannun
There is looking into that and thought about that. Absolutely. Water's pretty good. But the type of antifreeze you use can matter. So, what's standard in the industry today is propylene glycol, which has some nice properties. It's not toxic, it's pretty inexpensive. But the viscosity of the fluid increases as the fluid gets colder. So, as you reach your sort of highest heat loads, like the end of January, your loop is the coldest it will get. You need to make sure your viscosity doesn't increase too much to get in the way of your pumping requirements. And there are other non-toxic antifreezes that have better properties than propylene glycol.
They're cheaper, they have lower viscosity when it's cold. In every way, they would be better, but they're not allowed in many of the places we operate. Again, another element of us being a relatively young and unscaled so far industry is that a lot of the regulations just chose "You must use propylene glycol." I wish the law was something like "You must use a non-toxic antifreeze that has these properties that are good for customers." Like, it's not about not having the regulation. It's just sometimes they're written in a way that doesn't leave a lot of room for innovation. And so, it's something that we're working on. I think that particular lever isn't the most high potential of all the levers for reducing costs, but like, why not use an antifreeze that's better in every way? And so, that is the type of thing that we're thinking about all the time at Dandelion.
David Roberts
And are you committed to just doing houses or are you, do you want to do commercial and multifamily buildings?
Kathy Hannun
We absolutely do multifamily. So, we do residential, both single-family and multifamily today. And then, we also have a commercial drilling business. So, the boreholes that you install, they look the same sort of regardless of what the building is that they're serving. So, we will drill boreholes for any type of building. We're open for business on that.
David Roberts
Oh, interesting. Just like a "drilling as a service" type of thing.
Kathy Hannun
Yeah, exactly. So, we do that. But in terms of the actual sales that we make that include the interior as well as the exterior, we really do stick to residential, but we're open to all sorts of residential models, multifamily included.
David Roberts
And for a multifamily building, it's just one big unit and ducts to the different apartments. Right. There's no separate wall units. How does it work when it's a multifamily building?
Kathy Hannun
I mean, there can be different designs, but what's typical is you might have small units in utility closets. So, actually, units in each apartment and then water going to each of those units. That would be sort of a typical design you might see for multifamily.
David Roberts
And so, another thing you ran into and decided, "screw it, we're going to make our own" is the heat pump itself. You have developed your own heat pump called Dandelion Geo. I have wondered about this a lot over the years as I've been talking about heat pumps with people, just whether there's much innovation in the heat pump itself. The actual heat pump unit itself. I hear weirdly little about, relative to like, batteries, where you're hearing about fundamentally new chemistries every five minutes. Just weirdly little talk around innovation in the heat pump space.
You made your own heat pump? Why and what are its advantages?
Kathy Hannun
My impression when I started the company was that there was no need to make a heat pump because it's such a mature and large category. It was like, what could a startup offer? What we ran into is the US geothermal market is quite isolated from the rest of the world. One reason for that is that it's a niche industry, low volume, but also Americans tend to use ducts for heating and cooling and that's very unusual in the world. The Europeans use geothermal, but it's all water to water heat pumps.
David Roberts
Like water radiators, type of deal.
Kathy Hannun
Yes.
David Roberts
And you don't have those, you couldn't if I had an apartment building running that had radiators in it, you don't have a water to water heat pump that you could use in that case?
Kathy Hannun
So, the heat pump we developed is specifically for our retrofit market. There are a lot of homes with radiators in the Northeast US, but those radiators tend to have a much smaller surface area than the radiators you find in Europe. That matters because the temperature of the water that goes through the radiators in the Northeast is very high.
We ran an analysis that was like, "What would the efficiency be of a geothermal heat pump that would serve radiators at that temperature?" And how does that compare to just installing mini splits, air source mini splits in the home? And it's like the same or low. You know, there's like no advantage once you have to make water that hot. First of all, it's hard to do with the equipment available on the market.
