NEW
GEOTHERMAL TAX CREDITS CREATE
A “PERFECT STORM” IN THE GEOTHERMAL INDUSTRY
by Todd Giddings, Education Committee Chairman
We all remember when the 700 billion-dollar bailout legislation
was signed into law on October 3, 2008. This legislation, called the Emergency
Economic Stabilization Act of 2008, H.R. 1424, also contained long-term tax
incentives to encourage the use of renewable energy technologies in both homes
and businesses. The energy technologies include solar electric generation,
fuel-cell electric generation, wind electric generation, and geothermal heating
and cooling.
The new residential geothermal tax credit is 30% of the cost of the geothermal
heat pump system with no cap, and the commercial building
geothermal tax credit is 10% of the cost of the geothermal heat pump systems
with no cap. While the residential geothermal tax credit is effective
retroactively to January 1, 2008, the commercial building geothermal tax credit
is effective after October 3, 2008, the date of the signing of the legislation.
Both the residential and commercial building geothermal tax credits are
available until the end of 2016. Tax credits are not deductions that reduce your
taxable income; they are subtracted from the federal income tax you owe.
Dan Ellis, the president of ClimateMaster, in his keynote speech at the
International Ground Source Heat Pump Association annual conference in September
said that the new geothermal tax credits would be the final component in the
making of a “perfect storm” for the geothermal heat pump industry. The
geothermal heat pump industry was growing at an increasing rate due to a) the
demand for “green” heating and cooling systems, and b) the skyrocketing costs of
propane, natural gas, and heating oil. By adding tax credits on top of the
already high demand for geothermal systems, Dan Ellis explained that these three
conditions created a “perfect storm” in the geothermal heat pump industry that
would result in an unprecedented demand for geothermal systems and a massive
increase in growth for the geothermal heat pump industry.
At last month’s PGWA Board meeting, I overheard a director say: “If you’re not
drilling geothermal loop boreholes, you’re completely missing out on a huge
business opportunity.” This PGWA director is awaiting delivery of a new
air-rotary drill rig ordered specifically to drill geothermal loop field
boreholes. Also last month I was at an elementary school being retrofitted with
24 geothermal heat pump systems. The discussion was about the more than 3
million dollars of commercial loop field drilling that was located within 40
miles of State College and coming up for bidding.
I believe that the new geothermal tax credits will also create a “perfect storm”
in the water-well drilling industry. The “perfect storm” component that is
unique to the water-well drilling industry is the abundant availability of drill
rigs due to the precipitous decline in new home construction. This water-well
drilling industry “perfect storm” has spun off from the geothermal industry
“perfect storm” and is an important and very large new growth opportunity for
water-well drillers. The same drilling rigs, crews, and methods are used to
drill geothermal loop field boreholes, and there are several million-dollar loop
field drilling projects across the US that are ready-to-go, but are not being
constructed due to the lack of available drilling rigs and qualified crews.
Replacing a fossil-fueled heating system with a closed-loop geothermal heat pump
system requires that two or more boreholes be drilled in the yard of the home.
The high demand for retrofitting closed-loop geothermal systems has caused some
heating contractors to buy their own small drill rig because they could not get
the boreholes drilled by a water-well driller. This geothermal system retrofit
demand is often located in public water service areas, where, of course, there
is no water-well drilling demand.
On Thursday, January 29, 2009, at 12:30 pm in the keynote presentation at the
PGWA winter conference, I will be giving you more information on the geothermal
tax credits and will describe what potential the geothermal “perfect storm”
holds for the growth of your business (see details of this presentation by
clicking this link). I will be making
a second geothermal presentation that will explain the three types of geothermal
wells and cover all of the ways you could become involved in drilling both
geothermal wells and drilling geothermal loop field boreholes. My third
geothermal technical session will present the many differences between
geothermal boreholes and water wells, and will discuss several tips, tricks, and
shortcuts to achieve a faster drilling rate when constructing geothermal
boreholes in a loop field for a large house or a commercial building (see
details of these two technical presentations at this
link). The two technical geothermal
presentations will be offered as concurrent sessions that are in addition to the
usual technical presentations at a PGWA Winter Conference.
These three new geothermal sessions are designed to teach you all about
geothermal heat pumps and to provide an introduction to all of the geothermal
well and loop borehole drilling opportunities so you can grow your water-well
drilling business to include geothermal well and loop borehole drilling. I
overheard the same PGWA director say: “I expect that geothermal drilling will
account for 80% of my company’s business in 2008.” Please consider growing your
business to include the many new geothermal drilling opportunities. The graph
below shows the number of geothermal heat pump units shipped each year by all
manufacturers. It is easy to imagine how steep the graph line will rise as the
“perfect storm” impacts the geothermal industry in 2009 and beyond.
