If I were a betting man — and I am — my money would be on the residential and commercial geothermal tax credits not being renewed. These tax credits, which have been in place since 2008, are set to expire at the end of the year.
This has been a hot topic in the industry for some time now. I consistently get emails from both contractors and consumers wondering if I have any inside information on this topic. The truth is, I don’t, but the longer this drags out, the more it looks like a Peanuts cartoon with the government being Lucy and the geothermal industry assuming the position of Charlie Brown.
The geothermal folks have been working hard on this for years, and they have come close recently, twice. In December, when the Omnibus bill was passed, a deal was struck, but, as the dust settled, the solar industry got its tax credits extended while the geothermal folks were left out in the cold. At the time, both Republicans and Democrats said this was simply a “drafting error” and that they would soon get to that unfinished business of including geothermal.
The most recent pulling away of the football came with the Federal Aviation Administration (FAA) reauthorization bill, which passed with no amendments — including one that would have extended the geothermal tax credits for an additional five years. According to reports, Democrats had threatened to block the entire bill if it did not include the tax credits but backed down when it became clear that Republicans would not play ball after numerous conservative groups called on them to stand tough.
“Americans oppose corporate welfare, and they’re tired of lawmakers handing out special benefits to the well-connected,” said Andy Koenig, senior policy advisor with Freedom Partners, a conservative think tank. “When Washington tries to bury billions in special interest giveaways into any legislation, Freedom Partners will continue to shine a spotlight on it. Congress is right to reject this backroom deal and move ahead with a clean FAA extension.”
Of course, the geothermal industry did not agree.
“Congress missed an important and timely opportunity to achieve parity among renewable energy tax incentives and to advance an important technology,” said Doug Dougherty, CEO and president, Geothermal Exchange Organization (GEO).
Of course, each side of the aisle blamed the other and said something could be worked out in the future. However, if I were a geothermal contractor, I would be running my business under the assumption that this is the last year for those credits.
And, while that is not necessarily a good thing, it does not need to be devastating. As I was told by a geothermal manufacturer earlier this year, “We were here way before the tax credits and we will be here long after.”
HEAT PUMP HALF FULL
I do not blame groups like GEO for keeping up the fight. That is their job, and you never know which effort will be the one that accomplishes the goal. However, contractors need to be a bit more realistic.
This is an election year, which always leads to even less being accomplished in Washington than normal. A heavy supply of gridlock will likely be served throughout the remainder of 2016.
One silver lining is that, for the remainder of 2016, contractors can sell by telling homeowners to make the purchase now because it will get more expensive starting in 2017. This has been done somewhat successfully by the industry whenever a new efficiency standard approaches. Contractors can, and should, tell their customers it will never be cheaper to install a geothermal unit.
The expiration of the tax credits can also raise the level of the industry. A lot of people decided to get into geothermal after the tax credits were enacted because they saw a good opportunity to make money. Some were very good at installing geothermal equipment while others were not. It stands to reason the individuals who were merely striking while the iron was hot could be off to the next item. It is a good guess that these folks were not trained on the equipment quite like those who were taking the technology very seriously. This would leave quality contractors who know what they are doing to continue in the market.
However contractors choose to approach this, they need to deal in reality.
Publication date: 5/9/2016