David Roberts
That's just your compressor doing that. It's whatever is pulling the heat out of the water and concentrating it. Would it have to just work much harder?
Kathy Hannun
We would have to get it to such a high temperature that your efficiency falls off. And it's kind of like, why are we even doing geo anymore? And you don't get air conditioning. So, the other thing about mini splits is you would get air conditioning. So, probably a better product would be sort of like a geothermal mini split, which doesn't exist yet.
David Roberts
Yeah, that literally doesn't exist, or they just don't have them here?
Kathy Hannun
There's a geothermal VRF (Variable Refrigerant Flow) system that you can buy from Samsung. And we did experiment with that a little bit a few years ago, offering it because we do have customers with radiators that want geo. But it was very complex, very expensive. It wasn't a scalable product. So, we discontinued offering it. So, I'm sorry this is so circuitous.
David Roberts
No, I love it.
Kathy Hannun
So anyway, the US market's a little bit on its own because there's not a lot of manufacturers around the world making water-to-air geothermal heat pumps. The market that does exist here, which is very small, has optimized its geothermal heat pumps pretty much for new construction in the Southeast or in warmer climates. I think that is just an artifact of historically heat pumps having been most common in the Southeast. So, what that's resulted in is the geothermal heat pumps on the market today in the US are optimized for cooling, not for heating.
They do both, but they're designed to be better at cooling than at heating. And they just didn't have some features that we thought would be really useful. So, those features include: We developed a heat pump that is optimized for heating. First of all, since we really target customers in colder climates, that allows it to operate more efficiently in heating. It can also produce more heating capacity for a given compressor size. Meaning, like if you get a nominal 5-ton heat pump, the Dandelion Geo will just produce significantly more heat than a competitor. Which is useful because a lot of retrofit homes need a lot of heat because they're not necessarily that well insulated.
We also designed it to tolerate lower entering water temperatures. So, when you design a geothermal system, you size the ground loop by answering the question with a model: How long does this ground loop need to be so that it never goes below 30 degrees Fahrenheit? And 30 degrees is just the industry norm. It's what a lot of heat pumps are designed for as a minimum. And so, we thought, you know, what if you designed a heat pump to be totally fine and produce enough heat at 25 degrees Fahrenheit or 23 degrees Fahrenheit, you know, like that allows you to significantly reduce the length of the ground loop you need.
So, we are able to install, I don't know, 20% less ground loop and still deliver the same amount of heat as a different heat pump. So, it's like this small change you can make to the heat pump to actually save a lot of money on the ground loop. So, we did that. The heat pump also is designed to need a lot less electrical capacity. And the reason for that is in the air source heat pump paradigm, you often have an air source heat pump that needs to be supplemented by electric resistance sort of auxiliary heat.
Because the air source heat pump's capacity, its ability to heat will drop when it gets very cold out. So, it has an electric element to supplement.
David Roberts
Which is very intensive, electrically speaking, it uses a lot of electricity.
Kathy Hannun
It is. The geo industry had just adopted that same template to geo heat pumps. But there's no need to adopt it in exactly that way because the key advantage of geo is that even when the outdoor temperature drops significantly, the geo heat pump does not lose its capacity that much. And so, what we did, our heat pump still has an auxiliary heating element just in case something goes wrong with the heat pump. It's like a safety mechanism. But we've designed it so that only a small amount of that auxiliary heat is able to come on at the same time as the main compressor because you're never going to need more than a very small amount.
And so, that allows us to sort of share the electrical capacity between the compressor and the auxiliary heat because they'll never both be on at the same time. The reason that was useful to do is that a lot of homes that switch to heat pumps of any type run into the issue of not having enough capacity on the main panel and then they need to go through a main panel upgrade. It's very expensive and you have to work with the utility. It can be like $5,000 to $9,000 or more if you have buried lines. And it's just a big fiasco. So, we want to avoid that wherever we can.
