A Resolution for Congress

By Doug Dougherty, President and CEO
GEO – The Geothermal Exchange Organization

January 19, 2017 – Some call it a drafting error.  Others call it a mistake.  Regardless of how it happened, in December 2015, Congress passed a spending bill that extended tax credits for big wind and solar energy but left other clean energy technologies in the cold.  As a result, residential and commercial tax credits for geothermal heat pumps, fuel cells, microturbines, small wind, and combined heat and power all expired on December 31, 2016.

Congress’ failure to right this wrong is having real consequences.  Geothermal heat pump manufacturers project sales declines of 30-40 percent in 2017 and beyond.  The entire geothermal heat pump supply chain, which is entirely U.S.-based, is at risk for loss of investment and jobs.  This means distributors, dealers, contractors, installers, drillers – plus all the families and small businesses that they help support – will see job losses.

Whether it is the homeowner looking to save money or the commercial project looking for the most efficient heating and cooling technology, geothermal heat pump projects across the country are being shelved.  Take the Whisper Valley project near Austin, Texas as a prime example.  Taurus Development Group is building 7,500 affordable net-zero energy homes and two million square-feet of retail space.  They planned to invest more than $100 million in geothermal heat pumps to service the community.  But without the tax credits, the economics no longer work and the project, along with hundreds of local jobs, may not go forward using geothermal technologies.

To be clear, our industry does not view the tax credits as key to our long-term survival.  When Congress created the credits in 2008, the goal was to drive economies of scale to reduce installation costs.  But as soon as the credits were enacted, the housing market cratered and commercial construction came to a halt. 

That’s why we urged Congress to provide a short-term extension before phasing out the credits – the same glide path Congress provided for big wind and solar.  If Congress wants to do away with ALL energy tax credits, we would be the first industry to sign up for that deal.  As the most efficient heating and cooling technology, we are confident we can compete in a fair market.  But we cannot compete on a playing field that is tilted against us and in favor of other technologies.  

The irony is that by not fixing the tax credit issue, Congress is not only destroying thousands of jobs, but subsidizing foreign competition!  Only 25% of solar panels are made in America, and many wind developments are of foreign origin.  Compare that to geothermal heat pumps, which are 100% “Made in the USA,” with American-made components manufactured and installed by American workers.

Some Members of Congress suggest this will be addressed during the tax reform debate.  But we can’t wait.  With thousands of jobs on the line, we urge House Ways and Means Committee Chairman Kevin Brady and his colleagues to take immediate action to fix the “error” and ensure equal tax treatment for all clean energy technologies. (GEO)