With tax credit, consumers give turbines, solar panels a second look

The stimulus package allows buyers to claim a 30 percent tax credit for renewable-energy products.

At the Home and Garden Show in Augusta, Maine, on Saturday, the big attention-getter was over in the convention-center corner: a powder-blue wind turbine.

With clean lines and a sleek fiberglass composite skin, the home-scale windmill was fetching enough, but it was wearing something that made it even more attractive to passersby: a bright orange sign advertising that buyers could claim a 30 percent federal tax credit for its purchase.

Looking at the turbine, Bruce Cooper, a teacher, says he’s been thinking for six years about converting his home to wind power. “These tax credits may be just the thing that push me over the edge,” he says.

Across the United States, many in the alternative-energy and home-renovation industries report increased interest from consumers like Mr. Cooper, who have been enticed by the tax credits in the federal stimulus package to at least consider loosening their vise-grip on the purse strings and add something “green” to their homes.

The stimulus legislation allows consumers to claim a 30 percent tax credit in 2009 and 2010 for the purchase and installation of renewable-energy products such as wind turbines, solar panels, and geothermal heat pumps. Taxpayers may also claim a 30 percent credit, up to $1,500, for qualifying energy-efficient home improvements including insulation, ultra-efficient heating and cooling systems, and replacement windows.

Overall, the stimulus package outlines more than $25 billion for energy-efficiency and renewable-energy initiatives. In addition to the tax credits, those initiatives range from public-transportation benefits for commuters to some of the projects involved in the modernization of Defense Department facilities. The $25 billion also includes $3.2 billion for state and local energy-efficiency and conservation projects and $5 billion in weatherization funds for low-income households.

The funds have started to trickle out and will start flowing in earnest during the next several months.

Consumer incentives are a welcome development in the home-remodeling industry, which has been hit hard by the recession. Homeowner spending on remodeling declined 9.7 percent last year, according to the Joint Center for Housing Studies at Harvard University.

The tax credits are already boosting consumer interest, says Dave Moody, director of field marketing for Service Experts Inc., a heating and cooling company with 120 branches nationwide. “It’s having the desired intent,” he says. “It’s driving people toward energy conservation and more efficient appliances, from our observation.”

As consumers learn about the credits, activity is picking up at many of the company’s branches, says Mr. Moody, although he doesn’t have updated sales figures yet. To spur interest, the company is heavily promoting the products that qualify for the rebates on its website and at its stores.

Consumers’ use of the tax credits may depend largely on getting word out about them, says Moody. “The tax code is very confusing. It can take some time for consumers to take advantage [of the credits],” he says, adding that his company recommends that prospective buyers speak with a tax expert before purchasing anything.

Another company already seeing the effects is TAG Mechanical Systems, based in Syracuse, N.Y. With consumers sobered by the economic climate and armed with new reasons to improve energy efficiency, company vice president Ellis Guiles says he’s seeing “a shift away from the ‘sizzle’ upgrades like granite countertops and wood floors to things that will add value to a house and lower utility bills.”

Sales of on-demand water heaters are up, and more people are insulating and sealing drafty homes.

TAG Mechanical’s sales are up 10 percent so far in 2009, due to both the federal credits and New York State incentives for energy-efficient home improvements. The company is projected to grow by 15 percent this year and may add new employees, if sales are strong enough, Mr. Guiles says.

Also optimistic is Andy Kruse, senior vice president of Southwest Windpower, the company that manufactures the wind turbine that caught Cooper’s eye. Southwest Windpower had a strong 2008, although sales dropped off after the new year, he says: “There was so much uncertainty. We saw the stock market dropping and dropping. There was a sentiment of fear, and consumer confidence dropped off like a stone.”

But after the stimulus legislation removed a cap on the credit amount for renewable energy products and installation, things have been looking up for the company. Orders have again reached last year’s strong levels, Mr. Kruse says, and he thinks they’ll double by the end of 2009. “We’re projecting that between what is in the stimulus package and consumers’ continued belief in renewables, we’re going to see a really good year despite what is going on in the economy,” he says.

The small-wind-power industry as a whole is projecting a 30-fold increase in sales over the next five years, and much of that is due to the stimulus plan, says Ron Stimmel, small-wind advocate for the American Wind Energy Association, a trade and advocacy organization in Washington.

But others are less convinced that the tax incentives will be enough to get consumers spending again. “When you’re looking at the general unemployment rate, people don’t have the money to spend whether they get a tax credit or not,” says Kevin Schwalb, director of government relations for the Plumbing-Heating-Cooling Contractors Association, which represents about 5,000 businesses nationwide.

“I understand the whole concept [of the stimulus], but in the current economic situation, it’s going to take a lot more than a few tax credits to get the economy rolling again,” he says.

Though he hasn’t yet seen a “tremendous surge,” says Craig Perkins, executive director of the Energy Coalition, a nonprofit in Irvine, Calif., more sales and jobs will be created once the government’s funds start flowing. “The people actually doing the work – doing the weather-stripping, tuning up the heaters – are contractors hired by [the state or] community-based organizations,” Mr. Perkins says. These contractors will probably have to hire and train new people to meet the additional demand, he says.

Back at the home show, Charlie Shaffer sits among a small crowd waiting for a presentation on wood-pellet stoves. He’s looking to make a number of upgrades to his home in Brunswick, and the tax credits mean higher-end, more-efficient products are suddenly within reach. “They’re turning products I wouldn’t have been able to look at a few months ago into viable alternatives,” he says.