David Roberts
Oh, right. And you do that by keeping electricity demand tamed?
Kathy Hannun
Right. So, our 6-ton heat pump, which is the largest size, needs about 60 amps of main panel capacity, whereas a competitor unit would probably need 120 or more. So, it halves the amount. And then the last feature, and then I'll give it back to you, but a lot of our retrofit homes were designed to work for furnaces, of course, and furnaces heat air to a higher temperature than a heat pump does. And so, as a result, you don't need your ducts to be as large because if your air is hotter, you don't need as much of it to carry heat.
So, that's a huge friction point for retrofitting ducted homes.
David Roberts
Do you find yourself having to replace ducts a lot or enlarge ducts a lot?
Kathy Hannun
We did all the time before we made this heat pump, but then we designed the heat pump to produce hotter air than is typical for heat pumps. So, that really reduced the need to fiddle with the ductwork, which saved everyone a lot of cost and complexity. So anyway, you're getting a sense it was just like the product that we wanted to exist that was really tailored to the retrofit case, just didn't really exist. And so, we decided it was worth it for us to create the product we wanted to exist.
David Roberts
Are you selling those independently? Like, are you selling them to other installers or other people?
Kathy Hannun
We aren't currently focused on that. We use them mainly for our own customers. The decision was now that we're so focused on the opportunity with new build, so we've really shifted our focus as a company in recent years from the retrofit market to the new construction market.
David Roberts
Can we talk about that for a second? I was going to ask you about that. I mean, I guess the reasons are sort of obvious. Economically, the proposition is more attractive to someone building up front; it's just cheaper when you're building up front. There's probably more standardization and scale available in new builds than in retrofits.
Kathy Hannun
100%.
David Roberts
But there are more built homes than unbuilt homes. Do you know what I mean? Like, you are sort of tackling the smaller side of the problem. Is the long-term vision to sort of scale up and then go back into retrofits with sort of lower costs and more learning by doing in hand?
Kathy Hannun
Yes, that is exactly right. Yes, I think it would have been hard to start the company in 2017 going after new build because we had no track record. The policy landscape was very different. You know, there weren't as many parts of the country where the value proposition made so much sense as it does today for those new build customers. And it's just a much easier and faster sales cycle and feedback loop to sell to homeowners.
David Roberts
Nice to make one deal with Lennar rather than 1,500 separate deals with homeowners.
Kathy Hannun
Exactly. So, we almost needed to get to a place of maturity as a company where we could go after the new construction market. And the policy landscape had evolved to make that opportunity very attractive. So, it is the better opportunity for us right now. And I think it is the better opportunity not just for Dandelion, but also to scale geothermal and to bring it into the mainstream because you have those advantages of standardization and scale. But then, yes, we absolutely want to use the cost reductions and the simplifications and sort of the improvements that come from installing so much geothermal at scale to then go back to the retrofit market and continue to chip away at the existing home problem.
David Roberts
That's the big one. So, I have some nerdy grid questions. Everybody wants to electrify. We all want to get off fossil fuels; we want to get off gas. But one of the big fears, worries, concerns is that in cold climates, if you move everything over to air source heat pumps, you're going to get massive winter spikes in electricity demand in places where often the grid was built around summer spikes, not built for winter spikes. And this, of course, has everybody worried about grid capacity, etc. So, one of the advantages geothermal heat pumps have over air source heat pumps is, as you say, they use about half as much electricity, which is when you're talking about scale, when you're talking about doing HVAC at scale, really adds up and could make the difference in places' ability to electrify.
So then, my question is: That's a grid benefit. That's a grid stability and capacity benefit. Do you have any way of getting compensated for that benefit?
Like utilities — let's talk about the utilities. D oing this, a utility in a cold weather area has a lot of incentive, you know, to do it with as little electricity as possible. Are they coming to you? Are you working out deals with utilities? Are they giving you some value? Are there ways of making that value manifest in the price, I guess?
