It Is Past Time to Renew Geothermal Tax Credits

Industry continues to suffer while government drags its feet

Editor’s Note: The following editorial by Air Conditioning, Refrigeration & Heating News (ACHR – The News) Editor-in-Chief Kyle Gargaro is reproduced by permission.

October 24, 2016          By Kyle Gargaro

The U.S. government has been Lucy while the HVAC geothermal industry has played the role of Charlie Brown. The commercial and residential tax credits are the football, of course, that government pulls away every time geothermal leadership thinks it has an extension deal. Good grief, enough is enough.

As most of you know, the existing 10 percent commercial and 30 percent residential credits are due to expire at the end of the year. Twice in the last year, Geothermal Exchange Organization (GEO) president and CEO Doug Dougherty was confident a five-year extension deal had been finalized. Last December, when the Omnibus bill was passed, a deal was struck, but, as the dust settled, the solar and wind industries got their tax credits extended while the geothermal folks were left out in the cold.

Talk about picking winners and losers.

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. It didn’t happen.

Earlier this year, the Federal Aviation Administration (FAA) reauthorization bill passed with no amendments—including one that would have extended the geothermal tax credits. 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.

Is the third time a charm? It should be. While the government has been dragging its feet, the geothermal industry has been hurt. I have been told shipment data projections for geothermal equipment are down 15-20 percent for the third and fourth quarters this year. The reason is pretty simple. At this point, people can’t construct a house by Dec. 31 to meet the deadline, and they certainly can’t build commercial buildings.

That is why the coalition also wants tax credit qualification language changed from after geothermal equipment is “placed in service” to when construction/installation is “commenced.”

Dougherty has been at the Capitol about seven times this year making the case. This last time he brought industry leaders from ACCA, the National Association of Home Builders (NAHB), and the International Ground Source Heat Pump Association (IGSHPA). In addition, representatives from manufacturers, such as ClimateMaster, Earthlinked Technologies, WaterFurnace, and Enertech Global, attended.

This is the latest opportunity. There appears to be agreement that a continuing resolution will be passed to keep the government functioning until Dec. 9 of this year. This will open the door to more comprehensive spending legislation when Congress reconvenes in mid-November for a three-week “lame duck” session after this year’s elections.

“It’s within this narrow window that another omnibus or series of smaller bills will be decided upon,” Dougherty said. “The goal of our coalition is to make sure that the geothermal heat pump tax credits for both residential and commercial installations are included in one of those bills.”

This needs to happen because the government picking energy winners and losers is not what they were elected to do. The optics of wind and solar getting the tax credits while geothermal was left out affected the industry.

“There are lots of third-party financing for solar and wind because of the tax credits. We will not have that opportunity to go to Wall Street and find financing for third-party energy service companies (ESCOs) or performance contracting. What congress told Wall Street is we believe in solar and wind but forget about all the other industries,” Dougherty said.

Geothermal leaders even recommended the tax reform get rid of all subsidies for energy to level the playing field. That would include eliminating tax credits for oil, gas, propane, wind, solar, etc.

“If it is a level playing field and a free market, we win. We are the most efficient way to satisfy the thermal load of buildings,” Dougherty said.

But, in the interim, level the playing field. The geothermal industry can’t wait two to three years until tax reform may or may not have been accomplished.

Time for Lucy to keep the ball on the ground. 

Also see the article here in ACHR – The News: http://www.achrnews.com/blogs/17-opinions/post/133652-it-is-past-time-to-renew-geothermal-tax-credits