WaterFurnace International

What lies beneath

The race is on to find alternative energy sources that are economical and green. WaterFurnace International vice president Bob Brown explains to Andrew Pelis how one very natural source is fueling the company’s growth.


Any way you look at it, the current climate, both economically and ecologically speaking, has put extra pressure on every household and business. Soaring energy bills and the need to be environmentally aware have changed the approach each of us takes to our everyday lifestyle.

Yet there is an alternative that lies beneath our feet, costs nothing and is renewable. It’s a source that was first utilized as long ago as 1945 but only now is beginning to realize its potential.

Geothermal heating and cooling is extremely energy-efficient and generally provides the lowest utility bills of any residential system (saving typically between 40 and 70 percent on utility bills) by tapping into the renewable energy stored under the ground. More than a half million homes currently benefit from geothermal systems because of its growing popularity, driven by escalating energy prices and home and business owners looking to reduce their carbon footprints.

WaterFurnace International first began to harness geothermal technology in 1983; it’s fifth-ever employee, Bob Brown, is today vice president of engineering and takes up the story. “Back then we were only involved in distribution and some accessories manufacturing, and it was a whole new technology that had really come together at the end of the 1970s, thanks to the development of polyethylene pipe for the gas distribution industry, which could create a continuous piece of pipe that was reliable and made geothermal heating and cooling viable. In 1983 WaterFurnace focused upon bundling these components into a turnkey geothermal system for the dealer to install, which resulted in a high-performance and high-quality installation. Several innovations were developed by WaterFurnace at the time that are staples of a typical system today.”

The watershed for WaterFurnace came in 1985 when the company acquired a water-source heat pump product line that enabled it to become a manufacturer of the geothermal heat pump itself. The first WaterFurnace manufactured heat pump product, the WS Series, was introduced five months after the deal was signed.

Today the company, headquartered in Fort Wayne, Indiana, specializes in the supply of geothermal heating and cooling systems for the residential and commercial markets. As a part of WaterFurnace Renewable Energy, Inc., it has traded on the Toronto Stock Exchange since 1993 and enjoyed significant growth since then, hitting annual sales of $100 million for the first time in 2007.

The resulting financial benefits of going public allowed the company to launch a series of successful products, including its Synergy3 system in 1999, the first geothermal unit designed for forced-air heating and cooling with hot water for radiant floors, while another first came with the 2001 launch of the Premier E-series, the industry’s first geothermal unit featuring dual-capacity compressors and R-410A refrigerant.

Geothermal systems work by tapping into the consistent temperature of the earth. “The heart of the system is a heat pump that moves heat ‘uphill’,” states Brown. “It uses the ground as a temperate source of energy to move heat indoors during the winter or extract heat from the home and move it into the earth loop in the summer.”

During the heating cycle, a geothermal system regularly circulates water through a ground loop to extract heat. The unit then transfers this heat from the loop to the home in the form of forced air (Brown’s “uphill” definition, moving heat from a diffuse 50 degrees Fahrenheit ground to a higher lever, heating air to 95–105°F) distributed through a conventional duct system, hot water for radiant floors, or domestic hot water heating. In the cooling mode, a geothermal system reverses the process to extract heat from the home and return it back to the ground. Once the system extracts the heat from the air, it redistributes it throughout the home as cool, conditioned air.

“Once the initial installation has taken place—which can cost more than traditional technologies, as it involves excavation work—the operating costs can be much lower for the customer. The good thing is the longevity of the pipes installed underground; we have warranties that last 55 years on our loop piping systems but expect loops to last a lot longer,” Brown continues.

Today the company has two main areas of business: residential and commercial. Brown says that the technology can vary greatly from product to product, but that there are basic principles. “Our best-selling residential products are water-to-air heat pumps, but we also build water-to-water heat pumps, which are more common in northern climates where they operate radiant floor distribution of heat and the pipes are buried in concrete.”

The water-to-water systems, he adds, are commonly used in commercial buildings, and the technology can be used in everything from ice skating rinks to space conditioning to conditioning tilapia fish tanks, and it was even utilized at the Beijing Olympics. “We can make products to a variety of sizes from three-quarter ton to 25 tons for water-to-air products, and from one ton to 50 tons for water-to-water,” Brown states.

