Senators Propose Adding Wood and Pellet Heat to Renewable Energy Incentives

For years, homeowners have enjoyed a 30% tax credit on the cost of installing solar panels on their home or adding geothermal heat.  In Europe, virtually every country also includes automated, high efficiency pellet stoves and boilers. Why hasn’t it happened here?

Senators Angus King (I-ME), Susan Collins (R-ME), and Jeanne Shaheen (D-NH) introduced the Biomass Thermal Utilization (BTU) Act to do just that. The tax credit for solar panels has disproportionately benefited wealthy urban and suburban residents, who can already afford fossil fuel energy, but want to help the planet. By adding tax credits for modern wood and pellet stoves, you benefit a more rural demographic that is not necessarily trying to be “green” but who are merely wanting to use a more affordable fuel than fossil fuels to heat their homes. 

Congress can pick and choose which technology it wants to favor, and which demographic it wants to favor.  But a more technology neutral approach has many benefits and the case for high-efficiency wood and pellet appliances is a strong one: it displaces about the same amount of fossil fuel as the average solar panel installation. Wood and pellet stoves have a shorter payback period, which makes it more likely that a middle-income family chooses a pellet stove. The technology is less expensive thus it costs the tax-payer far less to displace the same amount of fossil fuel. Utilizing thermal biomass helps ordinary families without access to natural gas that struggle to pay high heating bills. The BTU Act extends technology options to low and middle income families.

The BTU Act will add a provision to include biomass fuels to the list of existing technologies that qualify for the residential renewable energy investment tax credit in Section 25d of the Internal Revenue Code. To qualify, the property utilizing biomass fuel must operate at a thermal efficiency rate of at least 75% HHV and be used to either heat space within the dwelling or to heat water. The BTU Act allows for both wood and pellet appliances to be eligible but the 75% higher heating value (HHV) means that only the most clean and efficient ones will be incentivized.

The justification for solar subsidies is not just the displacement of fossil fuel, but also to help an emerging technology off the ground so that it can be cost competitive without subsidies.  Pellet stoves and boilers need a similar boost.  The higher up front cost of a pellet stove or boiler is a major deterrent and until there is greater demand, when the per unit cost is likely to drop. Like solar, there needs to be a more robust infrastructure to permit, install and repair the appliances.  Over 10 million Americans use wood or pellet stoves to heat their homes but only perhaps 20% have modern high efficiency appliances that do not emit smoke. If our country is to switch to modern, clean, high efficiency wood and pellet heating, we need to incentivize those appliances.  Our current approach is not working.

Urge your Senator to become a sponsor of the BTU Act, click here:

http://www.forgreenheat.org/act/act.html

For more information: BTEC link

http://www.biomassthermal.org/legislative/action.asp

Important Clarification on Stove Tax Credit

Federal tax credit for residential biomass appliances is a full $300, not 10% up to $300

Alliance for Green Heat, February 7, 2013 - The hearth industry, the Alliance for Green Heat and scores of other institutions and companies have been incorrectly stating that the Internal Revenue Service (IRS) provides a 10% tax credit up to $300 for qualified biomass heaters.

In fact, the IRS provides a tax credit equal to expenditures up to $300 for qualified stoves. This means every qualified stove purchase will receive the full $300 unless the taxpayer already claimed a similar credit of $500 in a previous year.

The confusion arose because one set of energy efficiency improvements under 25C of the tax code are only entitled to a 10% credit up to a set amount. However, taxpayers who purchase biomass stoves are eligible under 25C(a)(2), which provides that qualified residential energy-efficient property may be eligible for a tax credit equal to the full cost of the equipment up to a set amount, which is $300 for biomass stoves.

Taxpayers filing with companies such as Turbo Tax, H&R Block or other tax preparation software should receive the full $300. While the error of stipulating that only a 10% tax credit is widespread among hearth retailers, manufacturers and others, it is unlikely that any professional tax preparation software would calculate the credit incorrectly.

The difference to taxpayers is substantial. For example, a $1,500 stove would only allow for a $150 credit, if the 10% provision applied. Click here for a copy of IRS form 5695 to claim the tax credit. A biomass stove purchase would be claimed in line 24 of form 5695.

For more information, visit our blog and this authoritative site: www.dsireusa.org/incentives.

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The Alliance for Green Heat promotes biomass heat as a low-carbon, sustainable, local and affordable heating solution. The Alliance is a non-profit Maryland organization and is tax-exempt under section 501c3 of the tax code. For more information: www.forgreenheat.org.