VRF Air Source Heat Pumps Set to Capitalize on Geothermal’s Loss

Heat Pump Slaes Volume By Country By 2020

Heat Pump Sales Volume By Country By 2020

As we have written previously, the Federal Renewable Energy Tax Credit for geothermal HVAC systems has sunset (as of 12/31/16). The 30% Federal Tax Credit for residential and 10% for commercial systems is now part of history, unless a Republican Congress and Executive branch happens to see the green light, which is obviously doubtful. In essence, this makes geothermal HVAC installations no longer economically viable for short term life cycle costs versus fossil fuels. Consumers have short memories and tend to be cost driven rather than conscience driven. It is therefor a likelihood that the US geothermal market will take a nosedive in the first quarter of 2017. The question is, what form of HVAC will benefit from this geothermal market downturn? Locally, The New York/Long Island Metropolitan market is still primarily oil based and there are many suburban areas with no access to natural gas. So what is the next best alternative for someone who no longer wants a buried oil tank acting as an environmental Sword of Damocles?

Variable Refrigerant heat pumps and ductless heat pumps are poised as the next best alternative to geothermal to replace fossil fuel heating systems. Although they do not qualify for federal incentives, they do qualify for rebate programs available from NYSERDA, Con-Edison and PSEG. They have been proven to provide consistent heating down to sub-zero temperatures. They have also proven to be one of the most maintenance free of all available alternatives. Consumers want a reliable, low cost heating and air conditioning system. Although the initial installation cost of these systems is higher than a standard cooling only system, the gap is closing between VRF and combined forced-air heating and cooling systems.
The only thing that could derail market penetration of VRF at this point is if a new government decided to significantly increase tariffs on imported HVAC equipment. The vast majority of VRF products are still manufactured in foreign markets (primarily Asia), including those that are name-branded by most American manufacturers. Although there are several VRF plants in the US, most of them are assembly lines for primary components that are manufactured elsewhere. It is only the finished product that rolls off the line here. So, until new trade agreements are put in place or new tariffs added, it is a good bet that VRF heat pump market share will continue to grow, especially in the wake of the fall-off of ground source heat pump demand.

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

NY State Legislature Passes Geothermal Tax Credit

The New York State Assembly and Senate have passed the Geothermal Tax Credit bill A2177A (A2177A-2015). This bill allows for a 25% state income tax credit up to a maximum of $5000 for a new geothermal HVAC system. It now is before Governor Andrew Cuomo for signature and adoption or veto.

Next up is NY State Assembly Bill  A5508 for NY State Sales Tax exemption on all geothermal HVAC equipment sales ( A5508). These exemptions coupled with the already existing 30% Federal Resdiential Renewable Energy Tax Credit on geothermal systems will combine to make new geothermal installations much more competitive with fossil fuel systems for new installation and retrofits. These bills are making geothermal HVAC more affordable for New York State consumers and providing all of the same incentives available to the solar industry, which has proliferated since the inception of these incentives.

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

Consumer Beware – Geothermal Hacks Abound

Unfortunately, as this News 12 expose’ reveals, not all geothermal HVAC installers are looking out for their customers’ best interests.  Geothermal HVAC Installer Scams Consumers

We have received a spate of phone calls from potential customers regarding the alleged unscrupulous activities of a competitor whose prices and promised incentives seemed to be too good to be true. Unfortunately, downpayments were not held in escrow, as per local consumer affairs laws, and many trusting, green-minded consumers have been left with nothing to show for their investment. Even worse, some who have had there installations started now have no recourse because their projects were started and now the contractor in question is reported to be in bankruptcy proceedings.

Although we have received numerous calls asking us to take over installations in progress, it is a difficult decision for us. Although we want to help consumers who may have been duped, in many instances they have no record of what has been installed. There are no plans and no detailed proposal or specifications. As a result, we have no idea what has been installed as a ground loop heat exchanger. Without knowledge of the bore depths, piping size and material, manifold sizing or grout used, it is impossible for us to determine whether or not what has been installed can be used for its intended purpose. Simply connecting to terminated piping isn’t an option since we have no idea what capacity could be achieved, what Reynolds numbers are involved, what the pressure drop for pumping requirements is and what thermal conductivity was figured. Not only does this open up the potential for liability and future warranty issues, it also leaves concern for potential environmental impact.

