Tuesday, November 26, 2019

New tax credit could tip balance toward modern, efficient pellet heaters


Solar panels have long enjoyed a 30%
federal tax credit. This Act could
provide some high efficiency wood
and pellet appliances the same support
A 75% efficiency threshold would help innovative stove and boiler manufacturers, set others back

Members of Congress unveiled a discussion draft for a wide range of energy tax credits from solar PV, geothermal and electric cars – to high efficiency wood and pellet heaters.  The tax breaks are part of  the Growing Renewable Energy and Efficiency Now (GREEN) Act.  The core tax breaks are in three areas - renewable energy production and storageenergy efficiency, and electric vehicles. Most of these provisions renew and or modify existing tax breaks and a few are new incentives meant to spur energy innovation.

The provision for wood and pellet heaters is partially an extension of a pre-existing credit, but it vastly narrows which appliances would qualify and increases the amount of the credit to 30% of purchase and installation costs.  By setting a 75% threshold at the higher heating value (HHV), the credit would overwhelming favor pellet stoves and boilers, because pellet appliances tend to be much more efficient – and much cleaner.  On the other hand, the traditional wood stove that relies on the consumer to adjust the airflow, would be almost entirely shut out of the credit.  

[Dec. 18, 2019 update - Provisions of the GREEN Act giving qualifying biomass heaters a 30% tax credit were not included in a massive end of year tax deal.  Instead, the $300 tax credit for qualifying biomass heaters was retroactively extended, making stoves 75% efficient or higher eligible if purchased in 2018, 2019 or 2020.  House Democrats pushed for the GREEN Act's inclusion but the White House, backed by powerful oil and gas interests, refused to entertain a package with many renewable energy tax breaks.]

“This tax credit is exactly what is needed to modernize residential wood and pellet heating and tip the balance of government support toward pellet heating,” said John Ackerly, President of the Alliance for Green Heat. “Unlike Germany, Austria and Italy, the United States has never had federal policies to shift toward pellet appliances, which is necessary for this sector to help drive down fossil heating fuels.  In addition, this is an important step to using premium pellets in high efficiency, small-scale heating in the United States instead of shipping industrial pellets to Europe for low-efficiency power plants that just make electricity,” Ackerly said.

The increase in the value of the credit, from $300 in 2017 to 30% of costs if this provision were to become law, is the result of strong Congressional support from House and Senate delegations from New England, where efforts to move toward pellet heating have been the strongest.  The 30% credit proposal was in the BTU Act, part of which was rolled into the new GREEN Act.   The coalition of mainstream energy efficiency organizations such as American Council for an Energy Efficiency Economy (ACEEE), Alliance to Save Energy (ASE) and others had proposed an initial 73% efficiency threshold that later moved to 75%.  Ironically, the BTU Act, championed by an industry association, the Biomass Thermal Energy Council (BTEC), has always supported the higher limit of 75% efficient.  BTEC, breaking from other industry organizations, made a strategic decision nearly a decade ago, with input from the Alliance for Green Heat (AGH), that the future of small-scale biomass heating needed to focus on highly efficient, modern technology.  Over time, other industry groups supported BTEC’s position.

Timeline

As currently written, the Act provides for the residential non-solar energy technology investment tax credit for seven years with the full 30% credit for 5 years, and reduced ones for 2025 and 2026.  The timing of this tax credit coincides with stricter EPA emission standards that take effect on May 15, 2020, resulting in stoves, boilers and furnaces that will be far cleaner than those sold over the last 30 years.  The new EPA regulations also require all stoves and central heaters to be tested for efficiency, giving all heaters consistent efficiency ratings. 
Credits under the Green Act last for 7 years, providing certainty to the marketplace.
One major impetus for the Green Act is that solar tax credits are set to
go down to 26% in 2020 and in 2022 they would expire for residential installs.