Kathy Hannun
This is a question and a project that we are focused on, and I would say today those mechanisms for internalizing that positive externality to the grid are not well established, but I do think there's increasing recognition that that benefit really exists for geo. There was recently a DOE report that analyzed the difference between electrifying with air source versus air source and geo. And you would, you'll save like I think the stat was something like 24,500 miles of transmission lines.
David Roberts
Really eye-popping numbers when you add it all up.
Kathy Hannun
Can be avoided if we do geo. Yeah, that's what I love. I'm so compelled by geo because it's like relatively easy to put a ground loop under a home when it's being built. And you do it one time, and that ground loop will be there, and then you get benefits for the lifetime of the structure. Including, as you say, like, you need less generation capacity, you need less transmission and distribution capacity.
David Roberts
Less T&D and T&D is the expensive thing now.
Kathy Hannun
It is so hard to permit, so hard to do. Why not just put in a ground loop? You know, it's just like putting in the infrastructure underground so you can avoid the infrastructure above ground, and then the homeowner benefits because they pay half as much. But anyway, to your question about, like, is there a way to monetize this? That is exactly the type of problem that we exist as a company to try and solve.
David Roberts
I mean, you would think utilities would be joining you in this effort somehow. Like, are you finding them cooperative? You think they would be coming knocking on your door?
Kathy Hannun
I think that utilities are starting to see the problem and understand it more. They see the challenges with electrification using air source and then start to learn that geothermal heat pumps are even a thing. I think, like a lot of people, they don't think of geo at all. And those who know about it, they think, "This is not scalable, this is niche, this is luxury." Because that's historically what it's been. So, I get that. But what I'm hoping that we can show with this Lennar project and with other projects we're doing is: actually, it is quite scalable.
And if it wasn't, Lennar certainly wouldn't be doing it. They're a very pragmatic, very mainstream home builder. And I think once people start to see this as a real option, hopefully, we will succeed in getting the value that these systems will deliver to the grid translated into an upfront incentive because that will allow it to be adopted in many more places.
David Roberts
Right. Like, if I'm a utility and there's a builder like Lennar in my service area, and it is debating whether to go air source or ground source, and I'm resource constrained, I have every incentive to go to that builder and nudge them. It seems like utilities ought to be more active in this. My second nerdy question is one of the things I noticed that you built into your heat pump that you built yourself is some intelligence. Some digital controls, some online-ness.
Which is raising the question, everybody's favorite subject, you are now installing a bunch of devices that you can communicate with and control centrally. So, have you thought about VPPing your GSHPs? By which I mean, coordinating your geothermal heat pumps in a way that is helpful to the grid from a central location. Like, is that on your radar?
Kathy Hannun
It's something we've talked about. But, you know, it's kind of funny. One of the implications of the fact that geothermal heat pumps are so efficient, even when it's very cold or very hot out, is it's actually less valuable to control them in that way than it would be if you had a much less efficient piece of equipment.
David Roberts
Because you're not actually moving that much electricity around, because they're not using that much electricity in the first place.
Kathy Hannun
That's right. So, whenever we've run the analysis, the value we could earn by doing that was just not worth it to actually go through the effort. But that could change. I mean, certainly if that changes and the incentives are there and it feels like something that would be good for our homeowners, we would absolutely be excited to try something like that.
David Roberts
That's funny. Like, we use so little electricity, it's not worth it. That's a good problem to have, though.
Kathy Hannun
It is, it is. It's like you just put a ground loop in and then that's all you need to do. Set it and forget it.
David Roberts
Well, here's something I really want to press you on, and it's something that has bugged me since I first found out about you all and found out about ground source heat pumps in general. It really comes up with, like this Lennar thing, which is the only way to make heating those Lennar homes more efficient than putting ground source heat pumps is all those houses having heat pumps inside them, but sharing a field of pipes, sharing pipes, basically, rather than having each their own individual installation of pipes in their yard. It seems to me just sort of like mathematical that you're going to save if you have multiple homes sharing the same field of pipes.
