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| WaterFurnace: Grounded Power |
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| Written by Eric Slack | ||
| Monday, 30 June 2008 19:00 | ||
 “It’s a small market, as the total number of geothermal systems sold is about 50,000 out of a heating and air conditioning market that is 12 million units per year,” said Bruce Ritchey, president and CEO.WaterFurnace manufactures, sells, and installs geothermal heating and cooling systems in the US, Canada, and overseas. The systems work by transferring heat to and from the earth. Even as outdoor temperatures change with the seasons, underground temperatures remain relatively constant four to six feet below the ground. The system consists of a heat pump, a liquid heat-exchange loop, and air-delivery ducts. The loop is buried underground and connected to the indoor unit. When it is cold, fluid in the loop transfers stored heat indoors, where it is compressed and warmed to the desired temperature. Conversely, when it is hot, the system pulls heat out into the ground. A small amount of electricity is used to operate the system’s fan, compressor, and pump. Gaining ground The company is experiencing a growth phase because of developments in the US energy market. Prior to 2005, WaterFurnace systems were sold almost exclusively in rural areas where natural gas wasn’t available and the cost of fuel oil, propane, and electricity was prohibitive. Since then, as the price of conventional energy has risen, geothermal systems got their chance. The available market has grown ten-fold in three years. Even with construction hit by the credit market, the geothermal portion of the market has risen, and WaterFurnace has doubled in size in less than four years. Now the challenge is to make people aware that the system is cost effective, reliable, and easy to install and maintain. That process doesn’t actually start with the end user—it starts with contractors. WaterFurnace typically enters a new area when heating and cooling contractors see a market for the technology. “Heating and cooling systems are sold by the contractors. They are the ones who make decisions about what goes into a building,” Ritchey said. “Consumers may have heard about these systems, but contractors need to believe in the technology.” That makes WaterFurnace’s primary focus exposure to the decisionmakers, helping them see geothermal systems as a smart economic choice for consumers and a profitable endeavor for them. It does this through sales and PR campaigns, as well as industry associations like the Geothermal Heat Pump Consortium and the International Ground Source Heat Pump Association. The company trains contractors in installation and maintenance and gives them software tools to illustrate to homeowners how the system works. It also does co-op advertising to create partnerships and stretch advertising dollars. It treats every new installation and new market as a publicity opportunity, putting up signs and contacting media outlets to make an installation a bit of a local news story on renewable energy. Standing out Currently, WaterFurnace’s manufacturing is done centrally in Fort Wayne. The company has 30 salespeople who service contractors. If the company can ship direct in two days, it deals directly with contractors. For areas beyond the two-day radius, independent distributors are responsible for developing the market. WaterFurnace is the dominant player in the single-family home market with a 40% share. The company looks at conventional heating and cooling as its competition, as those suppliers have 99.5% of the overall market. The commercial market is larger, and several other companies have a hand in the cookie jar, but 40% of WaterFurnace’s units go to the commercial market. The most common enterprises to look to geothermal technology are municipal entities, schools, and hospitals. What gives the company an edge in manufacturing is operating as a just-in-time assembler. Most other companies build components for their systems, but WaterFurnace prefers to design units with the best parts available in the market. Compressors, fan motors, and refrigerant coils are purchased from suppliers and delivered to its plant for assembly. Sheet metal and wiring are also outsourced pieces of a WaterFurnace system, and this just-in-time philosophy allowed the company to build close relationships with suppliers and have the fastest lead times in the industry. “We can ship 90% of our sales same day, and that is a competitive advantage. And our units are top of the line with the highest efficiencies available,” said Ritchey. “Of the top 30 most efficient water source heat pumps, 28 are WaterFurnace units because we focus on features, benefits, and high-end quality.” The secret is combining oversight of engineering, manufacturing, and IT under the same umbrella. Product development and all bills of material are closely linked with factory engineering, allowing the company’s computer system to put out a detailed bill of materials to its suppliers for each unit it is building. As the market grows, WaterFurnace is focused on staff retention and getting more installers on board. Students who work with the company while in college have a good chance at a position when they near graduation, and industry associations let the company stay in touch with experienced professionals who may someday look for a career move. And though Ritchey knows sales are out there and the factory can handle increased volume, the hardest part is finding partners around the US to put the loops in the ground. Heating and cooling contractors can easily install the indoor equipment but aren’t necessarily interested in working in the dirt. “We have a captive loop company working with us, and we are encouraging other water well drillers and horizontal boring machine operators to get into the business,” Ritchey said. “We can help them get into this industry and keep them busy.” |