Tax credits and demographics

Because this is a tax credit, consumers must pay the full price up front and wait until the following calendar year to claim the credit.  This limits the impact of the credit to consumers and families who can afford the higher up-front cost for high efficiency units and wait to deduct it the following year.  If someone owed no taxes, they could get the credit back as a refund.  Thus, the tax credit is not an effective vehicle for helping lower income families afford higher efficiency appliances.  Higher efficiency appliances and professional installation is often in the $3,500 - $5,000 range, far less than solar panels or electric cars and thus accessible to middle class  families, something that is likely appealing to both republicans and democrats. In addition, stoves and boilers are far more popular in rural and semi-rural areas and constitute a way for the Green Act to reach constituencies that may not be as easily reached with other technologies.


The credit is likely to drive more consumers toward pellet appliances and over the years, it will help tens of thousands of families afford the most efficient appliances that will enable them to reduce their fossil heating fuel consumption. The highest efficiency wood and pellet stoves and boilers tend to be the more expensive ones that are sold by specialty hearth retailers, not big box stores.  

Many new stove installs replace older uncertified stoves, a practice often touted by industry as a main benefit of selling more new stoves.  However, the more beneficial practice from an air quality perspective is moving from an old wood stove to a new pellet stove.  This transition from wood to pellet stoves would likely be hastened by this tax credit.

Impact on heater technologies 

Modern pellet stoves are
up to 87% efficiency
Of the 178 stoves that are 2020 certified by the EPA, 79 models are 75% efficient or higher, based on the EPA’s database of wood heaters.  Of those 79 models, 44 are pellet stoves.  Pellet stoves have made rapid advances as innovation in the US and Europe has driven down emissions.  

Of the 35 models that burn cordwood, 31 of them are catalytic or hybrid stoves. Catalytic and hybrid stoves have been a niche with less than 20% of overall cord wood stove sales, a percentage that would likely grow if this new credit were to become law. 

The category of wood stoves that is almost shut out of the tax credit is the popular, traditional non-catalytic stove.  It is very difficult for non-catalytic stoves to achieve 75% efficiency.  Only 5 non-cat models are 75% efficient or over and all of those are higher priced models sold by specialty hearth stores.  Of the 130 certified central heaters currently on the market, only 5 are 75% HHV efficiency or higher and compliant with the stricter EPA 2020 emission standard. 
One condensing pellet
boiler is at 90% efficiency
 

Masonry heaters do not have a certification pathway, and it may not be possible for them to take advantage of this credit.  Washington State and Colorado both have maintained list of approved masonry heaters.  However, those lists only cite PM emissions and not efficiency.  The well-known factory-built line of masonry heaters from Tulikivi may be able to get an alternative test protocol approved by the EPA and be certified.  Given the $10,000 - $20,000 price tag for masonry heaters, the tax credit would surely be a significant consideration by those interested in installing one.

Installation costs

Under this tax credit, labor and installation costs are also covered by the 30% credit.  IRS guidance states: "When calculating the § 25D credit, a taxpayer may include the expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the qualified property and for piping or wiring to interconnect the qualifying property to the home."  This presumes, but may not require, professional installation of the system.  Traditional wood stoves sold at big box stores that are under 75% efficient are the ones most often installed by consumers, often leading to safety problems.  Including installation costs in the amount covered by the 30% tax credit helps assure safe, professional installation as well as building out the network of NFI and CSIA certified professional needed to properly sustain this industry.

Impact on state incentives

If the federal government were to provide this tax credit, it may undermine the need and justification for certain state incentive programs.  However, an important function of stove and boiler change-out programs is getting old devices out of circulation.  Change out programs may be able to offer smaller amounts to achieve their goals and increase their targets for removals of old stoves.  Bounty programs may become more popular as a complement to the tax credit.

Impact on carbon reductions

Higher efficiency applications tilt the carbon benefits clearly in favor of using wood or pellets for heating.  From the pivotal Manomet study onwards, scientists have questioned burning biomass at 20 – 30% efficiency to make electricity, but high efficiency heating applications triple the energy from the fuel and triple and amount of fossil fuels that are displaced.  

