AGH urges the IRS to issue guidance on wood heater eligibility for tax credits

Thank you for this opportunity to provide comments.  IRS guidance on wood heaters is long overdue.  The Alliance is an independent non-profit organization that strives to represent the interests of consumers of wood and pellet heaters.  We believe a tax credit for wood and pellet heaters is essential as we transition from fossil fuel to renewable fuels. 

The IRS asked whether guidance needed to define the term "thermal efficiency rating"? If so, what testing procedures should the Treasury Department and the IRS consider requiring or permitting to be used by manufacturers to measure thermal efficiency and demonstrate ratings that are valid for purposes of the § 25C credit?

 

Summary: The most reliable method to protect consumers, ensure that tax credits are going to compliant models and create a level playing field for manufacturers is for Treasury/IRS to specify that eligibility is limited to units listed in the EPA Certified Wood Stove Database that have an overall weighted average efficiency of 75% or more using the higher heating value of the fuel.  

 

Using the EPA database to determine eligibility is the most effective solution from a variety of public policy perspectives but it is not without problems: multiple test methods result in disparate EPA seasonal average efficiency results for wood and pellet boilers, which are not comparable, and which are not helpful for consumers or for the purposes of setting an efficiency threshold for the tax credit.  The EPA is aware of the problem but an impending change in IRS guidance on wood heater tax credits is likely to hurt members of the industry who sell some of the most sophisticated modern wood heating equipment.  We urge the IRS to consult with the EPA on this problem and find a solution as soon as possible.

 

In addition, we urge the IRS to make it clear that the $2,000 tax credit for wood heaters is in addition to the $1,200 for other 25C qualifying home projects, not instead of them. The IRS should clarify that the full $3,200 is available to taxpayers. We also urge the IRS to confirm that 25C tax credits are available to renters, not just to owners of residences, based on the removal of the term “owner” by Congress.

Finally, the IRS asked for comments on certification or other requirements for home energy auditors.  We urge the IRS to affirm that when energy auditors are directed to inspect HVAC systems, that wood and pellet heaters are recognized as legitimate heating devices and need to be inspected for safety based on nationally recognized criteria, just as other heating systems are.  Various agencies and institutions such as DOE, NREL and BPI have begun to address this problem but wood heater remain marginalized, leaving many older, self-installed units that pose fire hazards and are not being properly inspected.

Background on wood and pellet heater testing: There is universal acceptance among test labs and manufacturers that efficiency is measured using in accordance with CSA B415.1-10.  When stoves are tested for EPA certification, the traditional test is to use the EPA’s “Method 28” which consists of 4 burn rates, from low (Category 1) to high (Category 4).  The lowest burn rate allows the lowest amount of air to flow through the stove and typically produces a higher efficiency.  High burn rates allow maximum airflow through the stove, and typically produce lower efficiencies.  The labs then combine these 4 efficiency numbers and produce “a weighted average efficiency” which is what is recorded on the EPA database of certified heaters as “overall efficiency.”

CSA B415 produces three types of efficiency: Overall efficiency, combustion efficiency and thermal efficiency.  The EPA uses Overall Efficiency to get an Average Overall Efficiency” and EPA guidance on testing deficiencies makes no reference to “thermal efficiency.”  Even within the wood and pellet heater industry, there is confusion between the terms “overall efficiency,” “thermal efficiency” and “weighted average efficiency.” The image below is an representative example of how test labs report efficiencies.  

Each of the four burn rates produces an overall efficiency number, and combustion efficiency number and heat transfer, or thermal efficiency number.  The EPA averages the four overall heating efficiency numbers to get a weighted average efficiency.  In the EPA database, this weighted average efficiency is in the column titled “Overall efficiency- HHV.” (The EPA used to use the term “Actual measured efficiency CSA B415.1 after they stopped using default, estimated efficiencies in 2015.)

There are eight labs approved by the EPA to conduct certification testing, including one in Canada, Czech Republic, Denmark and Sweden.  The labs do not use efficiency terminology consistently, and often just refer to “efficiency” rather than “overall efficiency” or “weighted average efficiency” rather than “weighted average overall efficiency.” All labs clearly distinguish HHV and LHV, and no lab uses “thermal efficiency” in their weighted averages, as far as we know.

