New Tax laws for energy efficientcy...

[tryan]

OK, so your friend was installing the geothermal anyway! So WTF did these stinkin' credits do for us? Why am I funding your friends heating unit? Let him pay for it himself!

He laughs about it ... it's just a wind-fall for him. Bet many of the 2008 installs will conveniently billed in 2009 (with an "inflation mark-up" for the installer). Just another loop-hole.

 

[eridanus]

You are going to have to show me how $1,000 from the Fed coffers (our money, borrowed at the rate of Govt bonds) provides a net economic gain for others in lower fuel bills. I understand that *if* ( a big IF with some of these credits) consumption is decreased, prices are driven down, but I can't see how that would exceed the amount paid out for marginal benefits.

If the person installing the system saves $1000 in fuel costs, then $1000 of less fuel is bought. The price drops by that amount. This is the supply/demand curve. I don't see why it's that difficult to fathom, unless your ambiguous "some people" is so large as to negate any cost savings entirely.

You're also ignoring the fact that most of that $1000 goes to installation. Installing a new tankless requires a larger gas line and sometimes a larger water line. The 2nd tankless heater, in 15-20 years, will be marginally more expensive than a tank heater and will have a much quicker payback. You can see this easily by looking at tankless prices. The Bosch 1600 is ~$600. A GE 40 gallon (12 year) at HD is $528. A 50 gallon (6 year) is $374. (Warranty is worth 150$??)

The total cost for a tankless is lindeed less than a tank, even without the credits. If all it took was an extra $200 or so (and you get added pantry space with a tankless), then more people would do it. But people are not economic automatons - study after study has shown this - and handing over an additional $1000 in installation costs, even when it will save money, does not sit well.

Bottom line: Maybe a stick would work better but carrots can also work. In this case, it does - less fuel is used.

 

[Zathras]

A friend spent all of last year building his dream home; complete with geothermal heat and solar panels. Late in the year he caught wind of the coming tax credits ... sooo he told his geothermal and solar contractors not to bill him until 2009.

He may want to check on that with his tax person, if he has one, very quickly. I was looking into just that as I installed some solar panels last year. What I have been told (from multiple sources) is that the billing date doesn't matter, it is the date the system is started.

Says he'll get 10k back on just the geothermal. So he paid 30k ... mine was 24k (in 2005 with a 10% Bush credit). Similar systems : 2 water to water units for radiant tubes and hot water plus a water to air system for heat/ac.

Holy cow, how big is your system? Mine ran 14k. Did you have to do the verticle wells instead of horizontal?

 

[ERD50]

If the person installing the system saves $1000 in fuel costs, then $1000 of less fuel is bought. The price drops by that amount. This is the supply/demand curve.

Two problems with that. First, it assumes that the "Price elasticity of demand" is unity, and I don't know if that is the case.

Second, as I said before, energy is fungible. So for the $1,000 in fuel we might save in the US, that savings gets spread across energy world-wide. We would only get a portion back in reduced energy costs.

I don't see why it's that difficult to fathom, unless your ambiguous "some people" is so large as to negate any cost savings entirely.

I never, ever said it negates it. Just that it would reduce it by some amount. But if it is a 15% savings for those that do not use more energy just because they have more hot water, then it only takes a few people using additional hot water to make a significant degradation in overall savings.

You're also ignoring the fact that most of that $1000 goes to installation. Installing a new tankless requires a larger gas line and sometimes a larger water line. The 2nd tankless heater, in 15-20 years, will be marginally more expensive than a tank heater and will have a much quicker payback. You can see this easily by looking at tankless prices. The Bosch 1600 is ~$600. A GE 40 gallon (12 year) at HD is $528. A 50 gallon (6 year) is $374. (Warranty is worth 150$??)

Well, a perfectly suitable 40G for us will cost $360. I think the warranties are just insurance policies - this one with a 6/6 has the same construction as the 12/12 (maybe a second anode rod, but I can replace that myself if needed). So still a big diff in cost. My tank is 22 YO and is the same basic model as what I will buy.

Bottom line: Maybe a stick would work better but carrots can also work. In this case, it does - less fuel is used.

I don't think the question was ever whether one will work or not. It is which one will gives the most bang for the buck. I think a revenue neutral tax and some education can go a long, long way. Something like: here is your energy tax rebate check- here are some things YOU can spend it on to reduce your high energy bills.

That way, we would not have a "one size fits all" program. T-Al can spend on tankless since he's on expensive propane, I'd probably buy more insulation, maybe a space heater.

And no one would get a credit to pay for something they were going to do w/o the credit, which is just a waste of my tax $.

And if you doubt the American publics ability to react to high prices, may I mention once again - what happened when gas went to $4? Did people find thousands of ways to conserve, or did they all go "I'm too stupid to know what to do - please Mr Govt, help me!"?

Are we having fun yet?

-ERD50

 

[Independent]

I know it is counter-intuitive (Who could be against energy independence?)
but pursuing it absolutely CAN be bad for the country. If producing our own energy is more expensive than buying it from someone else, then any industry or consumer that depends on US electricity will be disadvantaged by pursuing energy independence.

