Posted On July 5, 2022

Two new bills pending in the U.S. Senate are designed to speed the electrification of HVAC systems, decrease the amount of fossil fuels (such as natural gas and oil) used in buildings, and cut carbon emissions.

Both would offer financial incentives for the production of certain electric-powered HVAC equipment, particularly heat pumps—both geothermal and air-source—and heat-pump water heaters.

The bills represent another push from Washington, D.C., for greater energy efficiency. In June, the Department of Energy proposed phasing out the manufacture of non-weatherized residential furnaces with less than 95% efficiency, and President Joe Biden invoked the Defense Production Act (DPA) in an effort to increase the manufacture and availability of energy-saving technologies, including heat pumps and solar-power components.

The Installing Clean Efficient Energy Hastens Our Transition (or ICEE HOT) Act, sponsored by Sen. Ed Markey, D-Massachusetts, would amend the Energy Policy Act of 2005 by expanding an existing rebate program with $10 billion in funding from the 2023 through the 2030 fiscal years. Four other Democratic senators have signed onto the bill.

Manufacturers and distributors would be eligible for rebates for heat pumps, heat-pump water heaters, certain heat-pump clothes dryers, induction or noninduction electric stoves, “smart” electrical panels, and other electrical appliances as determined by the secretary of energy. Manufacturers and distributors receiving rebates would be required to pass at least 90% of their value on to consumers in the form of lower prices for those items.

“The ICEE HOT Act would transition homes across America away from costly, dirty fossil fuels towards cheaper, cleaner renewable energy,” Markey said in a press release. “With this legislation, we can put Americans to work manufacturing the clean energy revolution.”

The bill would require electrification products to meet its definition of U.S.-made in order to qualify for rebates. That means that at least 55% of the components of each product would have to be mined, produced, or manufactured in the U.S.

The second bill, the Heating Efficiency and Affordability through Tax Relief (HEATR) Act, sponsored by Sen. Amy Klobuchar, D-Minnesota, would offer manufacturers tax credits for making heat pumps and heat-pump water heaters. Six other Democratic senators have signed onto the bill.

Tax credits under the HEATR Act, an amendment to the Internal Revenue Code, would be as high as $800 for each Energy Star-qualified heat-pump water heater and as high as $1,000 for each residential space-heating heat pump that meets Energy Star criteria. Credits for commercial and industrial heat pumps, based on Btuh output, could be even higher.

“This legislation is a win-win—reducing energy costs for consumers while strengthening access to clean, energy-efficient heating solutions,” said Klobuchar in a press release.

A spokeswoman for the Air Conditioning, Heating, and Refrigeration Institute (AHRI), which represents HVAC equipment manufacturers, said the organization had no position on either the HEATR or ICEE HOT acts.

At Heating, Air-Conditioning, and Refrigeration Distributors International (HARDI), Alex Ayers, the director of government affairs, said that while ICEE HOT looks “on the surface” like it would help consumers, “the quotas on who the money goes towards were designed by policymakers with no understanding of the wholesale industry.”

Ayers pointed to incentives that he said work better, such as one in the 2017 tax reform bill that allowed small businesses to expense the full cost of an HVAC system replacement.

“There is no reason for the Senate to try and reinvent the wheel and try and accomplish policy goals completely unrelated to heat pumps or the HVACR industry through this legislation,” he said.

Both the ICEE HOT Act and the HEATR Act are pending in the Senate finance committee.

Original Article: Senate Bills Aim to Push HVAC Electrification