US tax changes mean good and bad news for the energy efficiency sector

The big changes to the US taxation system recently passed by Congress won’t have a “dramatic” impact on energy efficiency, according to the American Council for an Energy-Efficient Economy (ACEEE).

Lowell Ungar, a senior policy advisor with the ACEEE, said this week in an article for independent forum The Energy Collective that the most significant impacts are likely to arise as state and local governments, companies and individuals find they have either more or less money to spend on energy efficiency upgrades and programmes.  

Meanwhile, specific provisions in the tax bill offer either good or bad news for the sector.

The tax bill cuts state and local authorities’ ability to issue federally-backed bonds to finance energy efficiency improvements to public buildings, community schemes and some renewables projects. According to Ungar, $1.9bn in such bonds had been available, but this has now disappeared.

In good news, the cap on deductible business investments has been raised to $1m, and HVAC equipment and roofs installed on commercial buildings now qualify. 

In bad news, the bill does not extend tax credits for combined heat and power (CHP), fuel cells, ground source heat pumps and other energy efficiency technologies, but the tax credit for plug-in electric vehicles (EVs) has survived, as have tax-exempt ‘private activity’ bonds that can be used to finance energy efficiency improvements.

CHP has received tax credits since 2012, when President Obama issued an executive order aimed at encouraging investment in industrial energy efficiency projects, including CHP. The scheme targeted the deployment of 40 GW of industrial CHP in the US by the end of 2020.

Meanwhile, US trade group Advanced Energy Economy (AEE) called the tax bill a "missed pro-growth opportunity". 

The AEE said it was "disappointed that the bill does not level the playing field for other advanced energy technologies, such as fuel cells, storage, combined heat and power, geothermal, nuclear, and distributed wind". 

Congress is expected to address these tax credits, which Ungar called "orphaned", in the new year. 

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