Contractor Studies Tax Code, Rebates

March 29, 2010
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Contractors like WaterFurnace International dealer J.K. Mechanical no longer carry as much standard-efficiency equipment. Sales manager Bill Landis said, “Instead, we’re stocking more high-efficiency equipment as well as alternative HVAC systems, like geothermal.”


WILLOW STREET, Pa. - When Bill Landis joined J.K. Mechanical Inc. 22 years ago, he joined a company that prided itself on its ability to deliver quality products and services to its customers.

Today Landis, J.K. Mechanical sales manager, said the contractor’s role has expanded. “We continue to provide quality installations and service,” he said, “but now we’re assuming the expanded role of energy-efficiency expert and also helping customers take advantage of tax credit and rebate programs. We need to be more knowledgeable on a variety of subjects and be able to share that knowledge with our customers.”

J.K. Mechanical isn’t alone. As energy prices and utility bills increase, more homeowners are turning to HVAC contractors for help. “They want us to recommend energy-efficient solutions that will also meet the requirements for tax credits and rebates,” said Landis.

According to Landis, as recently as 10 years ago, a high-efficiency furnace had an AFUE of 90 percent, and a high-efficiency air conditioner had a SEER of 12. He estimated that just 10 percent of J.K. Mechanical’s equipment sales met those efficiency standards.

“Energy was cheaper 10 years ago,” Landis said. “So, there wasn’t a big demand for high-efficiency equipment, or many incentives to make the investment in more efficient furnaces and air conditioners worthwhile. People had the mindset that electricity and gas were cheap and their utility bills were low.”

In 2010, efficiency standards and energy prices are both on the rise. To earn a federal tax credit, a minimum AFUE of 90 is required for oil furnaces and 95 for natural gas and propane furnaces, while air conditioners must have a SEER of 16 or higher.

“These higher standards are suddenly more important to homeowners as they watch their utility bills increase,” noted Landis. “Because of this, I’d estimate that today at least 75 percent of our equipment sales are in the high-efficiency range.”

As a result, the product mix for contractors like J.K. Mechanical is changing as the energy landscape changes. “We no longer carry as much standard efficiency equipment,” Landis said. “Instead, we’re stocking more high-efficiency equipment as well as alternative HVAC systems, like geothermal. In fact, if I could offer one piece of advice to contractors, I’d suggest that they promote environmentally friendly or green systems as much as possible. That’s what’s in the news today, and that’s what people are looking for.”

GEOTHERMAL CREDITS

J.K. Mechanical, a dealer for WaterFurnace International Inc., began installing geothermal heating-cooling systems 26 years ago. “We’ve watched the sale of geothermal systems increase by about 8 to 10 percent a year for the past 10 years, thanks to increasing energy costs and federal tax credits,” said Landis.

Homeowners can apply for a federal tax credit of 30 percent of the total investment for residential ground loop or ground water geothermal heat pump installations placed in service through Dec. 31, 2016. This tax incentive is retroactive to Jan. 1, 2009.

“The tax credits and other rebate programs definitely make a geothermal system attractive to homeowners in both the new construction and replacement market,” said Landis. “But just as attractive are the energy savings associated with a geothermal system - as much as 70 percent on utility bills. And it provides a more even distribution of heating and cooling for a more comfortable and quiet environment.”

Landis also highlights the green advantages geothermal offers. It taps the free, renewable, unlimited supply of solar energy stored just a few feet below the earth’s surface and uses that energy to heat and cool both residential and commercial buildings. The system operates without using fossil fuel or emitting any carbon dioxide, carbon monoxide, or other greenhouse gases, dramatically reducing the homeowner’s carbon footprint.

“We’re finding people who invest in geothermal systems for the utility bill savings are proud of the fact that they’re also helping the environment,” said Landis.

THE CONTRACTOR'S MARKET

Geothermal installations for J.K. Mechanical are evenly divided between the new construction and replacement markets. About 65 percent of all HVAC systems the company installs, both conventional and alternative, are in the replacement or add-on market. The contractor notes a trend to replace older, less-efficient systems before they reach the end of their lifecycles.

“Homeowners see the economic advantages of a new, more efficient system and are looking to replace their old systems sooner than they once did,” said Landis. “They’re no longer waiting for systems to die. They’re being proactive and taking advantage of improved operating efficiencies and the tax incentives and rebates available to them today.”

And as consumers change their buying habits, they’re also more knowledgeable, especially when it comes to energy efficiency. According to Landis, they have a better idea of what they want in terms of efficiency. The Energy Star logo is especially important to them as they shop for new equipment.

“I think Energy Star has done a good job establishing its logo as the benchmark for efficiency,” said Landis. “Many people won’t even look at equipment that isn’t Energy Star rated.”

MANUFACTURER SUPPORT

The logo also helps contractors identify equipment that is eligible for tax credits and rebate programs. Keeping abreast of these programs is not always easy and requires contractors to do their homework. “Manufacturers can be a tremendous help to contractors,” said Landis. “WaterFurnace, for example, provides us with a list of all of their products that meet the federal tax credit requirements, and they offer their dealers and customers detailed information about the tax credit program.”

According to Landis, manufacturer support is also important when it comes to learning about new technologies. “Contractors depend on manufacturers to provide the appropriate training so that we can keep up with new technologies, and I would encourage contractors to take advantage of this training and the support manufacturers offer.”

Landis would be the first to admit that it isn’t always easy to keep pace with the changing contractor landscape, particularly where energy efficiency and tax credits are concerned. Efficiency standards increase, products improve, product mixes adjust to demand, and customer expectations for energy-efficient solutions increase.

“As contractors, we’re being asked to do more and know more than we did even 10 years ago - about energy costs, energy efficiency, new technologies, tax credits, and rebate programs,” he said. “But the equipment is there to meet changes in the energy landscape and satisfy customer expectations, and support exists if you’re willing to look for it and take advantage of what manufacturers have to offer.”

Publication date: 03/29/2010

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