This also creates a massive public relations problem for our industry and a proven technology. It is our hope that these consumers can find relief and that we can find a way to help them. However, this does reinforce the fact that consumers need to do their homework and check with the Department of Consumer Affairs and /or the Better Business Bureau before doing business with any home improvement contractor.

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

IRS Deals Major Blow to Geothermal Market

Here in the northeast, the recent price erosion of natural gas due to hydrofracturing has made it more difficult to sell geothermal by ROI payback analysis alone. It was still a home run against oil comparisons when including the 30% Federal Renewable Energy Tax Credit. In a major blow to the industry, the IRS recently issued “Notice 2013-70 titled “Q&A on Tax Credits for Sections 25C and 25D“. This notice serves to clarify certain parameters and questions regarding the 25C and 25D Renewable Energy Tax Credits. Specifically, the following passages effectively reduce the Section 25D tax credits to a point where geothermal systems cannot be sold by the financial benefits alone using many of the financial formulas currently in use:

Geothermal Heat Pump Property.

Q-31: A taxpayer contacts a seller to inquire about the installation of a geothermal heat
pump to heat his home. The seller/installer informs the taxpayer that the following items
must be installed in addition to the geothermal heat pump: heat exchange equipment in
the ground outside of the house, a distribution system for the home, and a back-up
emergency heating or cooling system. Which of these costs, if any, are eligible for the
§ 25D credit?

A-31: Only the cost of the heat exchange equipment in the ground outside the house
can be eligible for the § 25D credit. The costs for the distribution system for the home
and a back-up emergency heating or cooling system are not eligible for the credit
because they are not incurred for qualified geothermal heat pump property. Section
25D(d)(5)(B) defines qualified geothermal heat pump property as any equipment that (1)
uses the ground or ground water as a thermal energy source to heat the dwelling unit or – 12 –
as a thermal energy sink to cool such dwelling unit, and (2) meets the requirements of
the Energy Star program in effect at the time that the expenditure for such equipment is
made. Section 25D(e)(1) provides that expenditures for piping and wiring to
interconnect qualified property to a dwelling unit are eligible for the § 25D credit.
However, nothing in § 25D extends the credit to other auxiliary equipment such as
distribution systems within the dwelling unit or backup emergency heating and cooling
systems.

Rebates.

Rebates generally represent a reduction in the purchase price or
cost of property, and the taxpayer must exclude the amount of the rebate from the
amount of the qualified expenditure on which the taxpayer calculates the tax credit. In
general, in order for a receipt of funds to be considered a nontaxable rebate, the rebate
must be based on or related to the cost of the property; the rebate must be received
from someone having a reasonable nexus to the sale of the property, for example, the
manufacturer, distributor, or seller/installer; and the rebate must not represent payment
or compensation for services.

So, not only is the IRS taking away the ability to take a tax credit on the duct distribution system installed as a necessary part of the majority of geothermal heat pump installations, it appears to also eliminate radiant floor distribution systems as well. Depending upon your interpretation here, only the ground loop, connecting primary loop, geothermal heat pump and electrical wiring for the system actually qualify for the tax credit. To add insult injury, Utility Rebates must also be figured against the tax credit value.

Until now, I don’t know of a residential customer who has not claimed these items via Form 5695. How the IRS plans to enforce this determination and/or clarification moving forward is another story. You can easily foresee inflated ground loop and equipment installation segments with a $1.00 ductwork marketing special from contractors looking to bend the rules or create loopholes. A major and essential component for the operation of  any energy efficient system has apparently been eliminated from consideration. Unfortunately, this may be a serious job for the tax lawyers and lobbyists to try to reverse which may have to high a price tag for a burgeoning industry represented by IGSHPA and the Geothermal Exchange Organization. Between these two organizations there is neither the staff nor the PAC fund necessary to mount the political backlash necessary to reverse such a decision. Perhaps if they were to join forces with ACCA, ASHRAE and other industry organizations that are affected, there might be the necessary political clout to quash such a narrow interpretation.

