New Tax laws for energy efficientcy...

[cho oyu]

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Originally Posted by ERD50 Sure, it's great for Nords the recipient, but what is the benefit to the rest of the nation who paid for that tax credit? Are you saying you would not have put in the solar panels if it was a 42 month payback ( 18 months/(1-.57))? I suspect you would. So why ask the rest of the taxpayers to subsidize you. I can't find anything that is a 42 month payback for me, if I could I'd take it. I wouldn't need a tax credit to do that, I'd just do it. Not computing for me. -ERD50

Nords may have, but how many others may not? Be it initial availability of capital outlay, inability or unwillingness to do the economic analysis, or even the psychology of future economic gain discounting, there are a variety of reasons why most people would probably not put in solar systems.

I think one needs to look at this from a societal perspective of 30 years down the road, not 2 years down the road.

Global population is still increasing and noone seems to want to suggest that this is not a good idea.

Many high-population countries are starting to increase energy usage (India and China, for example).

Cheap hydrocarbon based fuel will not last forever; one can argue about how long it will last in terms of decades, not centuries.


And many other countries (S. Korea, Japan, western Europe, China) are realizing this. They are all investing, to some degree, in homegrown energy-efficiency or alternative energy industries. This is both to spawn local commercial viability and also to reduce dependency on external energy sources.

If the US does not keep pace, we will lose significantly in international political capital and economic prowess. As is, we are already incredibly indebted due to energy importing (to the tune of 400+ billion dollars a year - somebody can probably correct me on this number, but the order of magnitude will hold).

I simply cannot see how promotion of energy independence and reduced energy consumption can harm US society as a whole. And heck, because of that solar panel you subsidized, global fuel consumption decreased, less power plants have to be built, and your kWhr cost of energy just dropped by a tiny bit. Everyone benefits

[Zathras]

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Originally Posted by samclem If the technology is any good, then the purchasers/adopters will already have sufficient incentive to buy the product (i.e. theyll get to save energy). The government has no business taking money from all of us for the benefit of a few people who buy a product that benefits them anyway.

Do you also believe the government has no business keeping the prices artificially low for all of us so that just a few have to pay the much higher price? Specifically, those living near refineries or dealing with the first hand affects of coal plants (higher incidence of asthma, lung cancer, shorter life spans, etc)?
Personally, I still think the best solution is the one suggested by ERD and others of a energy tax to truly take these other issues into account.

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Originally Posted by samclem Is the government taking money from everyone so that some people get a subsidized purchase of leather seats and sunroofs? Tell me more!

No, and I think you know that is not what I said, nor meant to imply. I was responding to his point about a hybrid not 'paying for itself' for years if not decades, if ever. Just bringing up the point that there are very few aspects of a car that 'pay for themselves' ever, why pick out hybrids for the 'they don't pay for themselves' argument?

[ERD50]

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Originally Posted by cho oyu First, Nords brought up an excellent reasoning behind credits/subsidies that shows the consumer side of the equation: even if there is a short-term payback, many people don't have the increase in initial outlay money for more efficient technologies. I'll play a bit of devil's advocate to your three points: 1) Decreasing fuel consumption in non-critical areas lowers overall demand and prices. It also extends the period of time in which cheap fuel exists. With the US arguably the nation with the most general technological expertise, this gives us the longest time to figure out how to maintain long-term societal viability, be it through eventual required decrease in energy consumption or inventing the new cheap energy source. 2) If all we do is use energy and stop innovating, then your point is valid. However, what is being proposed is devising cheaper, energy efficient methods to live. It takes quite some time to mature a technology - why not start now and try to propagate our knowledge (for money and goodwill) when other countries determine that externalities (pollution) have to be addressed with high energy consumption? China, for example, is going to have some serious issues if they don't figure out how to control pollution (clean water is already a serious problem). 3) I agree. This needs to be an engineering problem to a large degree. It will ultimately end up being political, though, because of macroscopic environmental and economic effects (cross-border pollution, global warming, etc.). For this specific issue, it seems to come down to whether someone has actually tried to do a non-partisan economic and environmental analysis of the effect of tax credits/rebates on energy efficient systems and what those results were.

OK, but some of point # 1 is debatable - lowering prices tends to increase demand. One analogy - our computers are 1000x faster than they once were, but we just find more things to do with that power.

On #2 (and some of #1), the point some of us keep making is that raising the price of fuel with taxes will motivate those things *better* then specific tax credits.

Analysis! We don't need no stinkin' analysis! We saw what happened with $4 gasoline! Thousands of solutions, not just a few govt approved ones. Isn't it clear which is better?

Another side-point: we might be better off waiting until these technologies are better. A solar panel takes a HUGE amount of energy to produce. So much that if you put one in a good solar environment, the first two years it is just trying to catch up to replace the energy it took to make it. It is a net LOSS in energy for those first two years. So that is a big energy sink in itself. If solar panels were twice as efficient, or used half as much energy to produce, we would all be better off. There is plenty of demand to drive innovation, it might be best to hold off on wide-scale adoption until the technology stands on it's own two feet.

Again, the unintended consequence of solar panel credits is that it stifles research into competing technologies, which might prove to be even better. I can give examples, but I need to run. The free market does not discriminate like that.

-ERD50

[eridanus]

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Originally Posted by Zathras No, and I think you know that is not what I said, nor meant to imply.

Actually, the answer is "yes, they do." Remember the heavy SUV tax lophole? The government does indeed subsidize the purchase of 3+ ton luxury SUVs with leather seats and sunroofs. Sadly, samclem, that loophole has been tightened a bit - the immediate deduction is now only $25,000 for non-farm business purposes.

[Zathras]

Oh lord, you had to remind me. Although that wasn't targeted at 'leather seats' I am sure it was used that way by many.