And I can see why that's super difficult to engineer in the retrofit market, because you would need multiple homes right next to each other, all wanting to do it at the same time, etc. But in new construction, why on earth not just build a big shared field of pipes?
Kathy Hannun
Well, I'm glad you asked, but I am a little more skeptical that you would save a lot of energy by connecting all the homes. I mean, let me start by saying the reason that we are doing individual loops is that again, we're just focused on scalability, simplicity, cost effectiveness, and one loop, one home. It's just very simple, very scalable. You know, it's very resilient. If something goes wrong with one home's loop, none of the other homes care or notice. Just like you don't need any fancy operations or maintenance on the system. It's just super simple. So that is appealing.
But let's just go to the other part of your question, which was an assumption that connecting them would lead to a more efficient system. So, I see the argument that you're diversifying the users of heating and cooling. And through that diversification, you might have more variability in your usage, which might allow you to get away with slightly less loop than if each home only has one loop. But I will say, like, all the homes are homes. And so, they're all going to have the same assumptions around.
David Roberts
Yeah, this is not a mixed-use. It would be different if it was a mixed-use development, sharing a network. If it's all homes, they're going to have probably like roughly synchronous demand curves.
Kathy Hannun
And certainly, the loop would have to be designed assuming that they have identical demand. It's like no one is going to be cooling, while some — you can't assume some of the homes will be cooling while others are heating. They're all going to be heating at the same time. They're all going to be cooling at the same time. And then if you connect the loops, all of a sudden your underground infrastructure becomes way more expensive and you have way more pumping energy you need to pump the water everywhere between all the homes. You have to do a lot more excavation to connect all the loops.
You have a lot more maintenance. You might need to actually create a separate pumping station to manage all of it. It's going to be a lot more. You might actually use more energy just because you're going to be using a lot more pumping energy than you will be using with individual. So, I think in the case of like an urban center where you have commercial buildings next to residential buildings and some are heating and some are cooling, then it makes a lot of sense.
David Roberts
And some buildings have a lot of waste heat, like your data center, your factory, or whatever has a lot of heat that can dump into the network.
Kathy Hannun
Yeah, if you had a data center in South Dakota next to a neighborhood, that would be a great option. But if you just have a bunch of homes in Denver, Colorado, a single loop is the way to go.
David Roberts
Interesting. I hadn't really thought about that. We're getting near to the end. I did want to press a little bit more on how vulnerable you are to Trump, basically. So, I mean, you're a young, as you say, sort of nascent industry, kind of scattered, a little bit low scale, a little bit niche, still trying to sort of consolidate, grow, standardize, bring down costs, et cetera. But right now, at least a lot of what you do depends on incentives, Colorado incentives, federal incentives, et cetera. Trump is, you know, I don't have to tell you what he's doing.
Like, are you, are there things he could destroy that would meaningfully hurt your business?
Kathy Hannun
It's a question that we've thought about, as you can imagine.
David Roberts
I imagine quite a few people are thinking about it.
Kathy Hannun
If I could make my pitch to the Trump administration, what I would say would be, there is no HVAC system that is more aligned with what appear to be the Trump administration's goals as geothermal heating and cooling. Because all of our heat pumps are made in the United States. They're manufactured here. What other piece of HVAC equipment can you say that about?
David Roberts
Yeah, so maybe, like, tariffs won't hurt you. You specifically are not going to come in for a lot of pain from the tariffs.
Kathy Hannun
We hire local drillers and HVAC installers to install them, and then they're harvesting American energy from the ground.
David Roberts
Couldn't be more domestic.
