Recently, the state of Virginia passed a bill that will allow geothermal heat pump owners to sell Renewable Energy Certificates (REC) to utility companies. This legislation is set to significantly reduce the cost of geothermal installations by providing substantial financial incentives to homeowners. It's anticipated to create more jobs and inspire more contractors to enter the geothermal market, making these systems more accessible and affordable.
"It's exciting stuff," said Kylie Draucker, president of Delta Temp Geothermal Heating and Cooling in central Virginia. "It's making it more accessible for people, even low-income housing; it's reducing operating costs, and these incentives are going to spread the market to more individuals. It's a long-term plan, and it's truly going to make a long-term impact."
Federal and State Incentives
For the past 14 years, a federal geothermal tax credit has been available. Homeowners can already receive a 30% tax credit under the Inflation Reduction Act (IRA) for Energy Star-rated geothermal heat pump systems installed by January 1, 2033. However, the upfront cost of installing a geothermal system, which can range between $40,000 and $45,000 for a small home, has been a significant barrier.
Richard Lay, owner of North American Geothermal and past president of Virginia GFL Environmental, has been advocating for the technology despite its high initial costs. "If it really does so much good for everybody – including utility companies, the government, homeowners, the industry – how do you help them get to the point where it's installed?" Lay questioned.
The Bill in Action
The new bill aims to make geothermal installations more affordable by allowing homeowners to sell RECs to utility companies. This approach not only sets clear guidelines and expectations for electric companies but also aligns with targets for renewable energy integration. The bill is modeled after a similar one in Maryland, which has seen great success.
"We look at the sales difference in the residential market and how significant they are. People are reaching out and learning more about geothermal," Draucker noted. "If we electrify our communities, we have to reduce that load, and Maryland has been leading the way in this direction."
Financial Breakdown
In Maryland, residents can receive a $3,000 state rebate, plus additional utility company rebates that can range from $3,000 to $6,000 per residential installation. This means a geothermal system costing $45,000 could be reduced to approximately $27,300 after applying federal and state incentives.
Lay explained that aggregators like Clear Path Renewables manage the required paperwork and REC credits for homeowners, providing quarterly cash payments. This setup reduces the return on investment period and makes geothermal systems more financially attractive.
Looking Ahead
Virginia's new bill will likely issue RECs to both existing and new homeowners within a few years. The program defines geothermal systems as a renewable resource, leveling the playing field with solar and wind energy. "The goal is to grow the geothermal industry by 400% within the next eight years," Lay said. "Realistically, I think it will double."
This legislation is expected to create sustainable jobs and significantly boost the local economy. Maryland's success shows that with the right incentives, the geothermal market can thrive, providing long-term benefits for both homeowners and the industry.