However, some manufacturers will use “Heat transfer efficiency” otherwise known as “thermal efficiency” numbers to qualify models for the tax credit because they tend to be 1-2% higher than “overall efficiency.” Thus, if a stove has an average overall efficiency of 75%, it could have a single burn rate as low as 69%, using thermal efficiency numbers.  No manufacturer uses combustion efficiency for purposes of the tax credit as far as we know.  Combustion efficiencies tend to be in the 96-98% range.

Wood heaters are tested by EPA approved labs and then the EPA uses the data in the report to certify the stove for sale. Once it’s certified the EPA puts summary data on its Database of certified wood heaters. Since 2015, the EPA has also required manufacturers to post the non-confidential parts of their lab test report on their website.  Those reports are public and you can find the efficiency numbers for each burn rate, but they are not easy for consumers to navigate. On the contrary, they are dense, full of fine, highly technical jargon and are only used by regulators and experts.

Statistics: Currently, 25 of the 31 central wood heaters are eligible for the tax credit, using the EPA list.  113 of the 262 room heaters are above 75%, using the EPA list.  Overall, that would make about half of all heaters eligible, if the IRS were to use the efficiencies listed on the EPA database.

Public policy considerations: To achieve a level of transparency for the consumer, using the EPA database of certified heaters is an obvious solution.  Some consumers care about efficiency and the only place that consumers can make side-to-side comparisons is on the EPA database.  With pellet stoves, efficiency typically matters more than wood stoves because unlike cordwood, all pellets must be purchased, and a more efficient stove can save consumers by using less fuel.

If the IRS wants to be more lenient with manufacturers and allow more than about half of heaters to qualify, it could keep allowing manufacturers to issue certificates without any guidance, or specifically say that if any burn rate achieves 75% efficiency or more, it can be eligible for the tax credit.  If the IRS specified this, we expect all manufacturers would quickly adopt this system and about 80% or more of appliances would be deemed eligible.

Public policy is also served by setting a level playing field for all manufacturers, instead of allowing some brands to undercut others by claiming their units are eligible for the tax credit when they are below 75% on the EPA database.  Almost all US manufactures now use the EPA database to determine if their models are eligible.  

By setting an efficiency threshold for wood heaters, certain types of wood heater benefit.  The Alliance for Green Heat has monitored the changes to efficiency in wood heater for more than 10 years and documented the various ways that manufacturers claim that their stoves are eligible for the tax credit.  The averages below were calculated several years ago, when efficiencies were lower but the conclusion is remains the same: hybrid wood stoves have on average, the highest efficiencies are virtually all of them qualify for the tax credit, under any definition.  More manufacturers are building hybrid stoves in order to qualify for the tax credit and whereas there were only 6 models several years ago, today there are at least 21. Non-catalytic stoves, the cheapest, most popular, and most basic stove, have the hardest time reaching 75% efficiency. Today, only 15 out of 113 non-catalytic models are 75% or over.

From a public policy perspective, setting a 75% efficiency minimum, using the EPA database of certified heaters, is positive in that it tends to favor stoves that emit fewer particulate matters (PM) emissions.  Non-catalytic stoves tend to have higher emissions both in the lab and in the hands of homeowners if other factors are equalized such as moisture content of wood and ability of the operator. Pellet stoves and hybrid stoves tend to the cleanest, as used by homeowners.

Many taxpayers want to be able to download a certificate of eligibility to keep in their files, and taking a screen shot of the EPA list may not be as easy or feel as secure. The owner’s manual of the stove almost always has the weighted average efficiency, so that can also serve as proof of eligibility for the taxpayer.

There are two classes of heaters that would be unfairly penalized by an IRS requirement to base eligibility off the efficiency numbers in the EPA database.  The first is that multiple test methods result in disparate EPA seasonal average efficiency results for some indoor wood and pellet boilers which are abnormally low and are not comparable to other boilers or helpful for consumers or for the purposes of setting an efficiency threshold for the tax credit.  The EPA is aware of the problem, as is NESCAUM and NYSDERDA who are involved in testing programs to try to identify the calculations and assumptions leading to this problem and then find a solution.

The second are Masonry heaters are also penalized but since they do not yet have a pathway to EPA certification, the solution is more complicated. There are consistent and reliable ways to test factory-built masonry heaters and those manufacturers could issue Certificates of eligibility for the tax credit, but they will not be listed on the EPA database.  Standard combustion chambers used in site-built masonry heaters could also be tested but this is more complicated.  The Masonry Heater Association is the point group on this issue.

