Residential wood heat incentives trending

By Anna Simet | August 13, 2014

In New York and Massachusetts, residential wood heating incentives are on a roll, and the industry is beginning to see trends, according to John Ackerly, president of the Alliance for Green Heat.

Residential wood heat has risen dramatically in recent years, Ackerly said during an Aug. 6 Biomass Thermal Energy Council webinar, especially in Northeast and Great Lakes states. “In some cases, by 100 percent… incentive programs are guiding consumer purchasing and steering people to cleaner and more efficient appliances.”

And it’s finally being recognized that wood heat is a real opportunity for incentives that help reduce fossil fuel use. “Historically, all of that money and attention has gone into solar and geothermal, and now wood is starting to be included,” Ackerly said.

During an overview of federal and state level incentives available for residential wood heating, Ackerly discussed different programs and their purposes. The federal tax credit, which began in 2009 at $1,500, was reduced to $300 for next few years and is now unavailable, wasn’t hugely successful, he said. “Congress didn’t give much guidance, and the IRS didn’t issue anything specific, so as a result, everything became eligible.”

As a result of lessons learned from the federal tax credit, states aren’t using this as a model. Rather, they are crafting their own incentives, which achieve different goals according to state. “Some help launch technology that is not cost-competitive on its own,” Ackerly said, giving the example of automated wood pellet boilers, which Northeastern states are leaning toward. Other incentives in Montana, Arizona and New York reduce pollution by replacing existing, uncertified devices, and others focus on steering customers to the cleanest and most efficient models, such as in Oregon and New York, or reduce fossil fuel use.

Western states have the most experience with incentivizing wood stoves and pellet stoves, and only during the last few years have New England states stepped up. “Maine, New York, Vermont, Massachusetts and New York have come onto the scene,” Ackerly said. “But they are very different programs, mainly focused on promoting automated pellet appliances.”

Nationwide, Alabama, Arizona, Idaho, Maine, Maryland, Montana, New York and Oregon have ongoing, statewide wood stove incentive programs, all of which have different motivations, Ackerly pointed out, adding that Alabama’s 100 percent tax deduction is a “head scratcher. I called retailers down there, and they didn’t even know their state had a tax deduction for stoves to replace electricity, propane or gas.”

Arizona has a $500 tax credit focused on placing fireplaces out of commission, and Idaho, the only state that doesn’t offer a solar incentive, has one of the most generous, longstanding programs in the country, a 400 percent tax deduction for every wood stove on the market, according to Ackerly.

In Maine, there is a small rebate, but it entails quite a few requirements and is not very robust. “They might have to increase rebate size if they want people to take advantage,” he said.  

Maryland has a new program that’s been very successful, with about 750 rebates given so far, and it only applies to people who don’t have access to natural gas.

In Montana, replacing an old stove qualifies for a $500 tax credit.

Ackerly described Oregon’s program as being “very complicated, and the only state that uses an efficiency measure to determine the tax credit level. If you get a stove that has a real efficiency number, not a default number, you’ll get a much higher tax credit—up to $1,000.”

New York’s newly announced program focuses on low-income homeowners, providing residential incentives of $1,000, or up to $1,500, to income-qualified homeowners for the installation of wood pellet stoves.

And though the list is shorter, several states—New Hampshire, Maine, Massachusetts, New York and Vermont— also have residential and commercial boiler incentives. “The rebate amounts are quite high, and they’re all very new programs with the goal of getting technology off the ground—a business model where trucks delivery pellets in bulk.”

Ackerly touched on some problems with incentive programs, which includes “free riders,” or people who would make the purchase anyway, too many people using the incentive, a budget that rubs out quickly, excessive administration burdens, people finding loopholes, and finding ways to make programs relevant to low-income populations. “The good news is that there is a trend toward including wood and pellet stoves in state renewable incentive programs,” Ackerly continued. “I think this trend is more interest in technology neutrality, not just picking and choosing, and finding a way to measure the impact of each one and giving it an appropriate-level incentive. This is what’s happening with state RPS programs, at least in New Hampshire and Massachusetts.”  

Ackerly added that he sees programs requiring professional installations and home energy audits as additional new trends.

Also speaking during the webinar was Adam Sherman, executive director of the Biomass Energy Resource Center, who discussed commercial wood appliance incentives, legislative and financial policies, and Ryan Moore of NYSERDA, who detailed the state’s new renewable heat initiative incentives.