There is also a distinctly different business model for companies making pellets to export to electric power plants in Europe and those who make premium pellets for domestic heating.  Companies that export pellets rely far more on cutting down whole trees whereas the domestic heating pellet market has always relied far more on procuring sawdust from lumberyards.  

The downside of residential wood heat has been the particulate matter emissions from traditional wood stoves and outdoor wood boilers, not the carbon equation from high efficiency wood and pellet heating.

Impact on industry

The main trade association representing stove, boiler and furnace manufacturers, Hearth, Patio & Barbecue Association (HPBA), supports the tax credit but some individual manufacturers and retailers are worried that it may tilt sales away from the product lines they make or carry.

Companies making central heaters may have a hard time competing in the marketplace without a unit that is 75% HHV or higher.  The companies that made big names selling outdoor wood boilers currently do not have any products to sell in 2020, much less ones that could meet a 75% efficiency threshold.  Of the 5 central units that would qualify, all but one is made in Europe, though some are assembled in the US.  Consumers buying higher priced central heaters that can cost anywhere from $8,000 - $20,000 will most likely base their decision on whether the unit is eligible for the tax credit.  

For companies making only pellet or only catalytic or hybrid stoves stand to benefit the most.  Many manufacturers make both wood and pellet stoves, and some may have both wood and pellet units that are 75% efficient or higher.  Companies that don’t have any units in excess of 75% may experience fewer sales.  Companies that make cordwood stoves for high volume sales at big box stores and the internet market, will likely have no models that qualifies for the credit. 

Unlike with the previous tax credit, where manufacturers used a variety of ways to claim that their products qualified at 75% efficient, this credit specifies 75% HHV and all 2020 compliant heaters have EPA approved HHV efficiency values.  Rachel Feinstein, Senior Manager for Government Affairs at HPBA, provided a statement that said “We are especially happy to see that the language specifies higher heating value (HHV) of the fuel as the efficiency measure. This more specific language will make it easier for the public to determine which products qualify for the tax credit.”

What comes next

The Green Act, or large parts of it, could be absorbed into other legislation that passes both houses of Congress this year.  Almost all the elements of the Green Act have been in play for some time and there is not much new there for Washington energy insiders.  Congress just passed a one month stop-gap funding measure, giving them until December 20th to get real legislation passed. Stay tuned.




Sunday, November 17, 2019

A roadmap to get your home off fossil fuel


It took our family a few years and some investment, but it’s not that hard

Our 12-year-old son helping
move bags of pellets.  Each 
bag heats our house for a day.
by John Ackerly

Fifteen years ago I never imagined that our house and cars would be 90% fossil fuel free. It seemed like a futuristic goal that my son may achieve, but not me. Our approach is possible for millions of families who may not realize that they can do it too. With some modest upfront expenditure, it all fell into place.  

When I say fossil fuel free I am talking only about our home and cars, not our food or the junk we buy from Amazon or a store, nor our flights. But we are starting to think about those too and have some strategies.

We this did partly out of a realization that climate change really is an emergency and we don’t want to saddle future generations with a hotter world. But what we did was also smart investing that has drastically lowered our utility bills and transportation bills. Getting your home and cars off of fossil fuels may get as good a return as investing money in the stock market the next 5 to 15 years.  

We began our journey by weatherizing our house, and therefore reducing our demand for heating and cooling, as well as buying 100% wind energy into our grid through the utility company. Later on we began heating with wood pellets, added solar panels, and purchased electric cars. During the winter months when our solar panels don’t supply 100% of our electricity, at least we’re still purchasing energy through a renewable energy electric supplier. Making these changes is a process, and we still use some gas for heating and cooking.  It’s also been a journey of surprises and connections that go all the way back to my grandparents who told me about how wonderful it was when they switched to coal heat.  

