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A clean-energy Texas suburb goes national

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BY SAUL ELBEIN – 03/06/23 6:00 AM ET

AUSTIN, Texas — Real estate developer Douglas Gilliland believes the future of housing lies underground.

Amid the unseasonal heat of late February — as neighborhoods across the state hummed with the sound of condenser units struggling to cool homes — the Whisper Valley community Gilliland is developing was all but silent.

That’s because the houses he is building in the new master-planned community, which rises from the Texas prairie half an hour northeast of Austin, don’t feature air conditioners. 

Instead, they connect to what he calls a “geo-grid” — a network of purpose-built geothermal energy that he installed on-site long before builders showed up to put in houses.

Inside each house, water pumps mostly powered by solar energy shunt heat from the house into the cool earth more than 300 feet below — a form of clean energy known as geothermal heat exchange.

As well as reducing carbon emissions, this technology also slashes energy costs for the development’s 400-some residents, giving realtors and homebuilders an attractive additional pitch to buyers in an era of rising energy prices.

Now backed by the Democrats’ new climate stimulus tax package — which knocks nearly a third off the cost of all renewable energy — Gilliland is taking the Whisper Valley model national, with projects in Florida, New England and across Texas.

Real estate has been slow to embrace sustainable building methods — in part due to a fundamental conservatism around adopting new technologies; during the long era of cheap fossil fuel energy, customers weren’t demanding them.

Now that has begun to change, driven by a diverse mix of factors. There is the rising public enthusiasm around renewables and concern for climate change; the growing need of real estate investors to prove their sustainable bona fides; the rising unpredictability in energy markets.

Then there are the past years’ repeated news-making disasters — in Texas and elsewhere — in which overstressed urban grids have failed amid an onslaught of extreme weather.

But most important of all, there is a new flood of federal support: a flat 30 percent tax credit for potentially unlimited quantities of new renewable energy: geothermal, wind, solar, tidal. 

Before those tax incentives passed last September with only Democratic support, all renewable energy businesses lived in a continual fog of uncertainty: never sure whether Congress would restore tax credits the next year.  

When pitching to developers or investors, “you dread getting to that part, because it’s not very confidence-building to say, ‘Well, the [geothermal] incentive is 10 percent right now.’  They say, ‘Well what do you mean, right now?’” said Greg Wolfson, chief technology officer of EcoSmart Solutions, told The Hill.

EcoSmart is a company that Taurus Investment Holdings — a Massachusetts-based consortium for whom Gilliland is the managing director — incubated alongside Whisper Valley.

Now Wolfson is in charge of bringing the technology produced for Whisper Valley to developments nationwide; since September, EcoSmart has been able to approach potential business partners with the ironclad certainty of a decadelong, easy subsidy. 

The change has been subtle. Deals long shelved have been brought back down for consideration. Numbers that didn’t quite pencil now do. There hasn’t been a tidal wave, but a slow but definite rise in new interest; a new thaw in old deals. Wolfson had been planning to reduce his workforce; now he’s increasing it.

Gilliland plans to be on the forefront of this broader movement toward incorporating renewable energy into real estate.

Many of the products and practices now being implemented across the industry — from geothermal heat pumps and photovoltaic panels to solar-powered water heaters and modular homes — have existed for decades. But architects had long struggled to get anyone interested, John Rosshirt, former director of the National Association of Realtors, told The Hill.

One committee he served on at the National Association of Realtors — ostensibly about ‘Private Property Rights and the Environment — would have been better billed as “the anti-Environment” committee, he said.

Now the association has a director of sustainability, and — after the COVID-era, when houses were so scarce that energy concerns were “secondary to just having a roof over your head” — interest among buyers is shifting from bottom-line price to the day-to-day costs of owning that house.

That opens the door to a sales pitch that combines cost savings, energy efficiency and a sense of doing good for the planet. But despite the growing mainstreaming of broadly sustainable concepts, realtors still often pointedly avoid language around climate, renewability or being “green.” Those concepts “have certain connotations that are not well accepted in certain communities,” Rosshirt said. 