Kathy Hannun
It's like the most domestic possible way of heating and cooling. As we talked about in this conversation, you make the grid way more efficient, so you're able to accommodate all that AI data center demand. And, you know, all of the constraints that are coming. Like this is actually such a cheap, efficient way to accommodate a more efficient and resilient grid. But yes, to answer your question, it would be much better for us if the geothermal tax credits were preserved.
David Roberts
All the clean energy tax credits were going to be, or maybe are still going to be, merged into this sort of tech-neutral tax credit. Is there right now a specifically geothermal tax credit that you're making use of?
Kathy Hannun
It's not specific to geothermal, but there are two different primary tax credits that the industry benefits from. There's 48A, which is a commercial tax credit. It's the same one that's used for batteries and other types of geothermal and solar. And then there's 25D, which is a residential tax credit. So that one goes to the homeowner. And I would say that it will be much better for the industry if the tax credits remain because, as you said, it's like we are at the threshold. And if they do go away because of that split incentive issue I told you about, where the builder does not today benefit from the federal tax credit as it goes to the homeowner.
This is true for a single family. In the case of a multi-family owner that retains ownership of the building for five years, they would actually benefit from the tax credit today. So, it would really affect that use case. But in the case you're seeing, like with the Lennar project, for example, it's the homeowner that gets the tax credit. And so, if that tax credit goes away, that part of our business should be resilient because, you know, Lennar doesn't really make their decision based on that tax credit anyway. But I would say, while I think Dandelion will weather that storm, should it happen, of course, it will be so much better for the industry if the tax credits remain in place.
David Roberts
Yeah, yeah. And supposedly, Chris Wright, our new DOE Secretary, loves geothermal. That's what they say. That's what they say about him. Who knows how much he really knows about it or if he's familiar with all the varieties.
Kathy Hannun
Well, I certainly appreciate that about him.
David Roberts
All right, so wrapping up, let's talk a little bit about your plans or your sort of vision for the future. Because one of the questions I get a lot about this whenever I bring up this subject is, it sort of seems like a nice thing where it works for all the reasons we've discussed. But if it's going to be meaningful on a climate level, you need scale. You know what I mean? It needs to be going beyond thousands a year to tens of thousands, 50,000, 100,000 a year. What is the pathway to that scale? Maybe let's just start proximately, like right now you're still, as I understand it, available in the Northeast, a set of Northeast states.
Like let's start with where are you currently available and where do you plan to sort of expand next?
Kathy Hannun
Dandelion serves home builders and multifamily developers anywhere in the United States. But, we do tend to see our greatest uptake is in the Northeast, the Mid-Atlantic, and Colorado, though we do have projects outside of those places.
David Roberts
So, like, if I up here in Seattle got a Dandelion system, would it be a Dandelion approved contractor installing a Dandelion manufactured heat pump in my home, yes, that's how it would work?
Kathy Hannun
I should clarify that while we serve home builders everywhere, we only go direct to homeowners in New York and Massachusetts today. So, as a Seattle homeowner, unfortunately, today we could not help you.
David Roberts
So, if I was a Seattle developer, a builder of subdivisions, I could get your product. But for individual existing homeowners, it's just New York and Massachusetts?
Kathy Hannun
And a little bit of Connecticut. Yes, that's right.
David Roberts
Are you sort of like putting that side of the expansion on hold a little bit while you push on the developer side? Is that your main focus right now?
Kathy Hannun
That is what is happening. We're trying to really focus on pushing the developer side of the business just because it's so promising and just we have enough projects going on now that it really is taking our team's focus just to, we want to fulfill those projects with a very high level of excellence, of course, and we're growing as quickly as we can to meet the demand. So while that's going on, we're continuing to serve our traditional New York, Connecticut, Massachusetts homeowners, but not planning to expand our direct to consumer offering too much at this moment, but we do want to do it in the future.
David Roberts
So, then back to the previous question, do you see a path to meaningful scale here? It's such that it could make a difference in the macro numbers.
