GEO President Douglas Dougherty
Through its Washington, DC activist team at Bracewell & Giuliani, LLP, the Geothermal Exchange Organization (GEO) is actively supporting “tax extenders bills” that are now under consideration by the U.S. House of Representatives and in the U.S. Senate. The bills would reinstate and extend several tax incentives that expired last year.
According to GEO President Doug Dougherty, “Section 179 for expensing and bonus depreciation for ‘qualified property,’ which includes geothermal heat pump installations, both expired on Dec. 31, 2013. Both of these tax benefits are extremely significant for the commercial geothermal heat pump (GHP) market.” Under the lapsed expensing provision, he explains, “a business could expense up to $500,000 the year the GHP was installed. Under the bonus depreciation provision, a business could deduct 50% of the cost of a GHP in the first year of installation.”
In July, the House passed HR 4718 to make permanent an extension of 50% additional first-year depreciation (bonus depreciation) for a variety of “qualified property,” including GHPs. Last April, the Senate Finance Committee passed by voice vote the “Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act,” which would extend a number of energy related tax breaks, including an extension of expired Section 179 expensing and bonus depreciation incentives through 2015. Tax extenders will not be considered by the Senate until after mid-term elections next month.
GEO successfully ensured that the following provisions that impact tax deductions for GHP installations were included in the Senate legislation:
The New York Department of Public Service first proposed its Reforming the Energy Vision (REV) initiative in April to head off aging electric infrastructure, low load growth, and new peak demand with a plan that envisions new technologies helping traditional utilities face the future.
REV is aimed at changing New York’s regulatory regime in ways that promote more efficient use of energy; deeper penetration of renewable energy resources; wider deployment of alternative energy resources; and promotion of advanced energy management practices.
In August, NYDPS staff released a straw proposal outlining a basic framework of “customer-oriented regulatory reform.” The proposal calls for a broad range of Distributed Energy Resources to be coordinated with market and incentive structures designed to enable customers to optimize their energy usage. “By systematizing the cost-effective use of distributed resources, REV will establish New York as a leader in enabling resources and innovating around new market structures for the benefit of its electricity customers,” said NYDPS staff.
Massachusetts Thermal Energy Coalition Attorney David L. O’Connor
Renewable fuels to heat and cool buildings have many virtues, but their use for this purpose is distressingly low. Fuels such as biomass, biogas, and liquid biofuels—as well as geothermal, solar heating, and ocean thermal systems—can reduce greenhouse gas emissions, stabilize volatile energy costs, increase local jobs, and keep consumer energy spending local. Despite these valuable benefits, high initial capital costs or differences in fuel costs often discourage energy consumers from committing to them. While a number of states have proposed to create incentive programs that would overcome these barriers, few have been able to enact the legislation needed to do so.
However, in the summer of 2014, the Commonwealth of Massachusetts enacted legislation that guarantees the award of tradable credits for the operation of systems that use renewable fuels to generate thermal energy. Beginning in January of 2015, the state’s retail electricity suppliers will purchase these credits to fulfill their obligations to obtain a minimum percentage of their annual electricity sales from alternative energy sources. Needless to say, the companies that deliver these fuels and install these technologies are elated.
The U.S. Department of Agriculture (USDA) is investing $68 million in 540 renewable energy and energy efficiency projects nationwide. The funding is provided through the agency’s Rural Energy for America Program (REAP). REAP was created by the 2008 Farm Bill and was reauthorized by the 2014 Farm Bill. The program investments—largely in solar but including at least some geothermal heat pump projects—are meant to reduce America’s energy consumption and cut carbon pollution, while saving agribusinesses nearly $45 billion on their energy bills.
Eligible agricultural producers and rural small businesses may use REAP loan guarantees and grants to make energy efficiency improvements or install renewable energy systems including solar, wind, renewable biomass (including anaerobic digesters), small hydroelectric, ocean energy, hydrogen, and geothermal.
Geothermal Can Get a Bigger Piece of the Pie
Though 540 projects were selected in this round of REAP funding, 240 are for solar technologies, but only 10 involved geothermal heat pumps (GHPs) in eight states.
Geothermal heat pumps are efficient and last 100 years or more, but home-builders are hesitant to install the systems for a number of reasons. That’s changing, however, as large-scale housing developments across the country and major retailers begin large geothermal projects. Up-front costs are one of the main issues that trade groups like the Geothermal Exchange Organization (GEO), the industry’s national trade organization, are working to overcome. GEO says there is money to be made if homebuilders and developers construct heat exchanger loops and lease their use to home-owners. It’s one-time revenue from the home sale and recurring monthly revenue from the lease.