For the world's most extreme example, look at North Korea and their
"juchee" progam of economic independence. The Dear Leader proclaims that they will be independent in all areas, so they produce their own cars. They make maybe 100 a year, all are incredibly expensive and pieces of crap. Those 100 car "owners" and everyone else in North Korea would be better off if they imported cars at 1/10th the price that would work 10 times as well. But, they are economically independent--a meaningless goal for them as it would be for us.

The US could be "banana independent." We could grow all our own bananas domestically and say goodbye forever to dependence on foreign bananas. We'd need giant greenhouses and tremendous amounts of water and energy to do it, but it could be done. Yes, bananas would cost $6 per pound, so if you bought any you'd have less money to spend in the rest of the economy. Would that be good for the US? Is that the best use of our resources?

Anybody who believes in the overall benefit of free trade (caused by mutual exploitation of local efficiencies) cannot simultaneously argue for the "benefits of independence" in any significant economic area as a worthy goal in itself. The reasoning is identical.

You are correct, "Energy Independence" shouldn't be a goal in itself. It runs counter to the principle that there are gains from voluntary trade.

The counter-argument that makes sense to me is that the market price of crude oil in the US doesn't reflect the full economic cost of the oil. The missing piece is the tax dollars that the gov't spends trying to manage the mid-east so that those countries continue to put oil into the world market at a steady pace, without any negative actions toward the US.

Backing up one step, the gov't does this because it believes that oil is much more important to our economy than bananas. A 50% drop in the supply of bananas is a minor inconvenience. A 50% drop in the supply of oil is a major economic disruption.

We don't know exactly how much we spend trying to assure a steady supply of oil. As a convenient guess, I'd say $300 billion a year. This guess seems somewhere in the ballpark, and is "convenient" since we use about 300 billion gallons of crude oil, so a $1/gallon tax nicely covers the cost. We don't know exactly how much our use of oil would drop with such a tax, but if the $300 billion is roughly right, then the drop in use is also roughly "right".

Of course, instead of trying to put the gov't cost of managing the oil supply into the private cost, we could simply stop trying to influence actions in the ME. In this case, we would get our troops out and tell everyone (both in the ME and in the US) that they are on their own.

(I'm ignoring the whole CO2 issue, the issues are different there.)

 

[FUEGO]

And if you doubt the American publics ability to react to high prices, may I mention once again - what happened when gas went to $4? Did people find thousands of ways to conserve, or did they all go "I'm too stupid to know what to do - please Mr Govt, help me!"?

To be fair, we did hear a fair amount of "I'm too stupid to know what to do, please Mr. Govt help me!". Particularly from all the folks that have a 100 mile commute and can't possibly do it in anything less than a Ford Excursion. Remember the calls last summer for slashing the 18.4 cent gas tax and the government needing to do something to help with the gas price crisis?

 

[ERD50]

To be fair, we did hear a fair amount of "I'm too stupid to know what to do, please Mr. Govt help me!". Particularly from all the folks that have a 100 mile commute and can't possibly do it in anything less than a Ford Excursion. Remember the calls last summer for slashing the 18.4 cent gas tax and the government needing to do something to help with the gas price crisis?

True, but overall the numbers do not lie.

Gasoline consumption went down.

Isn't that what people are asking for?

-ERD50

 

[eridanus]

Well, a perfectly suitable 40G for us will cost $360. I think the warranties are just insurance policies - this one with a 6/6 has the same construction as the 12/12 (maybe a second anode rod, but I can replace that myself if needed). So still a big diff in cost. My tank is 22 YO and is the same basic model as what I will buy.

You'll still find that the tankless saves you money over the lifespan of a unit.

I don't think the question was ever whether one will work or not. It is which one will gives the most bang for the buck. I think a revenue neutral tax and some education can go a long, long way. Something like: here is your energy tax rebate check- here are some things YOU can spend it on to reduce your high energy bills.

Here:

Federal Tax Credits for Energy Efficiency : ENERGY STAR

You get $1500 to use for insulation if you like. Or a roof, or HVAC, or windows, or a tankless water heater.

"$1,500 is the maximum total amount that can be claimed for all products placed in service in 2009 & 2010 for most home improvements"

And if you doubt the American publics ability to react to high prices, may I mention once again - what happened when gas went to $4? Did people find thousands of ways to conserve, or did they all go "I'm too stupid to know what to do - please Mr Govt, help me!"?

Sorry, a "floor" for gas prices, as you've suggested, sounds vaguely Soviet-state-planning like. I can't agree with that. It'd be far better if we added in all the externalities to the cost of fossil fuels.

 

[ERD50]

True, but overall the numbers do not lie.

Gasoline consumption went down.

Isn't that what people are asking for?

-ERD50

heh, heh, heh, I just couldn't let it go at just that

Gas at $4 caused consumption to go down. This is the clearest, real-world cause/effect case we have of an action bring about results in energy savings.

