Sweetening Wood Heat

Using wood to heat homes and businesses offers plenty of perks, but spreading state incentives are further enticing installations.
By Anna Simet | October 31, 2014

During the first week of September, homeowners in New Hampshire paid about $25.20, $33.91 and $44.88 per million Btu for fuel oil, propane and electricity, respectively. Those using bulk-delivered wood pellets and cordwood paid about half that amount or less—$14.91 and $15.50. 

Though the low price of wood and pellets holds plenty of appeal to consumers, making the transition is oftentimes a different story, particularly when it comes to anteing up to purchase the appliance and pay for installation.  Most wood and pellet stoves cost between $3,000 and $5,000 for the appliance, potential change out and installation, but a wood pellet boiler system can cost anywhere from $15,000 to $20,000 with installation.

To help mitigate the initial financial burden of fuel switching, New Hampshire is one of five U.S. states that offers wood pellet boiler incentives—up to a 50 percent rebate, a max of $6,000—and is one of a handful of states that does so, which includes Maine, Massachusetts, New York and Vermont. Eight states offer tax credits, rebates or deductions for wood or pellet stoves, mostly in the western U.S., and a few states offer some kind of incentive for both.

Though states with wood heat incentives have seen momentous growth over the past several years—by over 100 percent in some—the trend isn’t isolated to that region; Great Lakes states such as Wisconsin, Michigan and Ohio have also experienced exponential increases. But states with incentive programs have a leg up on states that don’t, especially when it comes to meeting certain objectives, such as guiding consumers to purchase cleaner and more efficient appliances to improve air quality, or providing help to low-income families dealing with ever-increasing fossil fuel prices. It all depends on what the state’s goal is, says John Ackerly, president of the Alliance for Green Heat.

Different Goals, Different Programs

“Rebates are much better for lower-income people; they don’t have to wait until the next year to get it [money back], most rebates come in the mail one or two months later. Rebates are better for the consumer,” Ackerly says.

In states that don’t have air pollution problems, there aren’t typically requirements for qualifiers to remove old stoves, such as in Maryland, Ackerly’s home state, a newer member of the state wood heat incentive club. “We don’t have any substantial wood smoke problems, plus the program is being run out of the Maryland Department of Energy, and they don’t even have a mandate to improve air quality,” he says.

It’s a different story in the Northwest U.S., where programs are totally driven by air quality. “Even to the point of where the state will give you more money if you agree to switch to a natural gas appliance,” Ackerly says. “So there, the government is trying to get people to go from a renewable to a fossil fuel, and paying them more money to do so, which is kind of a pity. But in a deep valley in an urban area where pollution is really bad, you can’t really argue with that. Although, I think they could have done a better job starting earlier and providing people with incentives to get onto pellet stoves—the air quality might not be as bad as it is.”

Though the general wood heating incentive wave is trending toward boilers and automated bulk delivery—in Maine, distributors report an installation rate of about one system  per day—Maryland’s new wood and pellet stove program has exceeded expectations in terms of popularity, and serves as a good example and place to start for other states looking to implement something similar.

Implementation and Challenges

Providing $500 grants for wood stove installations and $700 for pellet stoves—both required to meet certain emissions rates—the goal of the program is to reach Marylanders who don’t have natural gas access, says Emilee van Norden, Maryland Energy Administration clean energy program manager. “Last year was a pretty difficult year for people—many had difficulty affording fuel oil because of the really harsh winter, harder than we’re used to. These stoves only cost a few thousand dollars, and we give a pretty sizeable grant to them. It also allows us to get to parts of Maryland where they can’t get solar on their roof because they’re in the woods or mountain areas, or regions where income is a bit lower and [they] can’t afford geothermal or solar.“

After a strong response to its pilot phase, the program was expanded indefinitely as part of the state’s Clean Energy Grant Program, which also funds other types of renewable installations. Money for the program is drawn from Maryland’s Strategic Energy Investment Fund, which results from the state being part of the Regional Greenhouse Gas Initiative, a market-based, carbon cap-and-trade program.

Figuring out where funding for such a program will come from can be a challenge to states hoping to implement what Maryland has done. To help generate ideas, EPA Burnwise has recently released a guide for states to help them through the program development process. Program funds may potentially come from weatherization and other housing assistance programs, grants and loans through the U.S. Department of Housing and Urban Development, USDA, U.S. DOE or U.S. EPA.

