FLEETWOOD-The onset of winter and the end of the year always brings a bump in business for the team at Fleetwood-based Scott Brothers Heating & Air.
But this year has been exceptionally busy, according to company co-owner Randall Scott.
He said the expiration of state tax credits as we ring in the new year could increase the cost of geothermal heating and cooling systems by up to $8,500.
The energy efficient systems last longer than conventional heat pumps and can slash your utility bills by up to 45 percent per month in some cases, but they’re more expensive to install, Scott said.
The cause for the cost increase at the end of this year? The end of the state’s renewable energy investment tax credit. For six years, it’s saved taxpayers essentially 35 percent on the cost of constructing and installing eligible renewable energy systems.
“People have realized, hey, the government is picking up a big chunk of this tab,” Scott said. “So the geothermal systems have been really popular for several years but, towards the end of this year people have really rushed to take advantage of the state tax credit before it expires.”
More than two decades in
Scott said the company installed its first geothermal heat pump in 1992, and has installed more than 300 systems over the past 23 years.
Conventional HVAC systems must heat or cool the outside air. In Ashe County those average daily temperatures can range from 20 degrees Fahrenheit in January to roughly 80 degree Fahrenheit in July. The larger the difference between the outside temperature and your preferred setting, the harder the system has to work.
A geothermal system, in contrast, uses the natural insulating properties of the earth, which usually falls between 50 and 60 degrees Fahrenheit year round, to its advantage.
“You’re essentially drilling a well and circulating water through a pipe at a constant 55 degrees,” Scott said. “So the system doesn’t have to work hard at all to get hot or cold air to come out of the registers.”
The trade-off? Because of the drilling, digging and extra materials involved, geothermal systems are more expensive than their conventional cousins. Scott said a complete install for his average client might cost between $30,000-$35,000.
During the pre-recession construction boom, he said essentially all of his geothermal installs were installed in new homes. These days, exactly the reverse is true.
“Probably better than 90 percent of the systems we’re installing are retrofit systems,” Scott said. “If they’ve already got a good duct system, you’re basically installing a new geo-unit and burying a closed loop.”
Booming since 2009
But despite the drop off in new home construction, interest in geothermal systems began to increase six years ago when the systems became eligible for the state’s renewable energy investment tax credit, Scott said.
First passed in 1999 and renewed in five-year increments, the credit was designed to allow renewable energy companies to catch up with mature competitors with cheaper operating costs. Geothermal systems were only added to the credit in 2009, a decade after it was first created.
Combined with a similar federal tax credit that launched in 2008, and Scott said government has picked up the tab for up to 65 percent of geothermal heat pump installation costs in North Carolina over the past six years.
“That was big for us,” Scott said. “It required me to have more employees and because these jobs mean excavating and well drilling, you’re hiring more subcontractors. We don’t look at it as the state just giving money away, because it put a lot of people to work.”
Scott said his company is likely booked solid through the end of December but predicts he’ll see his geothermal installs halved next year due to the expiration of the state credits.
“The fact that the federal tax credits are still available will bring more people through the door,” Scott said. “But yes, we’re expecting geothermal installs to fall off quite a bit.”
The federal 30 percent tax credit will sunset a year after North Carolina’s, on Dec. 31, 2016.
Scott said that expiration of both tax credits will change the landscape for the state’s HVAC industry, though he said he’s not expecting a dire shift.
He expects to see the sale of more efficient, higher end conventional heat pumps rise, along with things like ductless mini-split heat pumps.
“The trade-off is that they’re less efficient than the geothermal systems, but they’re also less expensive,” Scott said. “That’s what we’re game planning for right now.”
Reach Adam Orr at 336-489-3058 or Twitter.com/AdamROrr.