Every Penny Counts

New York extends Bioheat tax credit
By Erin Voegele | November 21, 2011

For the past several years, residential oilheat customers in New York have been able to benefit through an innovative incentive that allowed them to claim a tax credit for using biodiesel-blended heating oil. The program, which allows Bioheat users a 1-cent-per-gallon credit for each percent of biodiesel blended with traditional heating oil they purchase, up to a B20 blend, was set to expire Jan. 1, but has been extended.


On Oct. 14, New York Gov. Andrew Cuomo signed legislation into law extending the credit, formally known as the Refundable Clean Heating Fuel Tax Credit, for five years. The current law permits both corporate owners of residential developments and individual homeowners to claim the credit. Due to technical oversight, the bill that was presented to Cuomo failed to extend the provision of the law that extended the tax credit to individual homeowners. As a stipulation of his approval of the bill, Cuomo noted that both houses of the legislature have agreed to amend the bill to fix that technical oversight. In effect, the tax credit has been extended in its current form through 2017.


According to Danny Falcone, regional wholesale manager of Ultra Green Energy Services, the tax incentive not only financially benefits Bioheat customers, but it also clearly benefits industry by helping to drive interest in and adoption of biodiesel-blended heating oil. In fact, Falcone notes that several of his wholesale customers have announced their intent to sell B20 at a discount this fall. For the past six months, Falcone says, biodiesel has actually been cheaper than petroleum-based diesel or heating oil. “These suppliers are going to continue to offer standard heating oil because they have to give people a choice, but they are going to offer B20 at a discount,” he says. Due to the current price levels, we can tell our retailers that they can purchase B20 at a lower price and sell it to their customers at a lower price than traditional oilheat, Falcone says. In addition, those retailers can tell their customers about their eligibility to claim the tax credit. Taken together, the reduced price and tax credit can significantly reduce the price consumers pay for fuel, encouraging more people to try Bioheat.


The power this tax credit offers to consumers is particularly unique. Many other incentives, such as the federal biodiesel tax credit, actually benefit those in the middle of the supply chain, Falcone says. Those entities, such as blenders and wholesalers, bleed off a significant portion of the credit before it reaches the consumer level. “This is a very exciting credit,” Falcone says. “It goes right to the consumers.”


While the benefits of the Bioheat tax credit are particularly pronounced right now with the relatively low price of biodiesel, it will be even more integral to the Bioheat market in the event the federal tax incentive for biodiesel expires or RIN prices are depressed. If the price of biodiesel increases in the future, this tax credit will help ensure Bioheat remains affordable.


Falcone applauds the state of New York for extending the credit. Incentives are needed to help an immature market, like that of Bioheat, compete, he says. “This incentive became vitally important to the biodiesel market in New York and still is today,” adds Falcone. In addition, the credit helps encourage investment in biodiesel infrastructure by providing potential investors with added certainty.

—Erin Voegele

 
 
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