Weatherization and energy reduction

Anyone interested in saving energy and reducing their carbon footprint should begin with a home energy audit, often subsidized by utilities. Ours was the best $100 we ever spent, because it made the house much less drafty and immediately started saving us $10 – 20 per month in both summer and winter utility bills.  If you walk around with the energy auditor you can understand each step they take and ask lots of questions. Our house was pretty well insulated already, but there were many gaps where the cold or warm air could escape around ceiling lighting fixtures and behind floor and ceiling molding. As a result, one of the most strategic investments we’ve made in energy efficiency over 20 years was buying about 30 tubes of caulk, sealing up the various places that the auditor’s infrared camera surfaced.  

Other initial, obvious steps to reduce energy consumption is replacing every single lightbulb with LEDs. These bulbs are subsidized by utilities in many states, including Maryland. Whether your state subsidizes them or not, places like Costco have amazing prices for big boxes of bulbs.

Heating with wood pellets

Two tons of pellets comes on 2 four
foot high pallets of 40 lb. bags and
they need to be stored in a garage,
basement, or shed.
Last week we had two tons of wood pellets delivered to our driveway. It took an hour and a half to restack them in a shed behind our house. They cost $500 ($250/ton), plus a $75 delivery charge by Lowes. Our house is about 1,900 square feet with an open floor plan. In Maryland, winters are mild, so our Ravelli pellet stove does a good job heating the house on all but the very coldest mornings. The stove cost $3,000 and installation was another $500. My family and friends love hanging out in front of it. It’s a wonderful focal point for our family, cat and dog all winter. Some states have rebates or tax incentives to buy a pellet stove, including Maryland, Idaho, Vermont, Maine, New York and Massachusetts. Maryland gives a $700 rebate which is more than half the price of one reliable, highly rated and reliable pellet stove brand, PelPro.

Our pellet stove is a wonderful focal
point for our family, requires very little
work, and makes no visible smoke. 
Pellet stoves take a bit of work – about 5 minutes a day to load the hopper and clean out the firepot. Then you just push a button and it runs all day long. This is a lot less time and effort that mowing a lawn or walking a dog – but like a dog, you have to spend a few minutes a day taking care of it, or it can leave a mess on your floor.  It’s important to buy pellets that are certified by the Pellet Fuel Institute (PFI) to ensure the pellets meet quality standards and are 100% natural wood. 

This year, we bought Green Supreme pellets made by Lignetics, one of the companies dedicated to using the PFI certification scheme. They also have good values, motivated to help families across America end the cycle of using more convenient forms of fossil fuels with residuals and low-grade wood produced by the lumber industry. So I’m back to using a solid fuel, just like my grandparents did, which takes a bit more effort. I expect my son to enter a generation that will one day have 100% renewables on the grid, enabling him to also choose a heat pump in what will hopefully be a net zero house that makes as much energy as it uses. 

Another benefit of heating with a pellet stove is that the blowers on our gas furnace cost about $25 a
In much of the US, heat is the biggest 
single source of a home's carbon
foortprint, other than yoiur car(s).
month in electricity, whereas the fans and auger on the pellet stove only cost $5-8 per month. As a point of comparison, previously we heated with a wood stove, using free wood that local tree trimmers were happy to dump in our driveway whenever we needed to split, stack and season more. But with both my wife and I getting up and out of the house in the morning for work, we basically only used the stove each evening and on weekends. This meant relying more on the gas furnace and doing much more work loading the stove and trying to keep the air adjusted properly. 

I had three different EPA wood stoves over a period of 20 years (catalytic & non-catalytic), partly in search of a really good one that could run easily with no visible smoke. Using dry wood, I could usually get them to run without visible smoke, but it wasn’t always so easy and I didn’t feel good about putting smoke in a suburban neighborhood. I bought a high-quality indoor PM sensor and then a second one and found that my indoor air quality was always quite good, but the wood stove wasn’t good for the exterior air that was seeping into my neighbors’ homes. While applauding our success in not relying on fracked gas to heat our house, two neighbors agreed that the excess smoke from wood stoves concerned them. Most neighbors said they liked the smell, one of the enduring paradoxes of a pollutant which is not good for you.  Our neighbors can't even smell, much less see the tiny emissions from our pellet stove.

