Geothermal Heat Pumps:
Use of geothermal (from Greek roots geo for Earth and thermos for heat) for heating and cooling has been around for hundreds of years. But public interest in climate issues, the 2009 tax credits, refined equipment and technology, and an awareness on the part of the industry to help consumers understand the technology have helped geothermal heating and cooling to become a real option for many U.S. homeowners.
“It’s how other countries have heated for a long time; we’re just refining it to best suit our market’s needs,” says Brian McVay, general manager of Neil Kelly Designers/Remodelers’ home performance and home repair division, in Portland, Ore. “It’s a fantastic way to heat and cool a house, with huge energy savings.”
The ground just below the Earth’s surface is a fairly constant, comfortable temperature. There are three geothermal systems that can take advantage of that temperature: In a closed-loop system, the ground either heats or cools a water and antifreeze solution held in buried plastic pipes, which is then used to heat or cool the air in a structure; an open-loop system uses water in a pond or well as a heat source; and direct expansion uses a buried coil of copper tubing as the heat exchanger. Any of these systems may be eligible for tax credits as long as it meets Energy Star specifications (see the chart).
“A geothermal heat pump is twice as efficient as a regular heat pump and [costs] a little under twice as much to install,” says Matt Hoots, owner of The Hoots Group, a green builder, renovator, and performance contractor in Atlanta. “But you’re immediately saving money. It makes sense without the tax incentives and it makes even greater sense with them.” (Systems placed in service in 2008 are eligible for tax credits but are subject to earlier legislation and, therefore, tax credits for that equipment are capped at $2,000.)
Though geothermal requires electricity to run, it doesn’t use as much electricity as your standard furnace, and it runs at a much lower speed, thus conserving energy.
As with any home system, before installing a geothermal heat pump, do your homework. With geothermal [as opposed to one run on fossil fuels] the system has to be sized correctly. It has to be big enough, but it’s critical not to make it too big.”
The key to making geothermal efficient is to upgrade the home’s envelope. Though it’s not a requirement for the tax incentives, one builder uses a network of trade partners to conduct energy audits. They want to make sure that the building loses as little heat as possible before installing geothermal.
A qualified geothermal heat pump nets a taxpayer a 30% tax credit. The system may be installed in a new home or as part of a remodel, and the home need not be the homeowner’s principal residence. Equipment used only for heating pools or hot tubs is not eligible. In cooperatives or condos, owners/shareholders are entitled to a tax credit based on their share of the spending.
Solar Water Heaters: Benefits Begin to Outweigh Costs
Investments in renewable energy, such as solar water heating, should prompt homeowners to do good while doing well. Doing good is reducing your carbon footprint by installing solar. Doing well has to do with what your savings are actually going to be.
Despite system costs sometimes upward of $12,000, “doing well” is getting easier. Taxpayers can stack state, local, and utility-level incentives on top of the 30% federal tax credit created by the American Recovery and Reinvestment Act, offsetting initial costs by thousands of dollars.
Individuals may claim a tax credit of up to 30% of the total cost of a solar water heating system (including labor, piping, wiring, etc.) installed from 2009 to 2016. To qualify, the system must be Solar Rating and Certification Corp. certified, and must provide at least half the energy used by the home to heat water. Systems used to heat swimming pools are not eligible.
Solar: Does it really offer a golden opportunity?
Welcome to the new frontier. “The solar industry is in its infancy and it’s a tremendous opportunity for remodelers,” says Jeff Shubert, director of global marketing for Suntech Power, a solar panel manufacturer. Yet, despite a 20% to 25% price drop for solar panels and the passage of the American Recovery and Reinvestment Act (ARRA) with its tax credit incentives, demand has been low. Consumers are holding off, nervous about the still shaky economy. The hope is that as awareness of environmental issues grows along with interest in the “green” movement, the tax incentives will help push consumers into investing in sustainable and renewable energy.
The ARRA creates investment tax credits for “residential energy efficient properties,” such as solar, wind, and fuel cell power generators, and geothermal heat pumps.
Taxpayers are eligible for a 30% tax credit on the cost of qualified solar systems (also called photovoltaic or PV systems) used to generate electricity for their primary residence in the U.S. (Solar pool heaters are not eligible.) There is no cap on the credit amount (as there was in earlier bills).
The “cost” to the consumer on which the credit is based includes site preparation, assembly, original installation, and piping and wiring that might connect the device to the home, as well as labor and markup. According to the April IRS notice 2009-41, “the credit applies to residential energy efficient property placed in service before January 1, 2017.”
