WASHINGTON — As lawmakers debate budget cuts and tax reform in Washington, the Geothermal Exchange Organization (GEO) has formally asked the U.S. House of Representatives Ways and Means Committee to recommend extending federal tax credits for residential and commercial geothermal heat pump (GHP) installations through the year 2020.
In comments to the committee, GEO President and CEO Doug Dougherty made the case for continued federal interest in the health of the GHP industry.
“Buildings are the largest single sector of total U.S. energy consumption. GHPs can efficiently and significantly reduce the heating and cooling loads of buildings, with positive benefits for our environment and economy,” Dougherty said.
“Yet even though GHPs could achieve vast energy, economic and environmental benefits across America if installed for all suitable buildings, the technology is still relatively nascent and has been slow to catch a foothold in the broader HVAC market. At current rates of installation (<100,000 average 3-ton capacity residential units per year), GHPs represent less than 2 percent of the total HVAC marketplace. Reason? Higher ‘first cost’ incurred by drilling or excavation to place its ground-source heat exchange loop system near the building(s) which a GHP system serves,” Dougherty added.
The federal tax credits for residential and commercial geothermal heat pump (GHP) installations are set to expire on December 31, 2016. Dougherty suggested that with the life-cycle energy cost savings, the tax provisions make GHP systems more attractive to both residential and commercial HVAC consumers. Since inception, the federal tax credits and commercial bonus depreciation for GHP installations have effectively helped reduce the consumer shock of higher first cost for system installations.
After listing the many consumer, renewable energy, efficiency and environmental benefits that GHPs offer the nation, Dougherty spoke to the success of the federal tax credits.
“Even with all its potential benefits to the country, the nascent GHP industry claims less than 2 percent of the HVAC marketplace in the United States. Though approximately two million GHP systems have been installed—and Energy Star-endorsed GHP equipment efficiencies are better than ever—many competitive barriers remain for the industry,” Dougherty noted.
Dougherty continued, “During the recession, the federal tax credits for GHP systems helped prevent a crash in GHP installations. Though more recent GHP sales have declined, the industry believes this can be attributed to still lagging home construction and sales, as well as continued lack of consumer awareness. As the housing economy improves, the tax credits will reduce first cost and allow GHPs to make significant contributions to efficient heating and cooling in new and retrofit projects of all sizes.”
Dougherty suggested that with improving sales and installations will come greater recognition of GHPs, and an expanding HVAC market share, resulting in a positive impact of the federal tax credit program.
“Even so, it will take time for the geothermal heat pump industry to increase its market share from 2 percent to 20 percent or higher for the industry to move beyond its need for tax credit support. In the interim, Congress can help the GHP industry achieve greater market share by extending IRS Code sections 25D and 48(a) to the end of 2020,” Dougherty concluded.