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With the passing of the Economic Stimulus Package on Feb. 13 and the subsequent signing of the bill into law on Feb. 17, the Obama administration created the American Recovery and Reinvestment Act of 2009 (ARRA).
The administration believes the $789 billion compromise package will create or save 3.5 million jobs over the next two years. The White House expects to achieve this by providing tax breaks and incentives for the private sector and funding and grant money to encourage spending in the public sector with a focus on the country’s infrastructure. The HVACR industry stands to benefit from both of these tactics. Bolstering equipment sales via improved tax credits and increasing demand in highly-efficient building requirements places a green equipment demand to be supplied and a green job market to be filled by the industry.
Overall, the White House’s plan makes a $150 billion investment in the nation’s infrastructure the largest investment since the interstate highway system in the 1950s. Education, the arts, and many other sectors made the list of areas receiving funds, but much was invested in increasing energy efficiency, reducing federal government energy use, increasing low-income weatherization funding, and providing energy-efficiency grants to states.
“This bill provides enhanced incentives for consumers to upgrade existing heating and cooling equipment and it provides funding for the federal government, states, and cities to improve energy efficiency in buildings and schools,” said Stephen Yurek, president of the Air-Conditioning, Heating, and Refrigeration Institute (AHRI). “We are thrilled that there appears to be a paradigm shift in how policymakers view our industry. They now rightly see us as the solution providers we are and they have provided the market stimulus to help us provide those energy-saving solutions for the good of the nation.”
CONSUMER INCENTIVESMany of the homeowner incentives provided by the ARRA focus on making improvements to the overall energy efficiency of their homes. “Surveys show that homeowners want to install higher-efficiency appliances but the higher-investment costs have always been a barrier,” said Paul T. Stalknecht, Air Conditioning Contractors of America’s (ACCA’s) president and CEO. “These tax credits help shorten the payback period and allow homeowners to benefit from lower utility costs and increased comfort, all while consuming fewer fossil fuels.”
Previously limited to $300 for central air conditioners and heat pumps and $150 for furnaces and boilers, according to ACCA, the new law allows homeowners to claim 30 percent of the costs up to $1,500 for the installation of higher-efficiency furnaces, boilers, air source heat pumps, central air conditioners, and hot water heaters in the 2009 and 2010 tax years. Also removed was the $2,000 cap on tax credits for alternative sources of energy and heating and cooling in the residential sector. Wind, geothermal property, and residential solar thermal property now qualifies for a 30 percent tax credit on the complete install price of the system.
The type of qualifying equipment for energy tax credits changed as well. There was an increase in minimum SEER levels for central air conditioners, a decrease in minimum AFUE levels for boilers, and changes to heat pump standards.
“The efficiency levels for spilt air conditioners and heat pumps have been modified to reflect the highest tier of the 2009 CEE [Consortium for Energy Efficiency] specification,” said AHRI. “Therefore, only 95 percent AFUE gas furnaces; 90 percent AFUE oil furnaces; 16 SEER/13 EER and above central air conditioners; 15 SEER/12.5 EER/8.5 HSPF split heat pumps; 0.82 energy factor/90 thermal efficiency gas, propane, or oil water heaters; and 90 percent AFUE gas, propane, or oil-fired boilers would qualify.”
According to AHRI, these provisions replace the current tax incentives for these products.
Ann Kahn, president of Kahn Mechanical Contractors, Dallas, and a member of The NEWS’ Contractor Panel, was encouraged by the policy stances Obama is taking and considered them to be good for the industry. “Tax incentives to consumers, both homeowners and businesses, for purchases of new or replacement energy-efficient HVAC equipment, appliances, and other energy-saving devices can’t be anything but good for all contractors,” she said. “All of us should see an increase in business. How we price and sell that business will determine the impact on each of us.”
THE BUILT ENVIRONMENTThe focus of spending on the nation’s infrastructure was not hidden in the ARRA. In fact, it was witnessed again and again across the many sectors highlighted for assistance. Based on infusing money into the public sector, the theory of the law is that by creating funding for the already necessary structural improvements, it will, in effect, also create large amounts of jobs in the management and implementation of proposed building, construction, and retrofit projects.
Due to the focus of this administration and the nation on energy efficiency and the reduction of resources used, many of the monies provided come with green stipulations.
According to the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE), “For states to receive additional funding from the $16.8 billion allotted to the Department of Energy [DOE], Office of Energy Efficiency and Renewable Energy, governors would be required to work toward implementation of a building energy code at least as stringent as Standard 90.1-2007 and to develop a plan for achieving 90 percent compliance with the code, including provisions for training and enforcement programs.”
“This new federal energy-efficiency infrastructure investment and related tax incentives bode well for our industry, our environment, and our economy,” said John Ilten, president of the Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA).
Beyond Standard 90.1-2007, ASHRAE and AHRI reported multiple other provisions made for the public infrastructure that will affect the HVACR industry, including:
• $9.75 billion to states for use, if they so choose, to modernize and renovate schools’ heating and cooling systems;
• $3.6 billion for Department of Defense energy-efficiency projects and facility modernization;
• $4.5 billion to the General Services Administration for conversion of federal buildings to high-performance green buildings;
• $4 billion to the Department of Housing and Urban Development for energy retrofits for public housing, plus an additional $510 million to do the same for Native American housing programs;
• $21.4 billion to the DOE, Energy and Renewable Energy, for research, weatherization assistance, grants, and other programs;
• $750 million to the Department of Labor for job training, with significant focus on emerging industry sectors including energy efficiency and renewable energy;
• Federal agencies are receiving considerable funds for retrofitting and upgrading existing facilities to meet federal energy and water use requirements and help alleviate any maintenance backlogs.
“Obama’s position should increase business as we are on the front line, directly serving the consumers that will have to buy into the green movement and the environment,” said Ratib Baker, CMS, EMR Service, Baltimore. “This should increase our business, but will require changes in the way we think about the equipment and sales techniques.”
As the over 500-page document is studied further, new funding and business opportunities will be discovered by HVACR industry associations and contractors working to enhance their services and benefit from this new law.
FEEDBACK REQUESTED: Do you have an idea as to how to leverage the American Recovery and Reinvestment Act in your business? The NEWS would like to hear about it. Please send your thoughts and ideas to News & Legislation Editor Angela D. Harris at firstname.lastname@example.org.
Publication date: 03/16/2009