Friday, February 26, 2021

AGH urges IRS guidance to recognize efficiencies in the EPA Database

 Attorneys for AGH have facilitated numerous phone calls and correspondence between AGH and the IRS staff who write guidance for Section 25D of the US tax code that provides tax credits for residential renewable energy property.  This summarizes our communications with IRS attorneys and staff.


The Alliance for Green Heat (AGH) strongly urges the IRS to issue guidance on which wood and pellet heaters are eligible for the new 26% ITC tax in Section 25D.  Congress added  “qualified biomass fuel property expenditures” to section 25D.  Just as with Section 25C, this include stoves, boilers and furnaces that use biomass as fuel.  (Ninety-nine percent of biomass heaters use wood or wood pellets, but corn or wood chips could be used as well.)


Modern wood and pellet heaters are an important part of the array of renewable technologies we need to combat climate change. This tax credit is an important policy tool to help taxpayers reduce their fossil heating fuel usage with a renewable fuel.  By targeting wood and pellet heaters that are at least 75% efficient, Congress is helping taxpayers afford the more expensive and cleaner heaters.  Congress is also benefitting those stove manufacturers who invested in the R&D to make more efficient heaters and encouraging all manufacturers to reach higher efficiency levels in the future.  


Your guidance can be very simple: to be eligible for the 25D tax credit, wood and pellet heaters (e.g. qualified biomass fuel property expenditures) must have an efficiency of 75% or higher on the EPA-Certified Wood Stove Database.  


You may want to also add that manufacturers cannot issue certificates of eligibility unless their heater is rated at 75% efficient or higher on the EPA-Certified Wood Stove Database.  Instead of taxpayers keeping manufacturers certificates of eligibility in their files, they could simply rely on the EPA database. 


We urge the IRS to act quickly on this because the tax credit is already in effect and manufacturers, retailers and consumers need to be sure which heaters qualify.  While we believe the plain meaning of the credit already is clear and that the EPA database is the obvious, authoritative resource, significant abuse of the credit is likely unless you issue timely guidance.


To be eligible the biomass fuel property, Congress stated that heaters must have “a thermal efficiency rating of at least 75 percent (measured by the higher heating value of the fuel).”  The IRS should provide guidance that the EPA Certified Wood Stove Database is the way to determine which heaters are at least 75% efficient. Note that the EPA maintains a data for room heaters (stoves) and for central heaters (boilers and furnaces).  Both of these databases use the higher heat value to measure efficiency and every EPA certified heater has a verified efficiency from an EPA approved third party test lab


The column in the EPA database is titled “Overall Efficiency” which they define as “the percentage of heat that is transferred to the space to be heated when a load of fuel (e.g., firewood, pellets) is burned.” Thus it is clear that their use of “overall efficiency” refers to thermal efficiency, as used by the US Congress.  


There is no other consistent, reliable and transparent way for stakeholders to determine the efficiency of qualified biomass fuel property other than using the efficiency listings on the EPA Certified Wood Heater Database.  Allowing manufacturers to issue certificates of eligibility based on cherry-picking the highest efficiency of one burn rate, rather than using the average of all the burn rates does not conform to the plain meaning of Congress’s intention.  If Congress wanted virtually all wood and pellet stoves and boilers to qualify, it could have either removed any reference to efficiency, or specifically said that the efficiency of any burn rate or test would qualify. Note that Congress also did not specify that efficiency numbers had to come from a third party, EPA approved test lab during a certification test.  Thus, a clever industry lawyer could argue, that in addition to choosing the highest efficiency number from any burn rate, they could also use their own test labs to determine efficiency or use a test from third party lab that was not part of a certification test.


Unfortunately, the wood and pellet stove industry has a track record of subverting the plain language that Congress has used when it defined which stoves should be eligible for the previous, $300 tax credit under section 25C.  Up until Jan. 1, 2021, when wood and pellet heaters were under Section 25C manufacturers could use the lower heating value, but more importantly, they did not have to disclose the efficiency of the stove at all, or to disclose whether it was from a third-party lab or their own lab. Thus, virtually every single wood and pellet heater qualified for the Section 25C tax credit.  AGH wrote many blogs about this problem, and how manufacturers were able to take advantage of this tax credit and mislead consumers into thinking they were buying stoves at 75% efficiency or higher.


We do not recommend that taxpayers rely on a certificate from the manufacturer, unless the IRS states that a manufacturer can only issue a certificate if it is consistent with the efficiency listing on the EPA database of certified stoves.  