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

New York State Poised to Make Geothermal Heat Pumps Tax Exempt

Closed -LoopPress release from the Long Island Geothermal Energy Organization (LI-Geo.org):

The New York State Senate and Assembly have proposed new legislation related to geothermal heating and cooling installations.

On January 9, 2013, New York State Senator Maziarz introduced a bill to amend the tax law to exempt both sellers and purchasers of geothermal systems from sales and use taxes for materials.

The same day, New York State Assembly Member Jaffee introduced an identical bill to the Assembly.

This legislation will make geothermal heating and cooling systems more affordable and thus more economically attractive to all NYers. Please write to your NYS representatives to show your support for these bills.

The proposed bills are to amend the tax law to exempt both sellers and purchasers of geothermal systems from sales and use taxes for materials. (Sales and use taxes for the labor involved in capital improvements, such as these installations, are already exempt.). This is similar to the sales and use tax exemption that has aided the solar PV industry in New York State to prosper.

This change in the law will help the in-state geothermal industry—geothermal engineers, installers, designers, service providers, equipment distributors and manufacturers—be both more competitively priced and profitable.

Please write or e-mail your Senator, asking him or her to support this bill. We have a sample letter prepared on our web site for you to sign. Please feel free to customize the letter. If you do not know who your senator is, you can click here to find him or her.

You can also leave a comment about the bill for the Senate at the bottom of the page.

Please also write or e-mail your Assembly Member, asking him or her to support this bill. We have a sample letter prepared on our web site for you to sign. Please feel free to customize the letter. If you do not know who your assembly member is, you can click here to find him or her.

The bills are available for reading at the following links:

Senate Bill S01343

Assembly Bill A01411

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!

Hurricane Sandy and Energy Lessons Learned

20121102-162939.jpgHere I sit in an office with no power, phones, Internet or ROOF for the past 5 days, banging away on an iPad through a slow cellular hotspot to extol the virtues of hurricane preparedness. We saw it coming, but none of us really did anything about it. Now we are paying technicians to sit on gas lines and fill up trucks and empty gas containers so that we can run generators for our office and get service vehicles out to customers who have no heat and hot water. Off course, we have none either and it’s 55 degrees in our homes and offices and the temperature continues to drop. How can this be avoided in the future and what can we do about it now?

First of all, if you are reading this now, then you are better off than most. You have communications and possibly power. Power is the first thing you will need to get your heat back on, whether it be in the form of restored electricity or a generator. The Long Island Power Authority has estimated it will be 7 to 10 days before power is restored, but they have not even finished repairing the more than 50 area substations damaged, so they aren’t even starting on your neighborhood power infrastructure yet. Unfortunately, I think we are looking at another two weeks. Those of you lucky enough to have a gas fired hot water heater with a pilot light and no electronic ignition are the luckiest because you have hot water. Neighbors of ours let us shower at their house while they use the phone and Internet at our house (we have a generator, but not big enough to power an oil fired boiler with 6 circulators). Now I extol the virtues of geothermal, but would need an even bigger generator to power the heat pump and flow centers. Unfortunately, the only form of heat that does not require some form of electricity is that fireplace of yours. Even wood stoves have a fan system for the firebox heat exchanger that distributes the heat to the space. Fire that up without the fan for too long and you can damage your system. However, even those with fireplaces must be careful. My nextdoor neighbor found this out after they started a fire in their fireplace and smoked themselves out because the chimney cap had been crushed by a fallen tree during the hurricane. We fear the incidence of carbon monoxide poisoning will be the next deadly killer as others seek warmth by firing up gas heating appliances in their home that are not meant for home heating, including stoves, portable BBQs and the like. Not to mention the threat of fire hazards from all of these appliances and the generators being operated by those who have no clue as to safe operation.