“At the moment we’re building more residential pumps, and the split is probably around 70 percent to 30 percent,” he continues. “There was a big upturn in the market in 2007. The commercial market was hit harder by the economic downturn, but we’ve seen this offset by continued increases in the residential business since then.”

As WaterFurnace began to grow as an operation, green issues emerged as an important political topic in North America. Today, US homeowners who install geothermal heating and cooling systems are eligible for increased tax incentives under the American Recovery and Reinvestment Bill of 2009.

Previous legislation had offered a one-time tax credit of 30 percent of the total investment for residential ground loop or ground water geothermal heat pump installations, with a maximum credit of $2,000 for a single residence. However, in recognition of the benefits of geothermal technology in a struggling economy, the new bill removes the $2,000 cap and offers homeowners the entire 30 percent tax credit without limit. Commercial building systems installed after October 3, 2008, are also eligible for a credit of 10 percent of the total investment.

The Fort Wayne manufacturing site is not set up for mass production, as Brown explains. “We’re proud that our product offers so many variations on a theme; there are potentially several million combinations, but that, of course, makes it difficult to design a manufacturing plant not focused upon building in mass quantity. We’re very lean, and our promise is that we can build and ship any residential product in three days. Our assembly line may have multiple products on it at any time, but our secret is our bar code scanning system, which identifies components on the line at several locations, and an MRP system that gives us a good handle on where we are.”

The center received a major overhaul at the end of the 1990s when a number of measurements were introduced that Brown says had greatly enhanced efficiency. Of course, this required buy-in from the company’s 295-strong non-union workforce, and ongoing training ensures that staff are not only conversant with kanban or fork truck safety but also understand the principles behind WaterFurnace’s technology and products.

The company stays true to its beliefs by aiming to make its operations as waste-free and environmentally friendly as possible. In addition to the pond loop located at the head office, another 41 of the company’s own geothermal units meet all heating and cooling requirements for the facility.

This commitment extends to the workforce, who are encouraged to install geothermal heating and cooling units in their own homes. Those same employees are fully committed to the company’s enterprising drive to “Cut Out Waste” (COW), through a series of quarterly meetings at which they are rewarded for any operable ideas that can reduce waste.

 Brown suggests that there is an element of seasonality to WaterFurnace’s business, with the fall a typically busy period. “We pride ourselves on the approach of our employees, who work 10-hour shifts from Monday to Thursday. Any Friday work is optionally scheduleddepending upon the product load and is considered overtime, and of course during our peak season people will work the extra day. The measure of how well this works is the number of long-serving, experienced and knowledgeable employees we have here. This also prevents the seasonal layoffs and hiring that many other plants experience, which can really affect a workforce and ultimately hurt the product quality.”

Figures indicate that there are now over a million geothermal (or ground-source) heat pumps in use in American homes, commercial and government buildings, with an additional 50,000 households installing this technology annually.

“This is an exciting time,” Brown comments. “We continue to invest in research and development, but the market has become much more competitive and innovative. That said, we’re very excited about our recently launched IntelliStart compressor starter, a single-phase soft starter that reduces by 67 percent the start-up current of a compressor motor. The immediate benefit from this reduced starting current is the reduction in voltage dips and resulting light flicker, but long-term it will mean more to the consumer.

“This product already meets European current draw measurements for compressor-start voltage surges,” he continues, “and those standards are coming to America. Sales are already ramping up since we launched last May, and you’ll see this become a popular item as we get closer to European ways of measuring power, in which the consumer is charged based upon the instantaneous current draw of large space-conditioning compressors.”

The success of the IntelliStart is in keeping with the continued growth of WaterFurnace, but that’s something that Brown feels needs a degree of managing. “We’ll have to be nimble over the next few years. Government involvement, industry innovation and energy prices all contribute to what is a more excited and consumer-visible market than ever, and we’ll have to be diligent with managing our growth. I’m confident that we will go from a small manufacturer to a medium-sized one pretty quickly, and it can be tough to manage those changes.”www.waterfurnace.com