Wednesday, December 23, 2020

Expanded tax credits for modern, high efficiency wood and pellet heaters a big step in the right direction

Maine Senators Collins and King were
primary, bi-partisan champions of an
investment tax credit for wood heat.

On December 28, President Trump signed into a law legislation passed by Congress which was the largest renewable energy spending bill in a decade and included incentives for solar, wind, advanced wood heat and a host of other technologies. This marks the first-time modern wood heating systems have been granted an Investment Tax Credit (ITC), rather than the far smaller tax credit wood heating technologies had been receiving.

The incentive provides a 26% tax credit for stoves and boilers that are 75% efficiency or higher. Consumers can easily identify efficiency levels by checking the EPA lists of certified wood and pellet heaters. The credit has no upper limit and lasts for three years, declining to 22% in 2023.

The effort to pass such an ambitious bill was led by the Biomass Thermal Energy Council, who started lobbying for it in 2009. In recent years, another significant push was led by Charlie Niebling, a consultant for Lignetics and former Chairman of BTEC. The Alliance for Green Heat contributed time and resources to both of these efforts, along with many other BTEC members.

As the founding Chairman
of BTEC, Charlie Niebling
was a chief architect of the 
bill and perhaps its most
ardent advocate.

Many Senators and members of Congress signed on to various iterations of the bill over the last decade, but it was Senator Collins and Senator Angus King who provided the final push, along with Chairman Richard Neal in the House of Representatives.

The legislative effort gained momentum as new EPA regulations required wood and pellet heaters to be cleaner and to disclose their efficiencies. “This is an important step forward but it is only one piece of a much larger puzzle to modernize the technology and the test protocols,” said John Ackerly, President of the Alliance for Green Heat.

Analysis

Wood and pellet heaters that at least 75% efficient are cleaner on average than those that have efficiencies below this threshold. Pellet stoves that test over 75% efficient emit five times less carbon monoxide (CO) than those with efficiencies under 75%. Wood stoves that test over 75% efficiency emit less than half of the CO of their less efficient counterparts.

The 75% efficiency threshold favors pellet technologies, as consistently dry fuel and automated combustion make it far easier to achieve consistently higher efficiencies. Sixty percent of all pellet stove models are over 75% efficient, compared to only 40% of wood stoves. Most catalytic and hybrid wood stove models are above 75% efficient, but only 12% of non-catalytic stoves will be eligible for the tax credit.

The seventy-five percent efficiency requirement was originally chosen about seven years ago, when fewer appliances could meet that level. With today’s technology, 75% efficiency is not a particularly high threshold, but it is much higher than how the 75% threshold was interpreted by industry to meet the previous $300 wood heating technology tax credit. That credit, under Section 25C of the tax code was also pegged to 75% efficiency but Congress did not consistently specify high heating value.

Using efficiency as the sole metric to identify wood and pellet heaters to receive public subsidies is a blunt and imperfect metric but satisfies legislators’ need for simplicity. Particulate matter (PM) emissions from cord wood stoves and boilers are a more important metric for public health. Efficiency is a more valuable tool for pellet appliances since their lab tested efficiencies are a reliable indicator for the efficiency homeowners' get. But wood and pellet appliance manufacturers sometimes purposely lower their efficiency to achieve other goals valued by consumers. Some pellet stove manufacturers use excess oxygen, leading to lower efficiency, to keep the viewing glass clean. Some wood stove manufacturers use excess oxygen to achieve cleaner, faster combustion and to prevent the operator from giving the unit too little air, which causes smoldering. The State of Alaska is currently exploring new metrics to identify cleaner wood heaters, including using the amount of PM created during the first hour of certification test burns.

Using efficiency as a metric does help deploy heaters that will save consumers money with a low-carbon renewable. Since the early 1900s, wood fuel has been the primary way that American households have avoided or reduced fossil heating fuel. An estimated half of American households who heat with wood gather all or most of it themselves, making it a highly sustainable fuel in a country with extensive forest cover.

This bill will help Americans afford to replace older wood heaters or buy higher efficiency ones and have them professionally installed because the tax credit covers the cost of installation. It will also help scores of small pellet mills across the country that mainly use sawdust produced by sawmills. Finally, the bill will also help manufacturers of more efficient wood and pellet appliances and encourage them to redesign heaters to be more efficient.

Benefits of a tax credit do not help everyone equally. Lower income families benefit far more from a rebate granted at time of purchase and many do not have the income level to benefit from a tax credit. And, the 75% efficiency threshold excludes the value wood stoves sold at hardware chains that are affordable to lower income households. Unlike wood stoves, many low cost pellet stoves are at least 75% efficient.

“The Alliance for Green Heat applauds this increased tax credit and calls on Congress needs to do more,” said Ackerly. “We need a dedicated federal fund to switch old, uncertified stove to cleaner heating technologies, similar to the federal program for diesel trucks. We also need increased funding for DOE and National Labs to focus on R&D to develop a new class of automated wood stoves and smart pellet appliances that integrate with solar and heat pumps and reduce electricity demand during winter electricity peak events,” Ackerly continued.

A separate bill included report language that directs the DOE to continue the $5 million grant program for R&D to modernize residential wood and pellet heaters. The Alliance for Green Heat worked with Senator Collins’ office to ensure this report language was included again.

The massive omnibus package included other provisions that could help advance cleaner and more efficient wood and pellet heating:
  • $1.7 billion reauthorization of the Weatherization Assistance Program to support low-income families by retrofitting homes with cost-saving clean energy technologies.
  • Robust funding for EPA “core” programs to protect clean air.
  • Reauthorization of the EPA Diesel Emissions Reduction Act (DERA) program, which is a model for a national wood stove change out program.
  • $200 million timber hauling businesses that experienced a loss of at least 10% of gross revenue between January 1, 2020 and December 1, 2020, compared to the gross revenue earned in the same period in 2019.

 

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