[samclem]

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Originally Posted by cho oyu I simply cannot see how promotion of energy independence

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.

[ERD50]

Quote:

Originally Posted by cho oyu I simply cannot see how promotion of energy independence and reduced energy consumption can harm US society as a whole. And heck, because of that solar panel you subsidized, global fuel consumption decreased, less power plants have to be built, and your kWhr cost of energy just dropped by a tiny bit. Everyone benefits

OK, samclem covered one aspect, I'll take the second.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 it were a BIG savings in energy for the $ expended, I could see it. But then, people would do it w/o credits. I don't know anyone who lives in a house in this area w/o insulation. Why is that? Not just building codes - people *know* it will save them money.

Only some % of people will make these changes. Also, you have to consider with and w/o the credit. In my case, I *will* be replacing my water heater. Even though I'm I plan on getting the cheapest, least efficient model with the features I want (glass lined tank, same basic model that has lasted over 22 years in my house), it is more efficient than the old one. Old rated at 313 annual Therms, new at 254 - assuming the measurements are the same as they were in 1986). Now, some people will do the math and say that the credit was responsible for ALL the increase in savings over my old one, but in reality, it would only be responsible for the incremental increase over the cheaper, but somewhat more eff unit I would have bought w/o the credit.

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Nords may have, but how many others may not? Be it initial availability of capital outlay, inability or unwillingness to do the economic analysis, or even the psychology of future economic gain discounting, there are a variety of reasons why most people would probably not put in solar systems.

And how about those of us who have done the math and decide it is NOT worth the expenditure? And then we see people take advantage of the credit w/o thinking (free money!)..., or to fill their hot tubs with the "energy efficient" "endless hot water" unit.... kinda burns me up.

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I think one needs to look at this from a societal perspective of 30 years down the road, not 2 years down the road.

I am. That is why I keep saying that if we want the govt to push conservation, they should have put an ever rising, publicized floor on energy prices over the past 30 years. Let the free market devise real solutions, rather than having COngress "bless" a select few. We could start now, better late than never.

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Global population is still increasing and noone seems to want to suggest that this is not a good idea.

Many people suggest it. Few want to legislate it.

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Many high-population countries are starting to increase energy usage (India and China, for example).

Should we give them tax credits too? You said these tax credits are a benefit because it will lower energy prices for everyone. Energy is a fungible commodity. So it should make no difference if we save a barrel of oil in China or India or the US, a barrel saved will lower costs. This is a missed opportunity, based on your thoughts. We should send them container ships full of tax credits, energy prices will decline dramatically for us and everyone on the planet! /sarcasm/

Like wise (seriously now), that lower energy cost you claim we get with these credits is lowering energy costs for everyone on the planet. That money really has an uphill battle, and it means my tax dollars are going to lower energy costs for people in other countries. Why do I care to do that? So they can use more of this cheaper energy, which then offsets the conservation here in the US? It makes no sense.

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Cheap hydrocarbon based fuel will not last forever; one can argue about how long it will last in terms of decades, not centuries.

Exactly why we should tax it (apply my caveat here). What causes people to conserve something better than raising the price of it? I'll say it again: $4 gas?

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And many other countries (S. Korea, Japan, western Europe, China) are realizing this. They are all investing, to some degree, in homegrown energy-efficiency or alternative energy industries. This is both to spawn local commercial viability and also to reduce dependency on external energy sources.

Same point as samclem - some of those countries have accomplished nothing but raising the price of their energy to their citizens. Why use a more expensive substitute?

-ERD50

[ERD50]

Quote:

Originally Posted by eridanus Actually, the answer is "yes, they do." Remember the heavy SUV tax lophole? The government does indeed subsidize the purchase of 3+ ton luxury SUVs with leather seats and sunroofs. Sadly, samclem, that loophole has been tightened a bit - the immediate deduction is now only $25,000 for non-farm business purposes.

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Originally Posted by Zathras Oh lord, you had to remind me. Although that wasn't targeted at 'leather seats' I am sure it was used that way by many.

Good story on the "Hummer loophole":

Bill Takes Aim at 'Hummer Tax Loophole' : NPR

Short story - unintended consequence of a bill from Congress with "good intentions" to stimulate a specific part of the economy. See a pattern here?

-ERD50

[tryan]

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.

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.

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

[ERD50]

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

heh, heh, heh, another confounding influence from the law of unintended consequences!

Take that 94.1% furnace mentioned earlier. The dealer will have a hard time moving those since the 95% units qualify for a credit. So.... law of supply/demand says: lower the price on the 94.1% to move them. And/or, *raise* the price (or offer less of a discount - same thing) on the 95% due to higher demand.

Kind of alters the equation, doesn't it? Yet, Congress looks at these as static rather than dynamic pricing models.

It's one of the reasons I hate "gates" on things ( like the 95% eff "gate"). Just about everything should be done on a slope rather than a gate. It avoids many unintended consequences. If you are going to have a credit, make it a sliding scale.

These credits stink on so many levels, I just can't believe anyone (other than Congress critters getting kickbacks/votes - there's a "good" reason for them) is defending them.

edit/add - 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! Nothing against your friend - and he *should* take advantage of the offer since it is out there - I just think it is stupid that it is offered.


-ERD50

[tryan]

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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]

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Originally Posted by ERD50 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]

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Originally Posted by tryan 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.

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Originally Posted by tryan 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]

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Originally Posted by eridanus 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.

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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.

Quote:

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.

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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]

Quote:

Originally Posted by samclem 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]

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Originally Posted by ERD50 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]

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Originally Posted by FUEGO 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]

Quote:

Originally Posted by ERD50 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.

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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"

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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]

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Originally Posted by 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]

Quote:

Originally Posted by ERD50 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.