In addition, your guidance could state that in order to eligible for the 25D tax credit, the biomass fuel property must be EPA certified and appear on the Database of EPA Certified stoves.  All residential heaters on the market today are supposed to be certified by the EPA.  Fireplaces and chimeneas are not considered be residential heaters, thus they are not covered by EPA regulations. Typically, they also do not have or advertise thermal efficiency values.  But there is always some company that will try to get their uncertified product eligible for the credit unless the IRS makes it clear what can be eligible.


Various sectors of the wood heating industry may urge you to use a different definition of 75%.  Currently,  the website of the Hearth, Patio and Barbecue Association (HPBA) says that pending the expected IRS guidance, “the EPA certified wood heater database may be referenced.”  The Alliance for Green Heat worked with HPBA from 2017 through 2020 and they had been in agreement that the EPA database should be used to determine efficiency.  However, we understand that the Association’s Solid Fuel Section no longer has consensus on a position, and the Association is no longer able to take a position at this time. We understand that some leading companies believe that they can claim eligibility if any single burn rate was 75% or greater, instead of using the average of the burn rates.  This could result in an overwhelming majority of stoves being declared eligible.  Currently, about 45% of all wood and pellet stoves, boilers and furnaces would be eligible, based on the EPA list.


The only class of heater that has a good claim to high efficiency but cannot readily take advantage of this tax credit are masonry heaters.  Masonry heaters are currently exempt from EPA emission standards and thus do not have a pathway to measure and report emissions or efficiency.  While many masonry heater models are indisputable 75% efficient or higher, there is not a consistent, transparent way to compare them and find their efficiency, as there is with EPA certified stoves and boilers.  

According to the
 DOE website masonry heaters "produce more heat and less pollution than any other wood- or pellet-burning appliance."  The EPA website say Masonry heaters are typically very efficient heaters, and currently do not require EPA certification.   If the IRS is interested in finding a way to make masonry heaters eligible, I would encourage you to contact the Masonry Heater Association.  The Alliance for Green Heat is also available to provide you further detail about this uniquely clean and efficient class of wood heaters.


Congressional intent


AGH wrote a blog that looked at Congressional intent and noted that previous iterations of Congressional legislation included more detail.  For instance, For instance, the Home Energy Savings Act of 2019 said:

“This section would tighten energy efficiency standards for biomass stoves by requiring the efficiency to be determined in reference to the EPA’s “List of EPA Certified Wood Stoves,” “List of EPA Certified Hydronic Heaters,” or “List of EPA Certified Forced-Air Furnaces.” Biomass stoves, through 2020, would be required to have a thermal efficiency rating of at least 73 percent against these tighter standards. After 2020, biomass stoves would be required to have a thermal efficiency rating of at least 75 percent against these tighter standards.” 

This language was developed for Congress by a consortium of energy efficiency and other groups, including the Alliance to Save Energy, the ACEEE, our organization, HPBA and many others. This language turns up often in memos from this consortium to Congress, including this one on May 1, 2019 If you scroll to the very bottom of the last page of that memo, you will find the suggested language for biomass heaters.

Biomass stove - Thermal efficiency of at least 75 percent. Product category cap of $300. 

Proposed: Thermal efficiency of at least 73 percent higher heating value through 2020 – and 75 percent higher heating value after 2020 – as reported by the EPA on the "List of EPA Certified Wood Stoves" or “List of EPA Certified Hydronic Heaters” or “List of EPA Certified Forced-Air Furnaces.” Product category incentive cap raised to $400. 

Also please find attached an earlier memo signed by energy efficiency organization urging the IRS to use the North American higher heating value and the average efficiency.

Please do not hesitate to contact me if I can be of further assistance.  I can be reached at 202-365-4765.  



John Ackerly,





Monday, February 22, 2021

Thermal certificates can fuel commercial wood heating

Renewable Energy Certificates (RECs) are the market instruments used by state governments to identify who produced renewable energy.  When states require utilities to meet a certain percent of their energy from renewables, they can either produce it themselves or buy RECs.  RECs have been the core mechanism for solar to grow in the United States, but rarely were they used for renewable heat.  Currently a number of states provide RECs for renewable heat, which could come from biomass, solar thermal or geothermal.   A handful of states, including New Hampshire and Massachusetts now include thermal biomass and Maine, Maryland and others are exploring it.

