Geothermal Industry Hopeful Reed Bill Revives Expired Tax Credits
Recently introduced legislation, HR 1090, would reinstate lapsed geothermal tax credits
On Dec. 31, 2016, the 30 percent residential and 10 percent commercial federal tax credits for geothermal heat pumps expired. Similar credits for residential and commercial solar installations were extended, but geothermal wasn’t afforded the same opportunity.
Now, those geothermal credits are being reintroduced in the form of the Reed Bill, legislation introduced by Tom Reed, R-N.Y., Mike Thompson, D-Calif., and 18 additional cosponsors (12 Republicans and six Democrats). The bill will attempt to reinstitute and extend the credits through 2021 for geothermal heat pumps, fuel cells, microturbines, small wind, and combined heat and power equipment.
WHERE IT STANDS
Barton C. James, senior vice president of government relations, ACCA, said there is growing bipartisan support for HR 1090.
“Just a few weeks since its introduction, we’ve got some real wind in our sails with support for the legislation,” James said. “We’ve seen a real upswing in cosponsors over the last few weeks thanks to the hard work of Congressman Reed and a handful of groups like the National Rural Electric Cooperative Association, which has Paul Gutierrez leading the charge looking for geothermal, and folks like Bree Raum with the American Gas Association, who are interested in other parts of the bill like combined heat and power systems and fuel cells.”
Doug Dougherty, president and CEO, Geothermal Exchange Organization (GEO), said the bill, which was introduced in the last congressional session, had four cosponsors. In a very short time, it has accrued more significant bipartisan support.
“Having someone on The Committee on Ways and Means, which is the chief tax-writing committee of the U.S. House of Representatives, as well as the overwhelming support that’s been pledged for this shows that Congress is aware that there was a mistake made in December of 2015 when wind and solar were extended for five years. This issue is not going away.”
Neglecting to include language to extend tax credit provisions for geothermal heat pumps and other eligible renewable technologies has not stopped Dougherty and others from continuing to push for geothermal to get a seat at the table in Washington.
“Our goal is for this bill to gain 100 cosponsors — more Republicans than Democrats,” said Dougherty. “The benefits of that are twofold: It keeps the issue alive and shows we are not going away.
“Our coalition, which includes a number of organizations, is still working on this,” Dougherty continued. “Also, we want to make sure we have a place at the tax reform table. When renewable energy is going to be discussed in terms of tax reform, we want to ensure we are not a technology that is left out or forgotten. We have been down that road before where we were flat left out. Back when solar and wind got their first tax subsidies, geothermal heat pumps were not included. We don’t ever want to be in that position again. By having this bill and being visible, we are reminding Congress that geothermal heat pumps are a viable, clean energy technology.”
Roshan Revankar, acting executive director, International Ground Source Heat Pump Association (IGSHPA), said if the bill passes, it will definitely simplify contractors’ geothermal heat pump sales pitches.
Regardless of the bill’s fate, Revankar is optimistic for geothermal’s future.
“If HR 1090 does not pass, it will open up opportunities for financing agencies and utilities to own and lease ground loops,” said Revankar. “Either way, well-trained and qualified installation companies will find a way to sustain their businesses.”
AN UPHILL BATTLE
While support is growing for the Reed Bill, Jon Melchi, vice president government and external affairs, HARDI, believes it’s approval and implementation will still require an uphill battle.
“In the Reed Bill’s favor is the fact that Congressmen Reed and Thompson are members of the Ways and Means Committee. Any tax legislation introduced by members of that committee certainly has a leg up on legislation introduced by others. Having said that, I would classify it right now as a longshot.
“We know there will be an effort on tax reform, but any iteration of major tax reform that comes from the Republicans includes eliminating certain tax credits and deductions in order to lower rates,” Melchi continued. “It’s challenging to see how they would add an exception for geothermal and other renewables at the same time they are looking to make cuts elsewhere. In reality, even if they do full-blown tax reform, I think the solar credit that was the free-rider in 2015 is probably at risk.”
James also understands the tough fight ahead for the legislation, saying that while there is significant momentum in the House of Representatives, the Senate will be a different hurdle entirely.
“Our success will be tied to the appetite of Congress, especially the Senate, to advance tax reform,” James said. “We need to gather a loud enough drum beat from all the supporters of the technologies that were left out when solar secured the extension we are so desperately trying to get. We have to be so loud that we can’t be ignored.”
The fact that Congress essentially picked winners and losers in the renewable energy arena does not sit well with Dougherty, who believes the optics of the situation can also be detrimental.
“It appears as if Congress supports the renewable energy of wind and solar and nothing else,” he said. “And that is just a bad message to be sending to the investment community. We understand there will be tax reform sooner rather than later. Energy policy is going to be part of that discussion. We want the playing field to be level, and there is an outside chance that there is enough acceptance of the current inequity in the application of the tax code, both commercial and residential, especially when it comes to solar. We are not asking for any kind of bump or increase, but just the same tax credit that was extended for wind and solar at the end of 2015.”
WHAT HAPPENS NEXT?
With efforts to reinstate these credits being made from a number of organizations and industry advocates, the question naturally shifts to what the next steps will be in the process.
“I think the strategy moving forward will be to continue to pound the pavement and drum up support as much as possible,” Melchi said. “We must aim to get a hearing on everything, if possible, to stress the benefits of the bill. The odds of this passing as stand-alone legislation are probably less than 3 percent. It will have to be an amendment or part of a much larger package that is scheduled to come out before the August recess.”
James believes one thing that could help is to get those who support geothermal to provide demonstrations of the technology to members of Congress and their staff in and around Washington, D.C., as well as back in the states/districts during breaks.
“As a former congressional staffer and political appointee in the Bush administration, I speak from my personal experience that it is priceless when you can see the technology in front of you,” he said.
Dougherty summed up the situation moving forward as such: “We are still making the pitch and pleading our own case, and we are not going away. Hopefully, at the end of the day, we right the wrong, and we get some form of parity. If not, then, at the very least, we want to ensure we have a seat at the table when we talk future tax reform.”
Publication date: 4/3/2017