to really give the market an opportunity to respond to the policy price signal the credit represents, and grow. We have a similar expectation for consistent support over a meaningful period of time like solar, wind and other renewable energies have had for over a decade.” Getting the credit extended would up it back to its original 30%. “They added this provision into Section 25D, which was the result of legislation in the budget omnibus bill two years ago,” he explains. “There were stepdown provisions. So it’s now at 26% for two years, then drops to 22% in the 2023 tax year. And then, unless Congress acts, it will go away after that.” And, of course, getting the commercial component of the BTU Act wrapped in is another goal. It was excluded this time for a number of reasons, Niebling says, but seems more likely to pass once Congress and the government has recognized and accepted the benefit of the residential credit for modern wood heat appliances. Finally, he adds, because it’s a new provision of the tax code, industry needs to ensure the guidance issued by the IRS is workable, accurate and helpful. John Ackerly, president of the Alliance for Green Heat, emphasizes the importance of properly interpreting and following the EPA’s efficiency criteria. Informing Consumers “Much of the guidance the IRS is expected to issue about wood heaters is noncontroversial and will likely be consistent with solar,” Ackerly says. “There is one distinct issue that has plagued this industry in the past: how is 75% efficient at the higher heating value (HHV) defined and how much leeway do manufacturers have to stretch the meaning?” Congress stipulated that it must be HHV, Ackerly says, but the final language did not say that the EPA list of certified heaters is the definitive way to determine efficiency, although that is almost certainly what the IRS will allow. There is no other consistent, reliable way for retailers and consumers to know which heaters are actually 75% efficient or higher,” he says. “Over the past seven years, there have been a number of bills and extensive correspondence about strengthening
the definition of 75% efficiency and moving wood heaters from section 25(C) to 25(D). The only method that Congress has referred to is using the efficiencies on the EPA list of certified stoves. No other method has been suggested.” Tim Portz, executive director of the Pellet Fuels Institute, points out that currently, there are 51 pellet appliances in the EPA wood heater database that are 75 percent efficient or greater. “But just below the 75 percent—the appliances that don’t qualify—there are 19 pellet stoves that are 70 to 74 percent efficient, but these are ones you cannot use the tax credit for,” he says, adding that good retailers will let their consumers know which appliances do and don’t qualify. While big box stores often don’t have the expertise—an issue that could slightly hinder spread of the word about the tax credit in general—specialty hearth retailers like Martin Sales & Service in Butler, Pennsylvania, have that knowledge and will play a key role in educating consumers. “The challenge the tax credit leaves our industry is informing the end consumer,” reiterates Adam Martin, owner. “We all need to work together to spread the news, because we all benefit from more homeowners heating with wood pellets or wood heat in general.” Martin views it as a tipping point in making a sale, and has already experienced an impact. Despite only being passed a couple of
months ago, the tax credit has resulted in an uptick in pellet appliance sales. “I have had a few customers who seemed to be a bit hesitant about making a final decision to purchase a pellet stove or wood stove, but informing them about the 26% tax credit seemed to make that decision process much simpler because of the significant savings,” he says. Another piece of the puzzle is the fuel going into these appliances—balancing production and inventory with market demand, when it comes to wood pellets. Gauging Demand As is likely the case with many pellet manufacturers, Portz says that upon passage of the BTU Act, he began thinking about what, exactly, the real impact will be. “Will we sell more pellet appliances than we otherwise would have, or will we incentivize those already wanting a pellet appliance to buy a more efficient model? We have to persuade the fuel agnostic people to choose pellet heating, and it matters what our retailers tell them. Does this create a situation in which—outside of being motived by the renewable aspect or feel of pellet heat—it’s viewed as a commodity purchase, a way to cost-effectively heat their home? “Our members recognize that we have a good thing now, but another question is, when and how does it start to impact overall wood pellet demand? Looking at the data that we’ve
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