So here is the challenge to all you pro-credit people:

Show me where a federal credit or deduction program brought about a clear and measurable reduction in energy use at a national level.


-ERD50

 

[FUEGO]

True, but overall the numbers do not lie.

Gasoline consumption went down.

Isn't that what people are asking for?

No, people want decreased fuel consumption, cheaper gas, and bigger cars. Without costing anyone anything extra.

And people want fairies to be real.

 

[eridanus]

Show me where a federal credit or deduction program brought about a clear and measurable reduction in energy use at a national level.

This can't be done until everyone (or nearly so) changes/updates/replaces.

Now, if you look at individuals, they're saving money and fuel. Numbers don't lie.

 

[Nords]

A friend spent all of last year building his dream home; complete with geothermal heat and solar panels. Late in the year he caught wind of the coming tax credits ... sooo he told his geothermal and solar contractors not to bill him until 2009.

He may want to check on that with his tax person, if he has one, very quickly. I was looking into just that as I installed some solar panels last year. What I have been told (from multiple sources) is that the billing date doesn't matter, it is the date the system is started.

Yup. Hopefully he didn't do more than "test" it in 2008. Or he could operate part of it in 2008 (for one year's batch of tax credits) and put another part of it in operation in 2009 (for another year's batch of tax deductions).

But it's like arguing about tax-loss swap selling or wash sales. Enforcement is nearly negligible. I doubt the IRS goes looking for this, and even if they did a random audit they might not check it.

I wonder how much of the price increase is driven by the increased tax credit?

Good question. In 2006, Germany & Japan enacted huge subsidies on their citizen's home power systems. Worldwide demand for PV panels spiked so quickly that retail prices doubled. The stocks of many solar manufacturers tripled, for a limited time.

So it'd be hard to tease out the price vs the credit, and I'm not sure that there is any effect. Hawaii has enough solar water installers that if one or two of them tried to sneak in a price hike, the rest would immediately undercut them. All of the profits are in the speed & simplicity of installation-- special training for the crews, pre-assembled components, custom tools, and pre-approved construction permits.

The technology isn't so difficult to commoditize, whether it's photovoltaic or soldered copper. The biggest challenge is the raw materials like polysilicon.

 

[Zathras]

ERD I agree with you, the energy/gas tax would work best.
However, I am also pro credit, simply because while it doesn't work as well as a general power tax would, it is better than nothing.
While I don't have numbers, I recently saw a show about a Texas energy utility that claimed wonderful results with their efficiency rebates. They mentioned that the use of these rebates has actually allowed them to not build an additional coal plant that would have raised rates (and resulted in all the other damage caused by said plant).
So my position is:
Both work.
A general energy tax works best IF IT IS IMPLIMENTED.
A general energy tax currently won't be implimented because of short sighted politicians and public.
Thus get the option we can.

 

[Zathras]

But it's like arguing about tax-loss swap selling or wash sales. Enforcement is nearly negligible. I doubt the IRS goes looking for this, and even if they did a random audit they might not check it.

Agreed, the odds aren't high. But neither are the odds of losing at russian roulette on a single pull. I just don't feel it prudent to take the chance

 

[ERD50]

True, but overall the numbers do not lie.

Gasoline consumption went down.

Isn't that what people are asking for?

-ERD50

No, people want decreased fuel consumption, cheaper gas, and bigger cars. Without costing anyone anything extra.

And people want fairies to be real.

Yes, that does seem to be true of many. I was referring to the people on *this* thread who were asking for energy consumption to go down.

This can't be done until everyone (or nearly so) changes/updates/replaces.

Now, if you look at individuals, they're saving money and fuel. Numbers don't lie.

You keep making my points for me

When gas went to $4, enough people made changes to reduce consumption almost immediately. Because there are thousands of ways to conserve, not just the govt "blessed" ones.

Of course $4 as a sudden spike was painful. That's why I'm in favor of gradual, publicized, increases (again, *if* we are to do anything at all) to give people time to react.

-ERD50

 

[FUEGO]

Yes, that does seem to be true of many. I was referring to the people on *this* thread who were asking for energy consumption to go down.

Hey, I'm in 100% agreement with your position on this. People in general don't _REALLY_ care about energy conservation for the most part. Sure, some folks in the general public and perhaps many on this board do actually take steps to conserve energy and other natural resources. But most people don't really care. They may say they care. They may even go buy a hybrid SUV and eat organic. They may even install PV arrays and solar water heaters on their 4000 sf mcmansions. But most people won't really care unless it hits them in the pocketbook.

People in general care about avoiding huge expenses like $4 gas and $0.30 kWh electricity or high nat gas rates. People don't know how to "behave properly" (according to the government definition: conserve energy) unless it hits them in the pocketbook. Tax credits for installing more energy efficient equipment and fixtures doesn't increase the marginal cost of energy such that it will encourage conservation. It may just slightly reduce the energy consumed to perform a specific task. Or it may not. Maybe the owner of that new high efficiency furnace/ac will keep it a degree or two warmer/colder since they are saving so much on energy costs.