Instead, describing a home as “high performance” — which conveys its resilience to the ever-harsher environment — now attracts people from across the political and income spectrum, Rosshirt said.

Some of that new interest in energy savings has been funneled into solar energy — which, like geothermal, now benefits from a flat 30 percent federal tax incentive. 

But going has been slow, Charles Tassell, chief operating officer of the National Real Estate Investors Association, told The Hill. 

“Everybody has been trying to figure out how to make solar work,” but for investors’ purposes, “it’s just not quite there yet,” he said. For many homeowners, the high cost of solar panels — and the experienced workers who can install them — doesn’t make sense, particularly when compared to other energy-saving measures.

But Gilliland argued — and other real estate experts concurred — that all those numbers look different when you can do an entire neighborhood from scratch.

True, he concedes, turning America’s existing 20th century housing stock energy efficient can be expensive, even if it pays for itself in the long run. Making old houses energy efficient requires retrofits of insulation and appliances, not to mention costly new interventions like installing solar panels or drilling new boreholes for private geothermal.

By contrast, Gilliland argues, planned communities like Whisper Valley offer developers a clean slate on which they can build energy-efficient neighborhoods from the underground up.

“If you did one house at a time, you’d be spending double what we’re spending on each house,”  he said. 

Instead, by starting on a vacant site — occupied only by the rolling hills and live oak savannah of central Texas — his team was able to go in on the front end and drill a network of hundreds of geothermal wells that allowed them to move heat through the development.

In ecological terms, this approach has definite downsides. While Whisper Valley preserves 600 acres of woodlands and creekways — both as amenities and for flood control — the development is still being cut from forest that had been growing back over the abandoned cattle pastures from which its houses now rise.

For roughly this reason, the prevailing wisdom in climate and sustainability circles has been to encourage more growth in cities, packing more people closer to more services to allow the landscape to recover and, as it does, pull down carbon.

But land in the city is expensive, and the prospect of “scraping” hundreds of built up acres in central Austin — even to allow for a purpose-built energy-efficient neighborhood to rise in their places — currently belongs to the realm of science fiction. (EcoSmart also works with purpose-built apartment buildings — a better match for a denser city.)

“For the energy costs, the only place you could do something like [Whisper Valley] is out on raw land,” Rosshirt said. “But there’s pros and every subdivision. You lost a lot of habitat for foxes and whatever was there.”

That loss, however, comes standard with a new subdivision; the energy savings don’t. Each home in Whisper Valley boasts about 4 kilowatts of solar panels — substantially less than the 10 kilowatts recommended by the solar industry, Wolfson said.

This amount, if managed wisely and paired with a home battery like a Tesla Powerwall, can power a house nearly around the clock.

This kind of practical benefit — coupled with the certainty of a fixed and reduced energy cost amid an era of rising prices for gas heating — has helped change the pitch, Wolfson said.

“It used to be we would make our appeal to the leading edge kind of sustainable oriented or someone who wanted to differentiate their development,” he said. “But there’s a new, strong audience for us to reach out to — and that’s real estate investors.”

To those investors, he said, EcoSmart — by adapting the technology used at Whisper Valley to local subterranean conditions, from underground aquifers in Florida to nearby lakes in East Texas — can offer energy-efficient properties that can appeal to a mass audience.

“This not a luxury development. This is a mainstream kind of production,” Wolfson said of the homes, which range in price “from the high 300 thousands to the low 600 thousands.”

To Gilliland, that lower price point is key to mass acceptance. Concern for the environment isn’t a luxury concern, he argues — it’s a something that people want, at least on the margins, at every price point.

“What I found was that if people can be friendly to the earth, and afford it, they love it. They love the social consciousness they get from saying, I’m on board with this movement,” he said.

Updated 1:49 p.m. March 6