IRS options

The IRS has several options, depending on what their goals are.  

 

1.     The first, and best option, in our opinion is to use the “overall efficiency” numbers listed on the EPA database of certified wood heaters be the sole arbiter and end the practice of using manufacturer certificates, or only allow manufactures to issue certificates for heater models that are listed at 75% efficiency or higher on the EPA database. Many of the benefits of this are discussed above in the public policy discussion.

 

2.     There is a hybrid option of allowing manufacturers to issue certificates of eligibility if a model exceeds is 75% efficient or over for stoves and outdoor boilers or furnaces, or is 75% or more overall efficiency on any of their burn rates for indoor boilers or furnaces. 

 

3.     There is the current system, where manufacturers self-issue a certificate to declare that a particular model is eligible, sometimes without any reference to efficiency figures or definitions. This has resulted in manufacturers claiming models with weighted average efficiencies as low as 64% to be eligible. This has also allowed manufacturers to claim units that are not EPA certified to be eligible without providing any efficiency data. Another weakness of this option is that there is no agency with the time, resources, or agility to provide enforcement in this area, leaving consumers vulnerable to false claims. 

 

On the following pages, we have included representative samples of four types of manufacture certificates of eligibility for the tax credit.  The disparity of the language used and the range of models that are claimed to be eligible for the credit show a clear need for more guidance for the IRS.

 

A. Example of a certificate that claims eligibility without reference to efficiency, even though it appears all units are above 75% efficiency based on the EPA database.

 

B. Example of a company that claims its units are eligible, even though they are well below 75% on the EPA list and do not meet 75% even on individual burn rates.

 

C. Example of EPA non-certified stoves without EPA approved third party lab efficiency data to claim eligibility.

 

D. Example of a certificate that claims models are eligible solely because they are “qualified energy property” with no reference to efficiency.

 

EPA releases long-awaited searchable wood heater database

A screen shot of part of the
navigation of different fuel types
in the new EPA database

Consumer friendly site is cause of worry for some

Updated Dec. 2020  - The EPA released its long-awaited searchable stove and central heater database, overhauling a decades-old practice of using basic excel sheet lists.  The database is now a very user friendly site for consumers and all stakeholders.  A simple search that could have taken hours, now takes seconds.

The EPA said the new database was designed to“improve accessibility and usefulness” by allowing users to search for the cleanest stoves, the most efficient stoves, those designed to burn cordwood and other attributes.

A wide range of stakeholders, from industry to states to non-profits, had been urging the EPA to switch to a modern searchable format for nearly a decade. The painfully slow development of the database at times seemed to epitomize the government's reputation to move at a snail’s pace. The list is maintained by the EPA’s Office of Enforcement, which like much of the EPA has been hit with repeated budget cuts and loss of staff in recent years.

The sleek new functionality of the list, allowing users to focus on one parameter or another, is also worrying to many in the stove industry. Traditionally, this list of certified wood heaters has not been a primary information source for consumers. But with this new functionality, consumers may start relying on it more and more, leading to some unintended results, such as worse buying decisions or ones that favor some manufacturers over others.  Similar to the feature in the old excel spreadsheets, the new database now also indicates new additions.

One fear is that consumers will put too much reliance on higher BTU output if they can easily search and cross reference by these values. Right-sizing a stove is already problematic, and the BTU values on the list are overinflated due to loose parameters that allow labs to show high BTU output. Another fear, expressed by some manufacturers at the recent HPBA Expo in Nashville, is that consumers will favor “Cord Wood” stoves over “Crib Wood” stoves because they are not familiar with the lexicon of stove testing and the legacy of crib wood. 

The EPA chose to include a box that helps consumers identify the cleanest and most efficient stoves,

and some say that this puts unwarranted attention to values that won’t necessarily translate from the lab to the home. This “Quick Searches” box will likely be used by consumers who don’t understand pellet stoves work similarly in the home as they do in the lab, but wood stoves can only achieve the optimal lab numbers with a large bed of coals, dry wood and careful operation.