Solar Electricity

We did not have a south facing roof, so
they put 8 panels facing east and 10
panels facing west, which worked well.
When we remodeled our house in 2006, we unfortunately didn’t consider the potential of solar energy. But the roof still had good enough angles and enough sun. In 2016 we put on 18 panels, rated for 5.4 kW, enough to cover 100% of the household usage, after switching to all LED bulbs, and doing other DIY energy efficiency measures. We paid $18,000 up front, got $6,000 back from the federal tax credit the following April and had no electric bills most months, aside from the monthly $12 connection fee. We worked with Solar Energy World who did a great job. Maryland, like most states, has a net metering law that requires our utility to buy back electricity we produce and don't use. It’s a good deal for our utility too, since we put our excess solar electricity back onto their grid when they need it most – the middle of hot summer days when electricity demand peaks in the Washington DC area.  Not a bad trade-off. 
The blue shows the months we used
more electricity than we made and the
green show when we made more than
we used. 

Once we bought two electric cars and let a neighbor also charge her Chevy Bolt at our house, we now have average $50 monthly electric bill.  Powering a house and keeping 2 and a half cars full of gas could cost 5 to 10 times that much.

Solar panels are great because you don't have to do anything and they work month after month, year after year.  In our case, we spend an hour or two each year trimming a few tree limbs to prevent them from shading the panels too much.  If some of our neighbors hadn't done it first, it may have taken us years longer to make the plunge.  

Purchased wind RECs

Our utility estimated our
household  usage based on
a questionnaire of appliances.
About 15 years ago, long before adding solar panels, we signed up with WGL, a company that provides 100% renewable electricity for only about 10% more than our local utility Pepco charges for their filthy mix of coal, gas and nuclear. It felt so good when we realized we could avoid that.  The way it works is that you buy RECs (Renewable Energy Certificates) from a company that sends your money to a wind farm who is only allowed to sell a limited number of RECs. First make sure the company you buy from is reputable and is part of a third party verified system. WGL is Green-e certified and meets environmental and consumer protections standards set by the non-profit Center for Resource Solutions (CRS).  

There are many companies to buy renewable electricity and most of them buy into big wind farms in Texas and the mid-west, which helps them grow and fill those grids with renewables. We don’t actually get the electrons made by those wind farms, but we pay for them. I don’t really want to subsidize companies that do large solar farms because its often not an optimal use of land, compared to covering our rooftops, parking lots and garages, etc. 

This is one of the easiest things that most people in the country can do in one hour and be an important part of the renewable energy revolution.  Don't wait.

Electric cars

By fueling our own cars at home
and rarely needing maintenance,
we basically never go to gas
stations.
My wife and I had never paid more than $10,000 for a car and I thought I may go through life without ever buying a new car.  But the federal $3,750 tax credit brought the Chevy Bolt down to $26,000, which is what most people pay for cars anyway. With a 250-mile range, it can get us to New York City on one charge. To go on longer road trips, we have to build in more time, and plan where we stop for meals and charging. The state of Maryland gave us a 40% rebate ($400) to install a level 2 charger in our driveway, which was a prerequisite for us. Since we have solar panels, we are not eligible to participate in Maryland’s pilot time-of-use program. That would have made it even cheaper to charge the car at night, when electricity is cheap.

A downside of electric cars now is that most people don’t opt in to purchasing renewable energy, so they are still driving on fossil fuels. It’s still a lower carbon mode of transportation, but it’s so easy to go all the way and select a renewable energy provider for your whole house.