After fireplaces, your next best heating source in this situation might just be if you have a forced air gas furnace. Just a simple electric hook-up to your generator can get you going again because their has been no gas interruption. Those with gas fired boilers may have the added problem of multiple circulators which must be powered. This can somewhat be circumvented by backing off the flow check valves to allow mono flow of thermal back through the piping without circulator distribution. It depends upon which side of the system your installer has put the circulators, of course. Here on Long Island, more than 60% still have oil heat because National Grid and their predecessors, Keyspan, Brooklyn Union and LILCO never really expanded the gas main infrastructure into many neighborhoods. This makes your situation a bit more difficult as you must also power the oil burner and circulators as well as a fan if you have a forced air furnace.

We are open here and ready to help you restore heat as soon as you have some form of power. Perhaps it is time that we take a good lesson from the Europeans who were smart enough to bury their transmission lines after the devastation of World War II.

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!

Tough Heating Season Forecast in the Northeast for Oil Consumers

With home heating oil prices currently at $4.25 per gallon here on Long Island and a much colder season forecast ahead, this Newsday article predicts a difficult winter for those heating with fuel oil.  Two thirds of Long Islanders still heat their homes with oil and the majority of those would choose to convert to natural gas, if given the opportunity. Unfortunately, Long Island’s natural gas pipeline infrastructure (see Northeast map above) is not being expanded and  National Grid, the private entity responsible for local gas service, is loathe to invest shareholder money to do so.  Michael White, executive director of the Long Island Regional Planning Council, has been an advocate for gas infrastructure expansion to improve Long Island’s economy. White was quoted in the Long Island Business News stating, “it appears we are dependent upon the interests and investments of private fuel suppliers and pipeline companies to actually get approved, construct and operate infrastructure to supply us with natural gas. This paradigm clearly constrains Long Island’s ability to have an adequate and reasonably priced supply of natural gas to support our on-Island generating facilities, as well as conversions from heating oil to natural gas and overall growth.”

Because Long Island’s energy utility infrastructure is controlled by a host of players including private entities (National Grid, ratepayers and private contractors) and public entities (the Public Service Commission, Iroquois Pipeline, NY State and local government), expansion of main and branch service is an excruciating process. This unfortunate stalemate has historically left the majority of Long Islanders with only the costly options of No. 2 fuel oil, electric or propane heating.  We have previously written here about which of these energy options gives you the best bang for your buck.

Taking into account federal tax credits of 30% and LIPA incentives, it is clear that any Long Islander who plans to remain in their home for 5 years or more can get the best rate of return or return on investment by installing a geothermal ground source heat pump to heat their home. Unfortunately, there is a significant initial investment to make in order to convert to geothermal, which has scared away many consumers, even with a financial investment analysis proving out its viability and sound capital return. However, a new program allowing Long Islanders to pay for this conversion through NYSERDA with 2.99% on-bill financing may just be the answer for those too far from the pipeline for gas conversion and hesitant to put savings at potential risk. In order to obtain this financing, a homeowner participates in the Home Performance with ENERGY STAR program, where a BPI accredited contractor approved by NYSERDA will perform a comprehensive home energy assessment to identify opportunities for energy savings. The contractor will write a report that recommends specific energy improvements for your house along with cost figures for making the improvements and estimated energy savings. This program also includes air sealing, energy-efficient furnaces, boilers, water heaters, air conditioners, lighting fixtures and appliances. A homeowner can finance up to $25,000 with this program. An On-Bill Recovery Loan is 2.99% for terms of 5, 10, or 15 years. Once approved for the loan, the consumer’s interest rate is fixed for the life of the loan.

With the advent of variable speed and inverter driven compressors, another efficient option for consumers looking to move away from oil is VRF or “variable refrigerant flow” heat pumps. The market is now flush with systems manufactured by Mitsubishi, Fujitsu, Daikain, Samsung and the like, which have dominated Asian and European markets, but have only recently caught on here. These systems are extremely beneficial to multi-family residential complexes like condominiums and apartment complexes because they are modular, expandable and very efficient at part-load. They achieve their efficiencies because they can operate at partial loads from 10% to 130% in diverse settings, even at low ambient temperatures.

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!