When Good Intentions Become Counterproductive

Niebling says sometimes well-intended incentives, such as those associated with Renewable Heat New York, can become de facto regulations. These initiatives and others must better align with marketplace realities to build market penetration.
By Charlie Niebling | July 14, 2016

Sometimes well-intended incentives can become counterproductive de facto regulations.  Let me explain what I mean in the context of efforts here in the Northeast to spur market adoption of modern wood heating.

Advocates of modern wood heating have worked very hard to encourage state energy agencies to consider incentives for modern pellet boilers.  These agencies have supported solar thermal, geothermal and a host of renewable electricity technologies, so it has seemed logical to extend policy support for pellet boilers to help these states make clear, measurable progress toward broad renewable energy targets.  It took time, but these agencies have come around to the importance of supporting modern wood heating.

New Hampshire was the first state to promulgate a wood pellet boiler rebate program, initially for homeowners, and then for commercial building owners.  The program specified a high output efficiency requirement, minimum volume of bulk pellet storage and full automation of fuel feed. 

Maine followed suit with similar technical requirements.  The two state programs have been very successful because they made it relatively simple for folks to apply and they kept technical requirements reasonable.  They have collectively helped to support nearly 1,000 home, business, school and municipal installations.

Vermont started slowly but has come on strong in the past year, with rebate levels and straightforward program guidelines that should have a real market impact.  Massachusetts started with a pilot program and now has a fully implemented residential rebate program, with a much-anticipated commercial program due out very soon.

These programs all set a high technology bar.  The results are compelling: millions of gallons of imported oil displaced, strong incentives for private investment in bulk wood pellet delivery trucks and double-digit annual growth in wood pellet central heating.  In short, these programs are helping to build a market.

Then there is New York.  Efforts over several years by the New York Bioenergy Association and others finally resulted in Gov. Andrew Cuomo’s announcement in 2014 of “Renewable Heat New York,” a multiyear, multimillion-dollar initiative to support residential and now commercial installation of modern wood pellet boilers.  Advocates were elated to see this high-level recognition.  Cuomo spoke of the important role this technology could play in economic development and reducing dependence on imported fossil heating fuels.

Sadly, as designed and implemented by the New York State Energy Research and Development Agency, the program has been very slow on the uptake, despite offering rebates of up to 45 percent of the installed capital cost.  This is largely because it insisted on such unnecessarily stringent technical requirements and administrative hoops and hurdles for installers that systems that meet the requirements actually cost more to install with the rebate than an advanced system that does not have to meet the requirements without a rebate.

NYSERDA is, first and foremost, a research and development (R&D) agency, with a respected track record of research into understanding the performance of wood-burning technology.  For this, it should be commended.  Its capable researchers understand what constitutes best-in-class technology for modern wood heating.

The problem is pushing the very leading edge of R&D results does not necessarily align with delivery of real world programs to catalyze market adoption.  The market is not ready for unnecessarily stringent requirements and associated costs, with or without rebates.  Without meaningful market penetration, modern wood heat cannot and will not reach scale where unit costs will start to come down—such as what has happened so dramatically with solar PV.

By delegating the implementation of Renewable Heat New York to a R&D agency, Cuomo’s potential for this initiative has largely been squandered.  Efforts by advocates to urge NYSERDA to better align this program with marketplace realities have been mostly met with indifference. 

In this time of low fossil-fuel heating prices, folks won’t install pellet boilers without the rebate, and they won’t install them with the rebate because technical and administrative requirements are beyond the capacity of this nascent market to embrace.  The result—no market growth at all in New York state, the largest heating oil-consuming state in the country.

In this way, a well-intentioned initiative, Renewable Heat New York, has become a de facto regulation.  Fossil energy prices will not stay low forever.  I hope that as conventional heating costs come up again, NYSERDA will sit down with its colleagues from other northeastern states and progressive industry leaders and revisit its technical and administrative requirements, drop its guard a bit, and allow a phased approach that will help build some market penetration. 

Author: Charlie Niebling
Consultant and Partner
Innovative Natural Resource Solutions LLC
[email protected]