This “certified fuel type” feature also sheds light on one the biggest problems with the new searchable data – accuracy. Six wood stoves were initially listed as using wood chips as a fuel, an apparent mistake according to one of the manufacturers of those stoves. As of November 2020, two stoves are still listed as being tested with wood chips, even though no such test method exists. This could hurt sales of those units if consumers are relying on the database to narrow down the stoves they may purchase. EPA staff are quick to say that this is a work in progress and it is incumbent on manufacturers to vet the list and provide the EPA with corrections. In 2017, the HPBA warned the EPA that many inaccuracies existed in the database. Many of the same errors are still listed two years later.  A whole new frontier of recognizing deficiencies is now being opened up by an Alaska initiative that is reviewing all certification documents.

The Alliance for Green Heat welcomes the new database and had the opportunity to provide input on several occasions as other stakeholders did. Some of our suggestions and wording was adopted and some was not. AGH believes that the new database will help consumers become more educated about the working of stoves and the terminology, but it will take time and effort by the wood heating community.  AGH is currently urging the EPA to add a column showing what test method was used to identify single burn rate stoves and stoves that used an alternative test method.

The release of the database was coordinated with the update of some key pages on the EPA's Burn Wise website. The EPA finally changed their page on hydronic heaters which previously defined and pictured them just as outdoor boilers, a change that AGH had urged them to make for years. They also made major changes to their efficiency page which had not been updated since the EPA began requiring testing and reporting of efficiency of stoves.

Features and functions

·      Pellet stoves

The database shows 98 out of the 242 models are pellet stoves.  Nearly half of the  pellet stove models are 1 gram or under.

·      Catalytic Stoves

The database shows that 30 of the 144 models are catalytic, and another 19 are hybrids which also use catalysts. 

·      Hybrid Stoves

Wood stoves are divided into three
subtypes - cat, non-cat and hybrid.

Hybrid stoves, which almost all use both catalysts and air tubes for secondary combustion, are listed as a subtype and  there are now 19 stoves listed as hybrid. AGH is urging the EPA to also add “automated stoves” as a subtype in the future. Both hybrid and automated stoves offer great promise to help consumers run stoves more cleanly.

·     Cord vs. Crib wood
                  As of Nov. 2020, 83 of the 144 wood stoves were tested with cord wood, indicating a surging popularity with the ASTM test method, that allows more flexibility in the lab.

      BTU Output

With tighter homes and a new breed of tiny homes, it is now easy to search for stoves with the lowest BTU output. Many models are tested at less than 25,000 BTU. AGH believes that many units still have erroneously high BTU values based on loose parameters in lab testing and reporting, and these values should be used with great caution. 

Firebox volume

The cubic size of the firebox is an equally useful tool to estimate BTU output.  They range from 0.5 to 4.4 cubic feet. AGH has concerns that some BTU output figures are exaggerated due to the allowable calculations that labs can use to estimate heat output.  Small fire boxes are usually considered to be up to 1.5 cubic feet and good for holding a fire for no more than 4-6 hours.  Medium fireboxes are in the 1.5 to 2.5 range and usually can hold heat for 6 - 9 hours and large fireboxes are 2.5 - 4.5 cubic feet and can easily hold heat overnight.

Test method

In December of 2020 the EPA added a column to designate the test method that was used to determine emissions, but they have not yet populated the column with any data. This will help better understand which are single rate burn stoves, for example, and which stoves got variances.  The detail will be too technical for the average consumer but useful for stove geeks and agencies.

·      Efficiency

The EPA has chosen to use the term “overall efficiency” instead of simply “efficiency.” Some manufactures use “optimal efficiency” or “maximum efficiency” instead of publishing the EPA tested efficiency, which is lower. One hundred out of 244 models tested at 75% HHV efficiency or greater.

·      Carbon monoxide

Like efficiency, carbon monoxide is required to be tested and publicly disclosed, but there is no regulated minimum or maximum that must be met.  The CO listing raised concern from some who worry that consumers may use it instead of PM as a primary indicator of cleanliness, or that consumers may think it’s an indication of amounts of CO emitted into the room.

· 

·       Previously certified

The database also shows the 205 stoves that were previously EPA certified at 4.6 grams or higher, a feature that could be very helpful for change out program managers who want to target older certified stoves, many of which need replacement.

·      Key terms and definitions

The EPA provides a new page with definitions of key terms such as adjustable burn rate vs. single burn rate heaters, fireplace insert, wood pellets, etc.

