We asked three geothermal experts — Ryan Dougherty of the Geothermal Exchange Organization (GEO), Jack DiEnna of the Geothermal National & International Initiative (GEO-NII), and Tim Litton of WaterFurnace — to break down what’s in the bill, what’s not, and what it all means for 2025 and beyond. 

ACHR NEWS: Break down the good news, bad news for geothermal. 

Dougherty: It's definitely a mixed bag. It's pretty painful, especially as hard as we worked to protect the residential clean energy credit, 25D — we pulled out all the stops. The fact of the matter is that Congress right now is really dead-set on getting rid of consumer credits. We were wrapped up in this section of the code where we're bundled with solar and fuel cells, so it's basically all or nothing. The second consideration relates to the reconciliation process itself, and the fact that it has to be budget neutral, so anything that you're doing in the bill that costs money, you have to find an offset elsewhere. 25D had a pretty attractive price tag attached to it, and if they get rid of it, they could fill the gap and pay for the other things they wanted, wanted to do, which cost money, most notably the extension of the expiring tax cuts. So we were in this tough situation, and there was a reluctance to split us out, give us a softer landing, despite the fact that [many members of Congress] recognize that geothermal is great. I think their dislike for solar overrode their fondness for geothermal. 

We have kind of a painful memory of what happened in 2017 when the credits went away — sales in the industry went down by around 50%. A lot of companies left the industry. You had drillers close up shop, get into different segments of the drilling industry. You had contracting businesses that just moved in different directions or retired. It's been a long climb back … and it's a little upsetting to know that we're staring at another cliff when we asked Congress for just some sort of softer landing. 

ACHR NEWS: For residential geo, how much of a setback is this? Are we about to see 2017 all over again? 

Dougherty: I don’t think so. In 2017, we lost both the commercial and the residential credits. It was pretty painful. Everything went away. What has happened this time is, yes, by the end of the year, the repeal of 25D is going to affect businesses. I think it will affect consumer sentiment and buying habits or tendencies. But Congress saw fit to leave us completely untouched on the commercial side — we're not even in the “One Big, Beautiful Bill” really at all. We have a live path to 2035, and there's a two-year step-down. In 2033, the credit goes to 26%, and in 2034, it goes to 22%, and then zeros out in 2035. So we've got about a decade ahead of us to leverage these incentives, and my hope is that we can bring those credits on the commercial side to bear on the residential side. 

Litton: The commercial tax credit largely remained intact [in the new legislation], and the better news is that it did open up new business models for third-party ownership and leasing. We believe that can help offset some of the declines from the residential [side]. I certainly think the market is going to have to rebalance, but at some point, I think we'll find an equilibrium. We do have a lot more tailwinds at our back. This time around, society is embracing energy efficiency. Heat pumps continue to outsell furnaces. You see the adoption of clean electric solutions because of their energy efficiency and the longevity and the convenience. So I think we're in a different place than we were at before — a much better place. And so I think that it will certainly impact us in the short term, but we'll find equilibrium, and we'll continue to grow, be successful, and I think it still provides a great opportunity for contractors who are looking to differentiate themselves through energy efficiency. 

DiEnna: Quite frankly, I'm not sure how much of an impact the investment tax credit had on residential because typically, and what I found from the last go-around, was that the people that claimed the investment tax credit previously, late in 2018 … I think maybe 2%, something like that, of everybody who bought a geothermal system claimed the tax credit. HVAC contractors are definitely not salespeople, so by telling them, “You need this [credit],” in their head, they go, “Oh, well, if I don't have it, I guess I can't sell it, so I’ve got to sell something else.” So, thinking that you need a tax credit to sell a residential system is all in your head. 

ACHR NEWS: The bright spot in all of this is that the law creates an exemption from longstanding IRS policy known as the limited-use property doctrine. This means commercial geo systems can now be leased by third parties, including to homeowners. What does that mean, and why is it significant? 

Dougherty: Some of us in the industry have been thinking for years about how to scale. The biggest [challenge facing geo] has been the fact that geothermal heat pumps ask the end user to pay for the outside loop. The solar industry was able to really aggressively scale and really proliferate in the residential market with the advent of third-party ownership lease models. If it works for solar, why couldn't it work for us when we're facing the same upfront cost barrier? 

Here’s how it would work: We [the third-party commercial leasing company] are going to put these pipes in your front yard. Don't worry about the cost. You're going to pay us a small monthly lease fee, and the annualized energy savings you enjoy are going to more than cover the cost of the lease, so you’re cash flow positive as soon as the system is turned on. It's a pretty attractive proposition. It’s what grew the solar market. It helped drive economies of scale and drive costs down in the solar industry, and we think that those sorts of innovative business models and approaches are going to help us scale, too. 

It's cold comfort, and in some respects, maybe a silver lining to losing 25D, but I really think it sets the groundwork. It lays it sets the table for the next stage of the evolution of the geothermal industry. I think GeoExchange, our brave little trade organization, is going to be at the center of a lot of these discussions, and I want to ramp this up post-haste, because the clock is ticking on 25D, and I think we need to pivot quite quickly to ensure stability in the industry. 

DiEnna: If we think about the market, the big dog is developers, right? Our industry has lost out on propane, because propane guys go in, they cut the developer in for a piece of the action. Well, now a developer can own a ground loop and get the 30% tax credit on that system, which is much bigger than a propane deal. So now whole developments can put in ground-source geothermal, which means that developer only has to put in one appliance, not two. They can also become the HVAC utility for that development and then sell that asset.  

It also allows utilities to own ground loops. More and more utilities are looking at this, not so much for energy efficiency, but for grid stabilization. For every ton of installed capacity of ground source, it reduces peak load by .55 kW.  

ACHR NEWS: I hope some of the folks who are going to lose work from 25D going away can just shift over to this segment. 

Dougherty: Yeah, that's certainly my hope. I think that there will likely be, you know, a few flavors of contracts that hopefully, in the next few months, we're going to start sorting out so that residential customers are going to be able to somewhat seamlessly move into this new space. I've been talking to a number of companies that are already kind of sorting through the particulars internally, because they are very interested in this new frontier.  

Litton: I think it will be a boon to manufacturers. Obviously, the more people who are buying in geothermal heat pumps, the better off we are. But I also think it can be a boon to contractors, because a lot of times, these [third-party] companies won't install them. They'll simply set up the arrangements and then hire HVAC contractors. So there'll be a lot of opportunity. This is something that has not been around before for geothermal, so I do think it will help offset some of the decline of the 25D tax credit expiration. It's too early to tell, but we're certainly optimistic, and we have high hopes for the leasing model. It will take a little bit of education as potential investors start investigating geothermal and how it can impact their business, so I would think it would take a couple months before we start to see the first leasing options come out. 

ACHR NEWS: 2026 will be a whole new frontier, but the current tax credit is still available through December 31, 2025. What should geothermal HVAC contractors be focusing on for the rest of this year? 

Dougherty: Sell them and install them! This is sort of a fire sale — you've got to do what you can, make hay while the sun's still shining, and then you're going to have to pivot to something new.  

Litton: Typically, we've seen that the full cycle for people assessing geothermal tends to be about six months. By the time they pick up the phone and call the contractor, that tends to be about six to seven weeks. So contractors should be proactive and reach out to consumers who have been considering it to make sure that they know the tax credit is expiring, and it may change their timing. Another tactic that we've been telling customers to look at is to take owners who are at the 20-year mark for geothermal, because the average lifespan is around 25 years, reach out to them and let them know the tax credit is expiring at the end of the year: “If you want to upgrade your system, now is probably a pretty good time to do it.”