The US Senate’s draft budget reconciliation bill proposes canceling key industry tax incentives for geothermal heating and cooling systems, including ground source heat pumps. Industry executives are warning that this could lead to massive layoffs and hinder the growth of a technology that could help slash energy demands, boost manufacturing, and stabilize the electric grid.
The devices tap thermal energy from shallow wells or bores drilled several hundred feet underground, where temperatures remain constant, approximately 55 degrees, throughout the year. Ground source heat pumps are now used in just over 1 million US homes, but their efficiency and cost-effectiveness are threatened by the proposed cuts.
Industry executives, including those who manufacture ground source heat pumps, argue that the technology has significant benefits for domestic manufacturing, energy independence, and low-cost energy for consumers. They warn that the loss of tax credits would force them to reduce investment in the industry, leading to job losses and a slowdown in innovation.
The existing tax credits allow individuals who install geothermal heating and cooling systems to earn up to 30% offset on their project costs. The incentives are set to phase out over time before ending entirely for installations that begin construction after 2034. However, the Senate Finance Committee’s draft legislation proposes cutting these credits much sooner, just 180 days after being enacted.
The proposed cuts would be devastating for all clean energy technologies eligible for tax credits, but ground source heat pumps would be hit particularly hard due to their higher installation costs. Industry executives are urging lawmakers to preserve the residential tax credits for geothermal systems and maintaining incentives for larger-scale neighborhood-scale systems through 2034.
If the tax credits aren’t maintained, industry leaders fear massive layoffs and a slowdown in innovation. The industry currently employs over 2,000 people in manufacturing and thousands of additional workers in design, drilling, and installation. The loss of support would be devastating to an industry that has already faced challenges in the past, including when residential tax credits expired at the end of 2016 before being reinstated in 2018.
The US Department of Energy reports that ground source heat pumps could play a significant role in reducing demands on the electric grid, especially during periods of extreme heat or cold. Industry leaders believe that this technology has significant potential to help solve energy-related challenges and are urging lawmakers to preserve the incentives that support its growth.
Source: https://insideclimatenews.org/news/20062025/geothermal-tax-credits-budget-bill