The American Recovery and Reinvestment Act (ARRA) is one of the most significant pieces of legislation to come out of Washington, D.C. in years. It will cost less than the Iraq War, get us in less trouble with our allies and lead to more transferrable on-the-job skills than someone might get at Xe.
But it's not perfect. And hHere's one of my pet peeves: the wide discrepancy between the tax credits for energy efficiency retrofits and installing green power generation. If there are parts of the bill you don't like, please write in and post them below – we will highlight them in a subsequent article.
Here's a summary of the relevant sections on efficiency versus solar from the law firm of Bowditch and Dewey:
Residential Energy Property Credit (ARRA Section 1121): The ARRA increases the energy tax credit for homeowners who make energy efficient improvements to their existing homes. The credit rate is increased to 30% of the cost of all qualifying improvements and raises the maximum limit to $1,500 for improvements placed in service in 2009 and 2010. The credit can apply to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems. This credit was not available in 2008 and the IRS intends to issue guidance that will allow manufacturers to certify that their products comport with the new standards. Also, the IRS has warned manufacturers not to continue providing certifications for property that fails to meet the new standards.
Residential Energy Efficient Property Credit (ARRA Section 1122): This is a nonrefundable energy tax credit for a taxpayer's qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines. The new law removes some maximum amounts and allows for a credit equal to 30% of the cost of qualified property.
A residential solar system can cost $27,000, which makes the federal tax credit (not counting the state yet) come to over $8,000. Solar, however, can take eight years to pay off. Household energy retrofits can pay off in two years and sometimes less. (Shameless plug: Residential energy efficiency will be one of the big topics at or Green Building Summit slated for June 11.)
When you add state rebates, the discrepancy widens. In Georgia, for instance, homeowners can get a 35 percent state tax credit on solar panels above and beyond the federal one, says Don Ernst, who runs the green product division at Timber Holdings, a sustainable wood and flooring company. What do you get for energy retrofits? "Nothing," he stated.
Congressman Chris Van Hollen has suggested creating zero interest loans to help encourage energy retrofits. Sustainable Spaces CEO Matt Golden has talked about getting California and other states to equalize the tax credits and base them on energy performance, an idea an assistant for California Attorney General Jerry Brown said Brown is interested in.
And of course there are the weatherization programs under the ARRA. Still, this discrepancy invariably encourages solar and biomass over efficiency. And it may not be the best way to spend money.
Some have also complained that core scientific research doesn't get the attention it deserves. In Silicon Valley for the last eight year, CEOs and academics have complained how the research budgets for DARPA and the NSF were crunched. So far, the Obama Administration seems intent on improving it – the National Renewable Energy Lab just got $100 million with most of it going to research – but there has been an emphasis on shovel-ready spending. You're not going to get to the moon (or get the second Tang) with $100 million.
So what don't you like?