Water heating

Our Rheem heat pump water
heater enabled us to switch
gas to renewable electricity.
Last year our footprint shrank even further when our 15-year-old gas water heater died.  A bit of research led to purchasing a hybrid heat pump water heater, which uses highly efficient heat pump technology. The energy needed is now covered by the electricity from our solar panels for 7 months of the year and from purchased renewable electricity during the other months. This technology requires a big enough basement for it to have enough air circulation, as well as higher up-front costs for the tank and its installation, which come to about $2,000.  The state of Maryland offered a $500 rebate, offsetting the costs. Heating water only cost us $5 - 15 a month before, and now it’s even less. While the monthly savings is small, it’s an important step to get one more appliance off of gas and onto renewable energy. We use it in an eco-mode only by turning off the hybrid features that would allow resistance heating when needed.  Running it solely on the heat pump mode has been good enough to provide us with plenty of hot water for a 3-person household.

Costs of getting off fossil fuel
Solar panels and  electric cars are the big ticket items.  We did it year by year, waiting to upgrade our cars when they needed it.  The solar panels can also be leased, with no upfront costs or financed.  Many hearth retailers provide financing for pellet stoves and Home Depot could have financed the heat pump water heater.  The lowest cost impact is probably signing up for renewable electricity since its starting to be the same price as fossil fuel electricity.  Still, we recognize many families don't have anywhere close the finances that we had to do this.  If your household income is over $100,000 and you periodically buy a new car anyway, you can do it too.  The onlyother thing you need is some time to go through the steps. And you need to care enough about your carbon footprint or climate change, and understand that over the long run, these steps will save you money.  Having kids that care about this stuff helps as they are often the ones educating us parents.

What’s left?

Gas stove. Like a lot of people, we are very attached to our gas stove, which also happens to be antique. We are focusing on the bigger picture and not getting too hung up on every last detail and this will be one of our non-guilty pleasures. That said, we know people who love their induction cook tops and that will probably be in our future.

Gas furnace and gas clothes dryer. Even though we make 80% of our heat from renewable wood pellets, we use the gas furnace for 30 minutes on the coldest mornings to get the house up to temperature while the pellet stove gets going. In the warmer than average February 2020, our gas bill came to $29 for the furnace, cooking and clothes drying, and $11 of that is the fixed system charge. This is not an insignificant amount of gas, far more than our old gas cooking stove. A heat pump space heater for our kitchen/dining room area would probably work pretty well and cut gas heat down to nearly zero. But with only a $150 annual gas bill and maybe $150 for summer air-conditioning, we are starting to get into even longer paybacks. Our gas clothes dryer will be replaced with a electric heat pump clothes dryer when it needs replacing.  Air drying clothes is cheap and in the summer we do it a little and is one of those lifestyle changes that is a hurdle for us.  Part of this energy journey is chipping away at the easiest and highest impact biggest things and then figuring out next steps. We are still working the role of natural gas in our household equation. 

Your income is likely the largest determinant of your carbon
footprint.  Wealthier people have both the ability and the
responsibility to buy renewable RECs, add PV panels, etc.


Lawn mower.  We already had a junky old cord electric mower and we just teamed up with our neighbor to split the cost of a top rated Consumer Report Ego battery powered electric lawn mower ($200 each).

Flights: We have cut down on flying a little bit but still our family flies more than most, taking one or two domestic trips a year for pleasure and many more for work, including international flights. We plan to start buying offsets for our personal flights, which is a first step, albeit not a great one.

Home battery: A home battery, like the Tesla Powerwall, is a way to keep power during a black out for a day or two. I'm not at all convinced it’s worth it yet with a $5,000 - $8,000 price tag. Our neighborhood doesn't experience many blackouts, but they may be more frequent with climate impacts already visible. During the warmer three seasons, we can ride them out pretty easily, only losing the food in our fridge and freezer that we can't eat fast enough. We already have 2 big lithium batteries in the driveway, and it would be far easier if we could top those off before a storm and just run them backwards to power the house, instead of buying another one which would just sit there, virtually doing nothing for 99% of the time. If we had time-of-use (TOU) pricing, we could fill a battery at night and then use energy during the day, but we don't have that yet and it still may be a long payback for a battery.


Good luck with your journey and leave a comment below about how its going for you.  The sooner you begin, the more you will save in the long-run.