Green building advocates say the recently passed economic bailout package could provide a significant boost to the use and acceptance of alternative energy sources and energy efficiency in the United States, thanks to the legislation's provisions for renewable energy tax incentives.

But builders and remodelers may benefit as well as homeowners interested in high-performance housing have more financial incentives to invest in such energy-saving features. That's particularly true for solar energy technology, whose high cost often discourages homeowners and builders from including it in homes. Currently, less than 1 percent of U.S. energy is generated by solar power, placing the U.S. behind many other industrialized nations in terms of renewables. For example, roughly half of all solar power installations occurring around the world are in Germany.

This new legislation could change those trends. The solar industry says that these new tax incentives could make the United States the largest solar market in the world by 2016.

“This bill is a major step in our long journey toward energy independence and ensures that solar energy will be a significant part of America’s energy future,” says Rhone Resch, president of the Solar Energy Industries Association (SEIA) in Washington, D.C. “This long-term extension of the solar tax credits will create a domestic solar industry with hundreds of thousands of jobs while providing clean, affordable, carbon-free energy to millions of American families, businesses, and communities.”

“By passing this bill, Congress has finally given the solar energy industry ‘policy certainty’ that will attract investment, expand manufacturing and lower the cost of solar energy to consumers,” added Roger Efird, chairman of SEIA and president of Suntech America, a Chinese solar power manufacturing company. “This will allow companies like mine to move forward with expansion plans to serve the growing U.S. market.”

The cause for celebration stems from the "Emergency Economic Stabilization Act of 2008," which included an extension of the residential tax credits for renewable energy as well as energy-efficient improvements for new construction and remodeling. The bill reinstates—and in some cases increases—tax incentives that were allowed to expire when President Bush signed the energy bill in December of last year.

For example, the bill extends for eight years a tax credit of 30 percent for both residential and commercial solar installations. It also eliminates the $2,000 monetary cap for residential solar electric installations. The installation must be put in service after Dec. 31 of this year, however.

Tax incentives apply to other renewable energy sources too. The legislation offers a one-time tax credit of 30 percent of the total investment for residential ground loop or ground water geothermal heat pump installations, with a maximum credit of $2,000 for a single residence. The legislation also provides a credit of 10 percent of the total investment. To qualify for the tax credit residential systems must meet Energy Star requirements, and legislation is retroactive to residential systems installed after Dec. 31, 2007.

“We believe this incentive will encourage many more homeowners and business owners to install geothermal heat pumps,” says Tim Shields, chairman of the board of WaterFurnace, a Fort Wayne, Ind.-based manufacturer of various types of geothermal and water source heat pumps. “Geothermal heat pumps are made right here in the U.S. and the machines used to put the renewable heat exchangers in the earth are all made right here. Every system installed requires skilled U.S. labor, and more installations mean more jobs. This is truly a homegrown solution to the energy crisis and a very good way to address the financial crisis at the same time.”

The economic package includes an extension of the residential tax credits (for energy-efficient improvements) that expired at the end of 2007. The extension is for improvements made between Jan. 1 and Dec. 31, 2009, the EPA/DOE Energy Star Web site says, adding that improvements made in 2008 are not eligible for a tax credit. Consumer tax credits are available for insulation, replacement windows, water heaters, and certain high-efficiency heating and cooling equipment.

“If you are building a new home, you do not qualify for the tax credits for ‘eligible building envelope components’ (windows, doors, insulation, roofs) or "qualified energy property" (HVAC and non-solar water heaters). However, the tax credit for photovoltaics, solar water heating, and fuel cells is available for homeowners building new homes,” the Energy Star Web site says. The solar water heating and photovoltaic system tax credit is for 30 percent of the cost of the system, up to $2,000.

Home builders get some benefits too. Builders are eligible for a $2,000 tax credit for a new energy-efficient home that achieves 50 percent energy savings for heating and cooling over the 2004 International Energy Conservation Code (IECC). But at least one-fifth of the energy savings must come from building envelope improvements. There is also a $1,000 tax credit to the builder of a new manufactured home which achieves 30 percent energy savings for heating and cooling over the 2004 IECC.

Nigel Maynard is senior editor, products, at BUILDER magazine.

Learn more about markets featured in this article: Fort Wayne, IN.