Doug Dougherty has been president and CEO of the Geothermal Exchange Organization (GEO) since March of 2011. In that role, he became a major player in the lobbying effort to get the federal geothermal tax credits passed. The NEWS recently talked with Dougherty about those tax credits, the trends in geothermal, and his reaction to Google joining the industry.
The NEWS: How excited were you to finally get the tax credits passed? I know it was a long journey.
Dougherty: It was the happiest day of my seven-year run in geothermal. It was the biggest day in seven years. We worked a little over two years on this issue. A lot of people said, given the makeup of Congress and the executive branch of government, that we would never get this done. We said we could get it done. We knew we could develop a comprehensive political strategy on how to do this. It took a little over two years, but we got it done because we never gave up. We kept the issue alive, and we did everything politically correct to overcome every hurdle that was thrown at us. It was hard because there was always some bigger political issue at hand. I don’t know how many call to arms we sent to our 6,000 person email list. The manufacturers were really good about engaging their contractors through their business network. That is what makes a congressman pay attention — when they hear from a businessman in their district. I put all the business cards of all the senators, congressmen, and staff that I met with… it was 312 business cards. I laid them out on my dining room floor and took a picture of it.
It was a huge achievement for the industry. This industry, when it works together, can promote itself as a powerful economic engine.
The NEWS: I must admit, I was one of those who was skeptical. Give me the specifics on exactly what was passed.
Dougherty: It reinstates the 30 percent income tax credit for a residential installation of a geothermal heat pump and makes it retroactive to Jan. 1, 2017. The IRS just posted the revised form to be used for the energy tax credits on their website. People can amend their return and file a new form to get the credit for 2017. It then goes four years forward with the same language as solar. It is 30 percent for 2018, 30 percent for 2019, then it drops to 26 percent in 2020 and 22 percent in 2021. It ends Dec. 31, 2021.
On the commercial side, it does the same thing. It is retroactive to 2017 for the 10 percent investment tax credit. And then it stays at the 10 percent for the four years. It does not phase down. It also will extend an additional two years if you start your project by the end of 2021.
It is back to the future. It is as if nothing happened and the credits had just continued on and did not end in 2016.
The NEWS: How do you see this influencing geothermal sales, which took a dip in 2017?
Dougherty: It is going to take a while to build it out. We have to do a big consumer awareness program. The dealers have to get back into promoting the tax credit. We don’t know how long it is going to take to get back to 2016 levels. I am guessing about a year. I see us building momentum through 2018, and then we hopefully exceed 2016 levels in 2019. From there, we will keep working it. I don’t think natural gas will be staying down at these levels forever. That is a real headwind for us. Having lost the tax credits, I feel people sharpened their pencils and had to sell the technology with the higher upfront cost. People came up with new marketing techniques and better costs analysis. Now that we have the tax credits, I am telling guys that is the last thing they should be telling a homeowner. Sell it on its efficiency and mention the credits at the end.
The NEWS: Now that the tax credits have passed, what are you turning your attention to? I know you folks are active on the state level.
Dougherty: Absolutely. We have involvement in a number of states. Vermont is one that we have been working pretty closely with. We just reached out to the Massachusetts Clean Energy Center. They have one of the highest rebate programs in the country. We got wind that they might be thinking about chopping it because of the federal tax credits. We want to make sure that doesn’t happen. We always do a scan of where there are barriers that need to be removed.
The NEWS: We have now seen Google get into the geothermal industry. What are the early returns, and do you think this is a good thing?
Dougherty: I think it is good. Let’s start there. I think the creation of Dandelion does a few things. First, it brings another player to the industry. It gets us another promoter of the technology. It also gives validation of the technology. What also is very exciting about what Dandelion is doing is they are going after fossil fuel furnaces and retrofits. I think that is a telling story. In New York, a cold market, they are going after oil furnaces and propane furnaces, and it works. They are doing well, and it is a boost to the industry. If you just look at what their marketing budget is, it is a tremendous boost. I am excited about Dandelion being established and promoting this technology. It is a big deal.
The NEWS: What is a major trend you are seeing in the geothermal industry?
Dougherty: My idea of how the market is going to be transformed for geothermal heat pump technology is third-party monetization of the ground source heat exchanger. If you look at what Dan Cathy, CEO of Chick-fil-A [and visionary land developer who built the first full geothermal community in the U.S.], is doing outside of Atlanta, they figured out as a land developer how to monetize the earth. They are not drilling for oil, all they are doing is drilling for Btus. That is a game changer. I use the term “third party” and not “land owners” because utilities can do the same thing. There is talk of natural gas utilities getting into the geothermal heat pump industry as an installer and leaser of loops. I think the third-party monetization of the ground source heat exchanger is what will move the market. What in essence you are doing is taking the loop cost out of the equation. If you look at our machines and take the cost of the loop out, we are pretty cost competitive. If you look at the energy savings on a monthly basis, it covers the lease of the loop. This is starting to happen.
Publication date: 4/2/2018