Bennet and Senate Colleagues Call on Treasury to Enable Access to Clean Energy Tax Credits for Geothermal Heat Pumps, Lower Greenhouse Gas Emissions

Maximizing Deployment of Geothermal Heat Pumps

Introduction

U.S. Senator Michael Bennet (D-Colo.) and 14 other senators have written a letter to U.S. Department of Treasury Secretary Janet Yellen, urging the agency to issue guidance that will enable consumers and businesses to fully utilize the clean energy tax incentives in the Inflation Reduction Act (IRA). The focus is on deploying geothermal heat pumps (GHP) to reduce greenhouse gas emissions from heating and cooling systems. By making GHP systems more affordable, these incentives can have a significant impact on families and businesses in Colorado and across the country.

The Benefits of Geothermal Heat Pumps

GHPs are recognized as highly energy-efficient heating and cooling systems for buildings, offering savings of up to 50 percent on annual energy bills compared to fossil fuel-based systems. Despite their benefits, GHPs currently represent only about three percent of the residential HVAC market. Increasing their use can contribute significantly to meeting climate goals while providing reliable and affordable energy.

Unlocking the Potential of GHP Systems

The Geothermal Exchange Organization estimates that with proper guidance from the Treasury Department, GHP systems could prevent over 64 million metric tons of greenhouse gas pollution and create more than 90,000 jobs. However, existing Internal Revenue Service (IRS) procedures may limit the ability of working families and small businesses to take advantage of the tax incentives.

The senators are calling on the Treasury Department to release new guidance that enables third-party ownership models for GHP systems. These models would allow homeowners to avoid the high installation costs associated with GHPs. Low- and moderate-income households, in particular, would benefit from this approach, as they often struggle with the upfront expenses of GHP systems but stand to gain the most from their efficiency.

Removing Barriers to GHP Adoption

The primary barrier to widespread GHP adoption is the upfront cost of installing ground heat exchangers, also known as ground loops. The senators propose that third-party ownership models, similar to those used for residential solar energy systems, can make GHP technology more accessible and affordable. Under this arrangement, homeowners would make monthly payments to a third-party, avoiding the need for loans or capital investments. This approach would particularly benefit low- and moderate-income households, who are most affected by the higher upfront costs of GHP systems.

Clarifying Tax Incentives

The senators highlight the need for guidance from the Treasury Department to clarify that GHP systems are exempt from the “limited use property” doctrine. This doctrine, as applied by the IRS, could potentially limit the ability of lessors to claim the Section 48 energy tax credit for GHP systems. Unlike solar panels, which can be easily transferred between homes, ground loops are not economically feasible to move or remove. Therefore, if a GHP system serves only one household, it may be categorized as limited use property, hindering tax credit claims.

By issuing guidance that exempts GHP systems from the limited use property doctrine, the Treasury Department can align with the congressional intent to accelerate clean energy deployment and support third-party ownership models.

The Potential Impact

The Geothermal Exchange Organization projects that timely clarification from the Treasury Department can lead to:

360,000 additional households, including low-income households, and over 230,000 commercial facilities and small businesses benefitting from low-cost geothermal heating and cooling by 2030.
Creation of over 90,000 well-paying jobs.
Avoidance of over 64 million metric tons of greenhouse gas emissions.

Conclusion

The senators urge the Treasury Department to swiftly issue guidance that maximizes the deployment of GHP systems, ensuring the IRA’s climate, energy reliability, and cost-saving benefits are fully realized. By providing certainty and support for GHP adoption, the Treasury Department can play a crucial role in advancing clean energy goals and creating economic opportunities.

Read the full letter here.

Read More of this Story at www.bennet.senate.gov – 2023-12-12 18:44:09