Kathy Hannun
Yeah, and of course they do, because if I didn't, then I wouldn't be doing this. But let me tell you why. I guess, one thing I would just point out is that again, using the Lennar example, just because it's recent, Lennar is a very pragmatic home builder and they want the best product at the best cost for their homeowner. And they decided to go with geo in Colorado. Now, the air source companies that we were competing with for that business are multinational, huge scale, probably making like a million products a year.
We're the tiny, subscale geothermal industry, thrilled for the chance to make 1,500 of these in two years. And yet, we won the deal. You know, we were able to make a better value proposition to a very discerning customer. Part of the way we were able to do that is by partnering with the utility, Xcel Energy, and having them recognize the value of geo to them. And I think that model can be copied. You know, I think, as to our earlier conversation, as utilities start to translate the benefits over time, of geo into incentives that can be used to nudge these transactions towards geo.
I think the fact that we are competitive today at our scale with other HVAC types that are so scaled just suggests there's so much potential for us to become much more competitive over time. And I would say as a whole, Dandelion, as a company, it's like a two-part project. Part one, make the geothermal systems cost less. You know, to our conversation: Is this the right antifreeze to be using all the way to like how do we install these ground loops more cost-effectively? Can we get more heat out of less loop?
Can we make these products manufactured in such a way that they're less expensive? You know, like there's a million projects there. And then, separately, part two is, can we start to internalize these positive externalities so that the market values geo correctly? And those are the two efforts and what they come together to do is just to make geo the most economically attractive option for customers, which it is already in several markets in the US, but we just need to make that the case in more. And importantly, we need people to realize that that's the case. Because even though geo is less expensive than anything else right now in many parts of the Northeast, in Colorado, and in the Mid-Atlantic, I think very few people actually know that.
So, we have to make that the case in more markets, spread the word. But then, I don't see why it won't become the mainstream option. Because it is the best product. So, if it's also the less expensive.
David Roberts
When your eyes get wide and you get dreamy, like do you imagine this becoming the default for all new home builders? Or do you think it's going to be regional even once it's scaled up? Do you know what I mean? Or could it be universal?
Kathy Hannun
In Sweden, it's 70% of new homes, right? So, in Sweden, it is the default, which I think is an interesting proof point. Right? I do think it will be regional because the relative benefits of geo are regionally different. Like, you're going to see it do much more good compared to air source in, like, Minnesota than in, I don't know, San Francisco. So, I do think it will be somewhat regional.
David Roberts
But, let's just say, for those regions, for those super cold regions, an electric heating and cooling option that does not break the grid is a really key piece of decarbonization. Like, it's not necessarily huge, but it's very important. You can't work your way around it.
Kathy Hannun
It will be necessary. Like, I don't think there's a solution right now to electrifying cold places with air source and how exactly that will work in practice. And I think this will be part of the solution. And then I think we should start with new homes. I know it's not the full problem, like you and I totally agree on that, but the geothermal industry needs to achieve greater scale because with any HVAC, it's like, with scale, that's the main lever for cost reduction.
So, we need to achieve scale. This is the easiest way to do it. And then, we use that scale to tackle the harder buildings to retrofit.
David Roberts
Yeah, that makes sense. Like, retrofit is such a fussy — so fussy, so bespoke. So, it's difficult for a million reasons, but that's the main one. Well, this has been fascinating, Kathy. So much fun. Do you have other builders on the line?
Kathy Hannun
We do. We have other customers, actually. We have quite a few projects going on right now. Not all of our builders want to be named publicly, but we do have other top 10 home builders that are committed to doing this. So, I think in not too far from now, we'll be able to talk more about the momentum we're seeing. And again, they're doing it because it's cost-effective and it's just a better product for their homeowners.
David Roberts
All right, awesome. Well, thank you so much, Kathy. I really appreciate this. Have a great weekend.
Kathy Hannun
I really enjoyed that. Thank you.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