The Governor of Maryland proposed adding thermal RECs to Maryland's renewable portfolio standard (RPS) as part of its legislative package this year.  The Alliance for Green Heat was invited to testify to the Senate Finance Committee on February 23 and we reproduce our testimony below.  During the hearing on the House side, several witnesses opposed the legislation based on particulate matter emissions and carbon, so AGH focused comments on those areas.  

Chair Kelly and Vice-Chair Feldman and Members of the Senate Finance Committee:

Thank you for the opportunity to testify before this committee.  My name is John Ackerly and I am the President and Founder of the Alliance for Green Heat, a non-profit group based in Takoma Park Maryland that promotes renewable heating options.  As you may know, Takoma Park has a corn heating co-op, started by Mike Tidwell, before he founded the Chesapeake Climate Action Network.  What we are debating here is even better than heating with corn, because corn involved forest land conversion into agricultural fields.

We worked particularly closely with the Maryland Energy Administration and Delegate Heather Mizeur back in 2012 to set up their popular Wood Stove Grant Program, where about 85% of grants go to very clean burning pellet stoves.

We enthusiastically support the passage of Senate Bill 549 and the companion House Bill 682 because of the significant benefits to displacing fossil fuel.  We also support the amendments that would end Tier 1 RECs for black liquor since RECs should incentivize more renewable energy capacity, not subsidize existing renewable energy.  Thermal RECs have fallen prey to black liquor politics for too long.  It is time for a vote on their own merits.  

Particulate matter

Larger biomass systems are able to drastically reduce particulate matter (PM2.5) through electrostatic precipitators and other PM reduction technologies.  In terms of pollution, the most important thing to recognize with biomass heating is that residential wood stoves and boilers – whether EPA certified or not – are the biggest threat to local air quality.  A study done for the State of Minnesota shows the advantages of automated biomass boilers compared to traditional wood stoves. It shows that per unit of heat, wood stoves emit 12 to 25 times more PM10 than modern boilers.  

If Maryland wants to tackle wood smoke, the best solution would be to reduce the number of traditional wood stoves, particularly in more populated areas.  Pellet stove are an excellent residential heat option, and together with solar panels, can reduce a home’s fossil fuel usage by 50 – 90%.  

The benefit of passing this legislation in Maryland, is that the Maryland Department of the Environment has strict air quality regulations and staff that understand pollution control technologies.  The commercial systems that this legislation would enable will have to have technologies like electrostatic precipitators (ESPs) or similar technologies.  Most if not all Northeastern states have similar air quality protections but in some parts of the United States, ESPs would not be required and biomass heating plants could pose local air quality problems. 


 From a carbon perspective, wood pellet heating emits less than half the carbon of propane and is even more favorable compared to heating oil or gas.  My organization has reviewed scores of Life Cycle Analyses (LCAs) and has not found any that show wood or pellets is worse than fossil heating fuels.  It’s important for this committee not to confuse the Life Cycle Analysis of industrial scale wood or pellets used make electricity, which is a far different equation.  When biomass is used for electricity, it is combusted at about 30% efficiency, but when it is combusted for heat it is up to 80% efficiency.  In addition, the harvesting methods for industrial scale pellets, for example, that are shipped to Europe, involve using more whole trees, not residuals as they do in Maryland.  

A peer reviewed University of New Hampshire study in 2017 found that heating with pellets reduces greenhouse gas emissions by 54 percent vs. home heating oil, and 59 percent vs. natural gas. This chart summarizes their results.

Other factors

When comparing modern biomass heating systems to fossil heating fuels, there is more to look at than just PM and carbon.  There are toxicity implications for soil, water and humans.  The chart below compares softwood (pine) pellets with other fuels.  (Brassica pellets are not used in America and refer to pellets made from agricultural crops, or possibly hay.). This is important because the Chesapeake Bay watershed is a sensitive one, and we are confident that these modern biomass heating plants compare relatively well in almost all respects to other fuels.

This committee is considering other bills to expand Maryland’s renewable energy portfolio and one that specifically seeks to expand geothermal energy in Maryland.  We also urge you to support the geothermal bill and urge you to consider the cost/benefit analysis of geothermal and look at other socio-economic factors.  We need to be mindful that investments in various renewable energy pathways benefit different communities and different workforces in Maryland.  Biomass heating – both at the residential and commercial scale – has far more benefits for rural Marylanders, whose homes and businesses do not have access to natural gas lines.  In this age where we all know that environmental justice is important and jobs for lower income Marylanders is important. We urge you to vote favorably on SB 549.


John Ackerly,