While there’s no Energy Star–label equivalent for solar panels, they must have a UL or OSHA certification. Although there is no set standard for efficiency, currently the best panels have about 15% efficiency, i.e., 15% of the energy attracted from the sun is converted into electricity. To get the credit, consumers should keep a copy of a manufacturer’s certification in their files and fill out IRS form 5695 [PDF]. Tom Chiavetta, a CPA and director at Freed Maxick Battaglia based in western New York, who has been focusing on the ARRA, says that consumers should “show their accountants contractor backup support with regard to the work done and any paperwork they received from the manufacturer that shows the property meets the standards for the credit.”
Yes, solar systems have come down in price, but it still could be considered an expensive endeavor for many homeowners. According to the Solar Electricity Global Benchmark Price Indices, in May 2009 a standard 2 kWh roof-mounted residential unit, installed, cost about $17,645. (In addition, the index breaks out prices for a sunny climate at 36.88 cents/kWh and a cloudy climate at 81.14 cents/kWh). “The average home,” says Ron Kenedi, vice president of Sharp Electronics’ solar energy solutions group, “requires about 4,000 watts [or 4 kW] in solar panels.”
“Most people cannot afford to install the amount of solar PV that they would need to offset their current energy bill,” says Bob Fleming, president of Classic Remodeling & Construction, in Johns Island, S.C., who is about to launch a new company focused on energy audits and upfits.
But price is not the only deciding factor. With all the paperwork as well as the learning curve for both consumer and remodeler, prospective clients will be looking for professionals who they feel confident in and who can offer them a hassle-free experience.
To install PV systems, you need to “look at the sun, the home’s electric bill, the size of the house,” Shubert says. “There’s a skill to designing the system that is right for the property without taking advantage of people.” Remodelers need to take care to hire out work to qualified installers.
“Installations and the tax credit processing is too much of a burden for a small contractor,” says John Berger, CEO of Standard Renewable Energy, an energy services company based in Houston. “Putting on a solar system is not as straightforward as you think.” SRE has a staff that deals with all the administration involved — permits, tax rebates, communications with local utilities, licenses, accreditations, manufacturer’s certifications, financing.
Homeowners are eligible for a 30% tax credit on the cost of qualified solar systems for their primary residence. There is no cap on the credit amount (as there was in earlier bills). The “cost” to the consumer on which the credit is based includes site preparation, assembly, original installation, and piping and wiring that might connect the device to the home, as well as labor and markup. According to the April IRS notice 2009-41, the credit applies to residential energy-efficient systems placed in service before Jan. 1, 2017. While there’s no Energy Star–label equivalent for solar panels, they must have a UL or OSHA certification. To get the credit, consumers must keep a manufacturer’s certification for their records and fill out IRS form 5695.
Wind: Shorter Payback, Limited by Nature
Soaring at least 30 feet above everything within a 500-foot radius and requiring abundant open land, residential wind turbines are too self-limiting by nature, among other factors, to become the granite countertops of renewable energy. But generous tax credits make wind an attractive option for certain remodeling clients in key markets.
A small wind energy system typically costs $3,000 to $5,000 per kilowatt for a grid-connected installation, according to the American Wind Energy Association (AWEA). The American Recovery and Reinvestment Act of 2009 (ARRA) is “a real important milestone” for residential wind power, says Mike Bergey, president of Bergey Windpower, of Oklahoma, whose small turbines are installed in all 50 states and over 100 countries.
Federal tax credits that had been capped at $4,000 can now be as much as $15,000 when applied to a 10 kW Bergey turbine that powers a 2,500-square-foot home. Even without state incentives, that credit alone can yield a payback within 10 to 30 years, depending on wind resources and electricity prices, Bergey says.
U.S. sales of “small wind” — turbines with capacities of 100 kW or less — were $77 million in 2008, 78% higher than 2007, and will grow 30-fold within as little as five years, says the AWEA. By 2010, 13 million U.S. homes will be candidates for the turbines: that is, connected to the utility grid, on at least a half-acre of land, and with a Class 2 or better wind resource.
Besides public acceptance, Ron Stimmel, the AWEA’s small-wind advocate, identifies three policy issues that can hinder residential growth: absent or restrictive permitting regulations, utilities’ net metering policies, and grid interconnection rules and policies.
Bottom Line
The ARRA provides a 30% uncapped investment tax credit on the purchase and installation of qualifying small wind electric systems with rated capacities of 100 kW or less. Systems must be installed between Jan. 1, 2008 and Dec. 31, 2016. Other provisions, such as a manufacturing tax credit, are expected to indirectly benefit residential wind power through increased competition and lower prices.
(Exerpted from Remodeling Magazine)