Federal 25C Energy Tax Credits Unraveled

The American Recovery and Reinvestment Act of 2009 (aka “the Stimulus Bill”) has a number of provisions in it to induce consumers to take energy conservation measures by replacing or installing high-efficiency heating and air conditioning equipment and renewable HVAC alternatives.  A good overview of these options is available from the government’s Energy Star Program website.

Essentially, there is a a maximum $1500 tax credit that can be taken for new high-efficiency cooling equipment that has a Seasonal Energy Efficiency Ratio (SEER) of 16 or greater combined with an EER of 13 or greater.  For air source heat pumps, the Heating Seasonal Performance Factor (HSPF) must be 8.5 or greater with cooling performance rated at 15 SEER/12.5 EER or greater. For gas-fired furnaces, the Annual Fuel Utilization Efficiency (AFUE) must be 95% or higher.  For oil furnaces, the AFUE requirement is 90% or higher. For gas boilers, the rating requirement is 90% AFUE.  The credit only covers up to 30% of the installed cost.  In other words, you must spend at least $5000 on your installation to receive the full $1500 credit.  However, you can bank whatever is still left over for another qualifying capital investment. This credit is only good until December 31st, 2010 and only for your principal residence. In order to receive your credit,  IRS form 5695  must be filled out and is available here.

Geothermal heat pumps ARE NOT restricted to a $1500 tax credit limit. You get the full 30% energy tax credit no matter what the installed cost as long as your equipment meets the Energy Star requirements. These credits are also available until December 31st, 2016 and you can carry forward any unused portion during that time period.  For instance, if your geothermal installations cost $50,000, you would qualify for a $15,000 tax credit.  If you only owe Uncle Sam $7500, you could carry forward the additional $7500 to use against next year’s tax liability. This incentive is good for first AND second homes too.  IRS form 5695  must be filled out and is available here.

Commercial building owners can also get their share of the federal stimulus package by making qualifying energy saving improvements.  10% of the installed cost of a geothermal heat pump (minus any subsidies) is applicable for corporate tax credits. There is no cap on the amount of qualifying expenditures that can be used for the credit, nor a limit on the credit itself.  No matter the installation cost, you will receive a 10% credit under this legislation.  For corporate tax credits, IRS form 3468 must be filed and it is available here.

Geothermal heat pumps are also eligible for Modified Accelerated Cost-Recovery, which provides for accelerated depreciation over five years. This means an even shorter payback period for the investment in renewable energy. Commercial geothermal heat pumps have not been included in the ENERGY STAR ratings; therefore, commercial units do not need to be ENERGY STAR rated to qualify for these incentives.  Some businesses may not have enough tax liability to take full advantage of this program.  In these instances, if a business would qualify for the tax credit, they can instead take a direct 10% of installed cost grant from the Treasury Department—which the administration will supposedly pay directly within 60 days.

As always, to keep up to date with what’s new in HVAC technology, visit our website at airideal.com and follow us on Twitter @airideal and at our Facebook page!

Geothermal Landslide in Heating and Air Conditioning

In the past year, we have had an onslaught of inquiries about Geothermal (also known as Geo-Exchange) HVAC. With the availability of a 30% Federal Tax Rebate on top of  local and state rebates, it is now economically viable to become “green” with your heating and cooling system. You can even finance the whole project while you wait for your rebates!

Essentially, Geo-exchange is just that, the exchange or extraction of solar energy stored in the earth. The sun’s energy is soaked up by the earth year-round and stored below the initial frost layer. Just 5 feet below the surface, the soil remains a constant 50-55 degrees F year-round. A geothermal or geo-exchange system circulates water with antifreeze through a closed ground loop piping system to capture this energy and return it to a “ground source heat pump” for compression and uses that heat to meet the demand in your building or home. The reverse process moves the heat from your home to the earth to create cooling. Unlike fossil fuel and air-to-air heat pumps, a ground source heat pump can produce 5 times the amount of energy that is consumed with virtually no carbon footprint. A typical fossil fuel furnace can produce only 80% of the energy it consumes in the form of heat and does this while polluting the atmosphere.