Once the program is in place—after a need is demonstrated, preliminary plan has been developed, partners identified and funding scored—there are implementation problems that may arise, such as “free riders,” or people who would make the purchase anyway and don’t really need the financial help, an issue that stove incentives are more likely to encounter than pellet boilers. “[For boilers] the upfront cost is high, so I don’t think there will be too many free riders,” Ackerly says. “A few may have done it otherwise, but a $5,000 incentive is certainly enough to push people over the edge. One thing we don’t have in the stove or boiler world is the volume that will bring the per-unit cost down. Some of these companies are only selling a couple hundred boilers a year, and though 5,000 single stoves is a good year, it’s not enough volume to help bring the cost down.”

In Europe, where the residential heating market is thriving, the upfront costs of stoves and boilers are nearly the same, but the return on investment is much quicker. “The fuel you’re avoiding is double or triple the cost,” Ackerly says, adding that people stay in their houses longer in Europe, so most don’t mind making a longer-term investment. “Here, if you’re not sure you’re going to live there in five years, do you want to pay $20,000?”

Ackerly noted that a new payback mechanism, on-bill financing, is helping to sway those who may be planning to move in the future to make the investment anyway. “The next owner of the house will continue to pay the monthly amount, so you don’t need to worry if you sell the house in a few years,” he says. “They’ve been using it in the solar world, but it’s a lot easier to use it for electric appliances because the electric utility usually just adds a certain amount each month onto your electric bill. When you’re adding a nonelectric appliance onto your electric bill, it definitely takes coordination to make that happen.”

Other potential implementation challenges that are likely to be discovered during postprogram analysis include too many people using the incentive, causing the budget to run out quickly, excessive administration burdens, and people finding loopholes.

At that point, determining and fixing challenges is essential in ensuring a more successful next round. In Maryland, one challenge was identification of which stoves qualify and which don’t, van Norden says. “Now, I’m at the point of when I see a certain dealer’s name, I know it’s going to be a good application. It’s mostly a matter of making sure the dealers and stove owners are getting the right marks. Emissions rates are part of our requirement that people didn’t understand at first.”

To keep things running smoothly, a bimonthly meeting is held with Maryland stove dealers to find out what issues they might be having, or to answer any questions.

 Ace Hardware & Hearth owner Pete Peterson, who opened the Glen Burnie, Maryland, hardware store in 1978,  said the rebate program does result in more stove sales, but how it really benefits his business is other things that customers also buy—venting, pellets and wood, grates and materials to start their fires.

And, perhaps most importantly, the uptick in business has allowed Peterson to keep more employees on year-round. “We’re busy the whole year in spring and fall, so we get to keep eight people on during the winter because of this program.”

Peterson says upon implementation of the program, impacts occurred nearly immediately—people were quick to act upon the opportunity. “It was a very obvious there was an incentive to switch off of electric, oil, gas and propane,” he says. “In Maryland, we went through a situation where electricity costs went up 72 percent in just a couple of years, and there wasn’t much of an incentive [to fuel switch] other than some meager things the dealer can give. It’s been just like the story of the frog boiling in the pot—the heat has been turned up slowly and it’s dying but doesn’t know it—people have been slowly bleeding from their electric bill, when they could be buying other things.”

The biggest challenge has been spreading the word about the program, in Peterson’s opinion. “Letting people know they have an option, that they can take control,” he says.

On any confusion of qualifying vs. nonqualifying stoves, Peterson says the list the state has provided is pretty cut and dried, and there isn’t much motivation for hardware stores to carry stoves that don’t qualify. “It’s not very common, most of ones not certified are carried in big box-type stores that aren’t concerned about the things we are—they’ll sell anything at the right price points,” he says.

Van Norden says there’s potential to add pellet boilers to the state rebate program, but as the program is still new, much has to be figured out. “We’ll probably be looking at other states to see what they’re doing,” she says.

And to those states on the fence about implementing wood heating incentive programs, van Norden has the following advice to offer: “Engage the stove community—it’s a really good asset. And don’t hesitate. It’s a smart way to help people, it’s very practical, and it helps them lower their energy bills.”

Author: Anna Simet
Managing Editor, Biomass Magazine
[email protected]