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

Federal Tax Credit for Wood Stoves Reinstated in 2013

Dec. 2019 update: Congress included the $300 federal tax credit for qualified wood and pellet stoves and boilers in a compromise tax package covering purchases in 2018, 2019 and 2020.  It is expected to signed by the President.  To be eligible for the $300 tax credit, make sure the stove you bought in 2019 or plan to buy in 2020 is 75% efficient or higher.

House democrats had pushed The Green Act that included giving wood and pellet heaters that are 75% efficient or higher a 30% tax credit, just like solar. The White House refused to include this broader package of increased tax credits for wood heaters, solar, electric cars and other technologies.

Feb. 2018 Update: The federal tax credit for wood heaters has been extended through Dec. 31, 2017.  For more details, click here.

Update: The federal tax credits for wood heaters has been extended through Dec. 31, 2016.  More more detail on the 2015/16 extension, click here.

How to claim the credit if you purchased a stove in 2015: You need to use IRS Form 5695. Put $300 in line 22A and then use Line 52 to show that amount on your 1040 form. Click here for more advice (or consult with a tax professional as we cannot and do not give tax advice.) For more background and details about the tax credit, read on.

Alliance for Green Heat, January 2, 2013 - Congress passed a bill addressing parts of the Fiscal Cliff, and it included a reinstatement of the $300 tax credit for biomass heaters that are 75% efficient using lower heating value. Another provision of the bill extended the wind production tax credit for one more year.

The biomass stove provision allows the full cost of the equipment and installation up to $300 for stoves bought in 2013 and it is retroactive, so that all eligible stoves purchased in 2012 can also get the credit. This means that every stove purchase will be able to collect the full $300 tax credit because all EPA certified stoves cost more than $300 and virtually every EPA certified stove claims to meet the 75% efficiency threshold. However, a taxpayer could not collect the full $300 if they have already recieved tax credits under this provision in previous years and the total amount would be over $500.

This credit was allowed to expire at the end of 2011 and H.R. 8 extends it through December 31, 2013. In addition to the purchase price, consumers can include the cost of professional installation which is important to the proper and safe operation of biomass stoves.

The bill language that makes it retroactive did so by just extending the credit that existed in 2011, through  December 31, 2013:

SEC. 401. EXTENSION OF CREDIT FOR ENERGY-EFFICIENT EXISTING HOMES.
(a) IN GENERAL.—Paragraph (2) of section 25C(g) is amended by striking ‘‘December 31, 2011’’ and inserting ‘‘December 31, 2013’’.

The Alliance for Green Heat applauds the reinstatement of the tax credit for wood and pellet stoves. "This modest tax credit is important for low and middle-income consumers who need an affordable alternative to fossil fuels," said John Ackerly, President of the Alliance for Green Heat.

"However, when tax payer money is used for incentives, we believe it should go to the cleanest and most efficient stoves on the market, not all stoves on the showroom floor. The 75% efficiency standard is virtually meaningless because manufacturers can use any number of calculations to render all stoves eligible.This is a disservice to consumers who may unwittingly buy a 50% or 60% efficient wood or pellet stove and not enjoy the cost savings they expected," Ackerly said.

The provision relating to biomass heating equipment is part of a much larger package of energy efficiency equipment.  Despite efforts by some to increase the maximum rebate amount and make other changes to the biomass equipment and all the other pieces of equipment, Congress just extended the language that Congress had approved in 2010.

This tax credit extension for energy efficiency equipment, including windows, insulation and other HVAC equipment, is estimated to cost the US government $2.2 billion dollars.  The Alliance is trying to get the exact amount that the biomass heating equipment costs.

More details about the tax credit will be included in the Alliance for Green Heat's January newsletter, which will be sent next week.

Liberal and Conservative Organizations Unite Against Wasteful Ethanol Spending

The National Taxpayers Union and US PIRG-Education Fund, a conservative and liberal organization, teamed up to produce a list of Federal programs that can be cut at no adverse effect to the American public in a report entitled, “Toward Common Ground: Bridging the Political Divide to Reduce Spending.” While most of the recommendations concern wasteful military programs, there are two programs listed that relate to biomass.

The first program is the refundable tax credits for ethanol. The tax credits targeted go to oil companies that blend ethanol with gasoline, instead of the ethanol producers themselves. The reasoning the report gives is that the oil companies already makes significant profits and the ethanol industry should be mature enough at this point to not be subsidized by taxpayers. Additionally both industries have very healthy profit margins with the subsidy and could likely make a profit with no subsidies.

The second program is to reduce funding for public timber sales that sell at a loss. They claim that, “The Forest Service has spent more on federal timber sales in recent years than it has collected from the companies that harvest the timber.” The report does not address whether the Forest Service has other goals, such as thinning or other forest health reasons.

Overall the authors say the recommendations in the paper could result in $600 billion in savings by 2015, if implemented.

Appendix

Excerpts from “Toward Common Ground”

1.Plan: Eliminate refundable tax credits for ethanol

Explanation: Large oil companies that blend gasoline with corn-based ethanol, rather than the ethanol producers themselves, receive billions of dollars in subsidies each year. The credits combined with the Renewable Fuels Standard set up a taxpayer subsidized mandate, which is bad fiscal policy.

Savings: By 2015, cutting this program will have saved $ 22,650 million.

Source: Joint Committee on Taxation

Link: http://www.jct.gov/publications.html?func=startdown&id=3642

2. Plan: Reduce funding for public timber sales that lose money

Explanation: The Forest Service has spent more on federal timber sales in recent years than it has collected from the companies that harvest the timber. This is an unwise use of taxpayer dollars.

Savings: By 2015, cutting this program will have saved $ 279 million.

Source: CBO 2009 Budget Options

Link: http://www.cbo.gov/ftpdo