Wait a second. Did you say heat pump? Those things don’t work when it gets below freezing, right? WRONG. As previously explained, this is not an air-to-air source heat pump. The history of air-to-air heat pumps in the northeast has been that they were unable to produce high enough discharge air temperatures when the outdoor ambient temperature dropped below freezing. However, we aren’t using air as our heat exchange medium anymore, remember! We are using a constant ground temperature of 50-55 degrees F, even when it is freezing outside. So we don’t have the same fluctuations or temperature minimums as an air-to-air heat pump. In fact, we have left over heat which is used in an add-on heat recovery coil called a “de-superheater” which is used to preheat your domestic water heater or for radiant floor heat. You may need back up hot water heating capability in the winter (usually in the form of an electric immersion heating element), but, depending upon the size of your home or building, your primary hot water heating could be satisfied by a de-superheater in the summer. You are simply putting part of the rejected heat in the hot water and the rest back into the ground from whence it came!

There are 4 main types of geothermal heating and cooling. The first type is called “open loop” which pulls water from an open well to be used in your system and then returns it back to the aquifer via a rejection well, a standing column well or a leaching field. We don’t advocate this type of system because of the brackish nature of water and the associated minerals and alloys contained in the earth. This type of system is less expensive, but does not as long of a system life as does a “closed loop” system. It may also cause cross contamination of the aquifers if one of them contains surface pollutants. There are 3 major types of closed loop systems including vertical loops, horizontal loops and pond/lake loops. Essentially, all 3 types use a closed and fused polyethylene piping system with a flow center (or pump) to circulate the heat exchange medium (water with methanol or another antifreeze) through the ground loops and through your ground source heat pump. We advocate vertical loops bored to a depth of about 200 feet with one vertical bore per ton. A vertical system requires the least amount of acreage for the best heat exchange. There is significant cost in drilling the vertical bores and filling them with a thermally conductive grout (called Betonite), but there is better heat transfer and less property and excavation required than horizontal loops, which lie just below the frost line at 5 feet. If you have a pond near your home or building, this can also be used by sinking a system of closed loop “slinkies” to the bottom to use the water and ground temperature below the freezing surface. For a more in-depth discussion of this process and a geothermal installation, please see this October 2009 article in Popular Mechanics. You can also watch the short WaterFurnace video below.

Air Ideal is one of the largest dealers of WaterFurnace ground source heat pumps in the New York metropolitan and suburban area. We are also one of the few accredited installers who have passed WaterFurnace and the International Ground Source Heat Pump Association’s System Design, Pipe Fusion and Accredited Installers training and testing process. (IGSHPA Accredited ID # 20675-0909). We are a design/build contracting and engineering firm that is capable of working seamlessly with your architect via AutoCAD design drawings or on our own for new installations and retrofits. We conduct an energy survey and load analysis of your home or building to make sure that we size systems that meet your requirements while not wasting excess energy or cost.  We’ve set up this easy-to-use Geothermal Savings Calculator to help you see how much a geothermal system can save you.

<span style=”text-decoration: underline; color: #ff00ff;”><a href=”http://www.airideal.com”><span style=”color: #ff00ff; text-decoration: underline;”>As always, to keep up to date with what’s new in HVAC technology, visit our website at airideal.com</span></a></span> and follow us on <span style=”text-decoration: underline; color: #ff00ff;”><a href=”https://twitter.com/#!/AirIdeal”><span style=”color: #ff00ff; text-decoration: underline;”>Twitter @airideal</span></a></span> and <span style=”text-decoration: underline; color: #ff00ff;”><a href=”https://www.facebook.com/pages/Air-Ideal-Inc/274548102519″><span style=”color: #ff00ff; text-decoration: underline;”>at our Facebook page!</span></a></span>