Decarbonization tax credits are still significant in 2025

GreenerU's construction team begins the process of drilling boreholes for a geothermal system at Wellesley Village Church

As guidance from the IRS was released and absorbed by building owners and industry, it became clear that decarbonization tax credits and nonprofit eligibility would profoundly impact the calculus for planning long-term capital investments.

In particular, ground source heat pumps (geothermal), the cream of the high-efficiency heating crop, enjoy such significant incentives—up to 40% of project costs—that the financial playing field may be leveled with more conventional fossil-fuel options for heating system upgrades, especially when including the increasingly necessary costs of cooling. These provisions are already accelerating the adoption of a proven, reliable, and effective technology with the potential for significantly reducing building emissions and costs while improving comfort and safety.

Yet, with the impending change in federal administration, many are worried that these important benefits of the IRA may come under fire. This places an added burden of complexity on those trying to navigate an already complex pathway to carbon neutrality along with institutions replacing equipment at the end of its useful life with systems designed to hold up for the next quarter century.

If you are struggling to navigate the pathway to carbon neutrality, GreenerU can help!

Those who were prepared acted quickly to begin construction of eligible projects, positioning themselves to secure the related decarbonization tax credits. For some, the added uncertainty has pressed the pause button on upcoming projects, or has otherwise disrupted the process of creating a long-range plan.

But the work of decarbonizing our buildings began long before the IRA and will go on long after it, whenever that may be. GreenerU offers the following perspectives on how to move decarbonization and capital replacement projects forward over the next four years and beyond.

• Have a plan. Those who saw the most immediate benefit when the IRA was passed were those who stood ready to proceed with their clean energy projects. Having a systemic plan and pathway based on clear goals and supporting strategies creates the right conditions for seizing opportunities like this one. A good plan is flexible and can adapt to externalities. Having no clearly defined plan leaves organizations flat-footed and unable to progress amid uncertainty.
• Take the long view. The investment tax credit sharply focuses on a project’s first cost (capital investment), but energy infrastructure investments deliver value throughout the asset lifetime. Financial analyses should cover the complete economic lifetime of the building and can often reveal that the “more expensive” option is actually less expensive to own and operate in the long run. This was true for many decarbonization projects even before the IRA tipped the scale further in favor of geothermal energy and solar. The key is to use smart designs, reliable project partners, and a sophisticated approach to modeling several techno-economic scenarios over the long term.
• Look local. For years, if not decades, Massachusetts and nearby states have led the nation in energy efficiency programs independent of federal policy. These programs have in recent years continued to evolve and more comprehensively address the challenge of decarbonization, beyond energy efficiency exclusively. These programs support established and advancing technologies that reduce energy usage and provide decarbonization via electrification. MassSave’s 2025–2027 three-year plan ratchets up the emphasis on greenhouse gas emissions reduction programs and includes more than $3 billion in customer incentives. The Northeast Energy Efficiency Partnership (NEEP) has found that Northeast states continue to expand efficiency programs and align with decarbonization policy objectives and up to 40 cities have added future penalties for carbon intensity above defined, and declining, limits. 

To decarbonize existing buildings over the next four years we need to focus on proven, commercialized climate solutions. These solutions are already out there—efficiency, envelope, electrification—and have been used to reduce building energy use, operating costs and emissions for decades and they’re only getting better—more efficient and more cost-effective. Implementing these solutions may require more resources and more effort than the base (“business-as-usual”) case, but when applied through a carefully developed strategic plan, can deliver multiple benefits: investment in our aging energy infrastructure; renewal and preservation of our existing built environment; and meaningful and intelligent progress towards our decarbonization goals.

Contact GreenerU to learn more about whether your building is a good candidate for geothermal and how available financing and incentives can help you pay for it.

  Back to Articles