[Note: Paul Stalknecht is president and CEO of the Air Conditioning Contractors of America (ACCA). On Jan. 26, 2010 he sent this letter to President Barack Obama just prior to his State of the Union address.]
Dear President Obama:
As your administration considers job creation policies, I would like to recommend an expansion of the energy efficiency incentives available to homeowners. By lowering the minimum standards for qualified equipment and ensuring that new systems are installed properly, homeowners are guaranteed to see a payback through lower utility bills, better IAQ, and fewer emitted greenhouse gases.
In the stimulus package passed earlier last year, Congress provided tax incentives for homeowners to purchase higher-efficiency heating and cooling systems in 2009 and 2010. Since these systems amount to nearly one-half of the average home’s utility bill, to an outsider, these tax breaks look like a win-win. High-efficiency systems can dramatically lower energy usage, and nothing that consumers do will have as big an impact on reducing American energy dependence than by replacing old, inefficient heating and cooling units.
Unfortunately, thanks to some little-known requirements and prescriptions in the legislative language, these tax credits are adding up to a missed opportunity. By aiming too high, the incentives may have missed the mark entirely.
As many contractors know, homeowners are only eligible for the energy tax credit if the central air conditioner model they select meets minimum efficiency metrics of 16 SEER and 13 EER. However, there are millions of homes in this country with old, inefficient HVAC systems of 10 SEER or lower. Without proper maintenance and repairs, these systems are likely performing at even much lower energy-rating levels.
According to the 2005 Residential Energy Consumption Survey conducted by the U.S. Department of Energy, 39 percent of residential central air conditioners and 60 percent of residential heating equipment are more than 10 years old.
Replacing a central air conditioner system is an expensive proposition for a homeowner. The cost difference between a higher efficiency 16 SEER system and a basic 13 SEER system far exceeds the $1,500 maximum tax credit. Today, many homeowners are struggling simply to replace their existing systems with just the minimum equipment. How can anyone expect them to upgrade to the much higher, more efficient equipment? The $1,500 incentive is only an incentive for those who can afford the higher-priced units. In many respects, it’s outside the financial reach for most middle income homeowners.
While homeowners in some markets are benefiting from this program, there are many in other markets who simply can’t afford to participate. Many homeowners are choosing to keep inefficient equipment running - through patchwork repairs - instead of replacing it, due to the much higher prices for higher SEER systems.
If the tax credits encouraged homeowners to purchase equipment that meets the lower EnergyStar™ standard (14 SEER/11 EER), we’d wind up with a lot fewer energy hog homes, much lower utility bills, reduced emissions, and a dramatic change in our usage of foreign energy sources. This level would provide the vast majority of American homeowners an attainable opportunity to upgrade their current HVAC systems and make a significant contribution to our nation’s energy conservation efforts.
Finally, I’d like to add that these goals will only be reached if the new equipment is installed properly. You cannot assume that a box with a rating stamped on the side will actually operate at the level the stamp claims. As we in the industry know, nothing could be farther from the truth. I shudder to think how many homeowners will receive a $1,500 tax break on a system that winds up being less efficient than the one they replaced - all because it wasn’t installed properly. Homeowners - and the entire country - would be better served if the credits incentivized the proper installation of EnergyStar™ HVAC systems.
Homeowners want to take advantage of energy efficiency improvements because they increase the value of a home and result in greater comfort. Your administration’s support for these adjustments to the federal incentives to reflect current market conditions would put HVAC upgrades back within reach for many American homeowners, and produce job opportunities for the entire HVAC industry.