·      Central Heaters

The database is separated into two: “Room Heaters” and “Central Heaters” and you have to select one or the other or your search may turn up empty. There are 32 central heaters with 12 that use pellet fuel.  Of the 32 heaters, only 3 are forced air furnaces.

·
Not included in the new database

Some stakeholders have urged the EPA to include more search attributes, such as the test method, lab, and a link to the detailed lab report that manufacturers are required to post on their websites. The list also does not say whether PFI certified pellets were used during certification testing and are thus technically required to be used by the consumer.  Up until 2007, the list used to include the deadline that the five year certification certificate expired.  Up until the summer of 2015, the list included the outmoded estimated default efficiencies, which listed all non-cats at 63%, cats at 72% and pellet stoves at 78%.  The default efficiencies were set based on testing in the mid and late 1980s, resulting in relative accurate estimates for wood stoves, but helping to develop the enduring myth that pellet stoves had such high average efficiencies.

Contact Rafael Sanchez at the EPA's Office of Enforcement to address errors or omissions in the database, (sanchez.rafael@epa.gov) at (202) 564-7028.

HHT and Ravelli agree to release efficiency for 5 stoves

In response to a Freedom of Information Act request filed by the Alliance for Green Heat, Hearth & Home Technologies (HHT) and Ravelli released actual efficiency numbers for several of their popular pellet stove models.  Efficiencies ranged from 56% to 76%.

Wood and pellet stoves certified after May 2015 must test for and disclose their efficiency to consumers, as required by new EPA regulations. Prior to these regulations, stove manufacturers claimed that any available efficiency data was confidential and they generally did not provide it to consumers.  However, many companies provided the efficiency data to the EPA as part of the certification process. 

The Alliance for Green Heat, based on its legal counsel, argued that the EPA could not keep efficiency data it collected prior to May 2015 confidential because it was based on emission data, and emissions data cannot be confidential.  In July 2015 the EPA declined to release the efficiencies to the Alliance, in keeping with its longstanding practice that they would keep all data confidential if it was submitted as Confidential Business Information (CBI).  

Originally, the Alliance had asked for the weighted average efficiency as well as the efficiency from each of the four burn rates that labs use to test stoves.  The Alliance agreed to drop the request for the individual burn rate efficiencies and only request the average.  Based on that change, HHT and Ravelli agreed to allow the EPA to release their efficiency numbers to the Alliance with some conditions.

The EPA provided a final response with a data sheet (pdf) attached.  The efficiency numbers (HHV based on B415.1) from that data sheet are:

Company        Model                         Efficiency

HHT                Accentra 52i insert    76%

HHT                Mt Vernon E2            75%

HHT                Mt Vernon AE           71%

Ravelli             RV100                       70%

Ravelli             RV80                         56%

The Alliance requested efficiency information for these particular models, along with several others, because we were in the process of independently testing a selection of pellet stoves.  The Alliance was also attempting to convince the EPA to change their policy and disclose all efficiency data, even if that efficiency data had been marked as Confidential Business Information.  The Alliance argued   

The Ravelli RV80 Ceramica
is far cleaner than the original
RV80. The new, improved
efficiency is not yet posted on
the EPA list.

that efficiency was of such basic importance to consumers and that keeping it confidential served no useful purpose. That attempt was unsuccessful.  The Alliance is not appealing.

The five newly released actual efficiency numbers are not included on the EPA’s list of certified stoves, where about 25% of the stoves have actual efficiencies listed.  Except for one of the Ravelli’s, these five stoves all have around average or above average efficiencies.   The Ravelli RV80 was only 56% efficient, but  Ravelli has a updated version of this stove, the RV80 Ceramica, that has much lower grams per hour. (In response to this post, the EPA found that they had mistakenly omitted posting the efficiency of the RV80 Ceramica and said they would post it soon.)  Virtually all stoves claim to be 75% efficient to be eligible for the $300 federal tax credit, and EPA listing or disclosure that reveals the stove is not even 60% efficient does not appear to deter manufacturers from continuing to claim eligibility for the tax credit.   

Note: A representative of Ravelli replied to this blog saying that the RV80 is now out of production.   The Ravelli representative said that the updated RV80 Ceramica has an efficiency "over 75%." We asked Ravelli to support the "over 75%" figure with a lab report.  EPA regulations require companies to post lab report on their website for any stove tested under the 2015 NSPS.  Some companies comply, and others resist this level of transparency.