Abrupt end to tax credits brings turbulence to Maine’s heat pump and solar industries

By Cameron Levasseur, The County Staff

The banner across the website of Assured Solar Energy reads like a flash sale.

“Secure Your 30% Clean Energy Credit Before It’s Gone!”

That’s because, in a sense, it is.

As part of the Republican Party’s sweeping domestic policy bill signed into law on July 4, federal tax credits of 30 percent for residential clean energy improvements will end on Dec. 31, instead of lasting through the 2030s as they were previously intended to. 

That means in less than six months, customers of the North Yarmouth-based solar company could pay thousands more for installation — with the average price range jumping from roughly $15,000 to $20,000 now, to between $21,000 and $28,000 without the credits. 

So demand for their services in the interim is booming. 

“We’re going to have a crazy end to the year,” Assured Solar Energy President Rob Taisey said. “But we’ve seen that before with other policy changes.”

And it’s not the only cost credit delivered by the 2022 Inflation Reduction Act for home efficiency upgrades that’s now going away.

Another program getting cut is the Energy Efficient Home Improvement Tax Credit, which offers a 30 percent credit up to $2,000 for qualified heat pumps and an additional $1,200 for certain energy efficient home improvements. 

On Dec. 31, it too will be eliminated. 

“The government for a while has been really endorsing electrification and pushing hard for heat pumps and increased home efficiency, so a lot of us have built businesses based on that,” said Kristie Green, co-owner of Westbrook-based Horizon Homes, a weatherization and heat pump installation company. “Cutting the tax credits is a bummer for everyone.”

All told, the loss of those programs will set back Maine’s efforts to get more residents to adopt tools for reducing their energy consumption and shift away from legacy fossil fuel resources including heating oil and natural gas. While it won’t cripple the cleaner, newer industries, it will make it harder for Mainers to access those energy-saving devices in the short term while also causing turbulence for those who install them. 

More than 100,000 heat pumps were installed in Maine between 2020 and July 2023, meeting an early climate benchmark set by Gov. Janet Mills and spurring a new one of 175,000 more heat pumps by 2027. 

That was a goal set in part because of significant federal incentives, some of which are now going away. 

But other Inflation Reduction Act funding for heat pumps remains. Maine was allocated nearly $72 million in 2024 as part of a $450 million grant from the Environmental Protection Agency funded under the legislation to support residential heat pump installation in New England states. 

The funding is distributed as rebates by the quasi-state agency Efficiency Maine. Payments can be as high as $3,000 for each heat pump unit for a low income household, with a lifetime limit of $9,000. For a moderate income household, rebates can reach $2,000 per unit with a lifetime limit of $6,000.

“Compared to the amount folks are getting from the Efficiency Maine rebates, [the federal tax credit] is not the largest dollar amount that folks are usually getting back,” Green said. “So we’re not anticipating a huge hit from it. It’s unfortunate, but in the scope of the cost of most of these projects, it’s not devastating.”

The credit elimination has been disappointing to customers, Green said. But she noted that it doesn’t seem to be changing people’s interest in heat pumps. 

Other installers believe there will be some silver linings to operating without the credit. Matt Scott, the vice president of the company Dave’s World — Maine’s top heat pump installer by volume — said it will be beneficial to both consumers and the overall market.

“At some point we have to wake up and do and buy the right products because they have return on investment without the rebate,” Scott said. “A heat pump heats and cools. It’s 2-in-1. There’s your savings. You don’t have to put in a heating system and then a $20,000 air conditioning system.”

Scott admits that the credit has increased profit margins and stimulated immediate growth in the heat pump industry. But at some point, he said, “we have to just leave it alone and let it take its natural course. If heat pumps were no good, they wouldn’t survive the market.”

He voiced concerns about the range of heat pumps eligible for both the credit and rebates and how he said it can lure customers into buying units that are not the most efficient for their property because they’re cheaper up front. 

“I go into a customer’s house and say, ‘Hey, look. If you want to talk rebates, we can talk rebates,’” Scott said. “But how about we figure out what your house needs and see if what your needs match with a rebate?’”

While the long-term impacts of the loss of the credits are unclear, both heat pump and solar installers agree it will have an impact. They also see it as just the latest challenge their relatively young industries have had to navigate as they have responded to growing demand and policy incentives. 

“Everybody in the industry calls it the ‘solar-coaster,’” Taisey said. “We’re used to these policy changes. It does have an impact. It’s hard to predict.”

Efficiency Maine declined to comment on how the new federal legislation will impact the residential solar market, given that the agency does not have a current solar program. But in a statement, Executive Director Michael Stoddard said that the organization believes that the energy efficiency market in the state will revert to a level that existed prior to Inflation Reduction Act credits. 

“The loss of certain federal tax credits increases the overall payback period on investments in energy efficiency measures,” Stoddard said. “That said, Mainers have always proved to be savvy consumers when it comes to energy. If they see that they can save money over time by insulating their home, installing heat pumps or switching to EVs, and there are state-based incentives available to help, Maine consumers are smart about making those investments regardless of whether there are federal tax credits in place.”

Dan Burgess, director of the Maine Governor’s Energy Office, said in a statement that the office is “reviewing the federal law and working to understand the full scope of potential impacts to Maine.” 

“This bill is widely expected to lead to increased energy costs for Maine people and businesses by slowing our transition to affordable, reliable renewable energy,” Burgess said. “It will also create significant uncertainty within Maine’s burgeoning clean energy economy, which is supporting thousands of good-paying jobs across the state, reducing energy costs for homeowners through heat pumps and weatherization investments, and reducing our state’s reliance on fossil fuels.”