Given that it operates at 300% efficiency, performs in below-freezing conditions, requires no fossil fuel input, is low-maintenance, and saves users up to 70% on their heating and cooling bills, the Acadia advanced heat pump/air conditioner would seem to be a prime candidate for a tax credit under the American Recovery and Reinvestment Act (ARRA).

Of course, that would be too easy. In actuality, the legislative language identifies two-stage heat pumps as being eligible for tax credits, and Acadia is not included in that product category.

“The fundamental problem with the tax credit is because current federal standards recognizing air-source heat pumps identify two stages of compression,” says Duane Hallowell, president of Hallowell International, which manufactures Acadia. “Acadia is actually a three-stage system, so when they try to measure the system for efficiency, it throws off the numbers. So, this isn’t a fight against the stimulus package, but against the Department of Energy to speed up the process of recognizing advanced technologies.”

Applying for Waivers
Up to now, Hallowell has submitted to having its Acadia equipment tested under two-stage conditions, despite the discrepancy in the results. The company also continues to push forward with the Department of Energy to work on advanced testing that would make more sense for this type of advanced technology.


Hallowell says he believes that if the ARRA legislation had not been written so quickly, Acadia and other emerging technologies would have been included in the tax credit portion of the Act. “My delegation said they had three weeks to consider the stimulus package,” he says, referring to his state legislators. After the final law came out and it appeared that Acadia wouldn’t be included in the tax credits, the delegation looked for a clause or loophole that would allow homeowners to claim the credit for high-efficiency equipment that had no federal standards in place. There were none to be found. “The wind was just taken out of my sails that day, not just for our company, but  because I was thinking of other small companies as well,” Hallowell says. “We’ve become a strong company, and we refuse to lie down in the face of this problem, but there may be other small businesses that can’t afford to keep going.”

Indeed, Hallowell Industries grew 600% last year when oil prices rose sharply to the $5 mark. Rising oil prices were particularly keenly felt by residents of the northern U.S. and Canada who rely on fuel oil for heat in the winter. “With Acadia, people finally had a choice that wasn’t tied to fuel,” Hallowell says, noting that Acadia runs on electricity. “When you’re watching the news and people are looking at making better, smarter choices in the face of a very volatile market, they’re desperate for an answer, which we were able to provide.”

Now, Hallowell notes that sales are down by more than 50%. “Until the second quarter of 2010, we’re going to have to weather the storm,” he says, noting that the company is working on applying for waivers that will allow the full Acadia line to become tax credit-eligible. “We’ve had to shift the company to handle the change, but we have not stopped development of other products.”

Holding Off the Competition
While Hallowell’s growth came before any taxpayer incentives were available, the ARRA tax credits have helped invigorate the geothermal industry, which is Acadia’s main competitor in New England and other cold climates.

“The 30%, no-cap tax credit to geothermal hurt us most,” Hallowell says. “There have been studies that have shown Acadia to be more efficient than geothermal systems, especially in below-freezing temperatures, but when the legislation was written, the government failed to recognize that our product was even there.”

Still, Hallowell says that the cost of a geothermal system, even with a 30% rebate, still carries a higher price tag than installing an Acadia unit. Moreover, the company says it is gaining traction in the world of state and local tax credits. “Up here in Maine, we’ve started working with Efficiency Maine, and local electric utilities are offering $3,000 to homeowners who install Acadia,” he says. “That rebate helps normalize the price to what it would cost to install a boiler. The problem is that with a company of just 40 people, we don’t have the legwork to have troops on the ground hitting every major utility in the states that we serve. We’re hoping to get more attention on a national level in the U.S. and Canada.”

To that end, Hallowell says the company has already applied for waivers that will allow its products to become eligible for ARRA tax credits. “After meeting with the delegation and understanding that the legislation wouldn’t be changed, we immediately filed our efficiency ratings through Energy Star,” Hallowell says. This step helped because Energy Star does not require the equipment to be certified by the Air-Conditioning, Heating & Refrigeration Institute. “As of last week, our 2- and 3-ton units are now eligible and are listed under the non-AHRI equipment,” Hallowell says. A third unit is still pending eligibility.

“We filed our interim waiver in March, which is scheduled to be completed through a seven-member panel,” Hallowell says. “Once it’s approved, we’ll be able to re-test the system through AHRI and then move forward with eligibility. In that time frame, a year will be lost, which is detrimental to us, but we hope it continues to bring attention to the need for a set of advanced testing criteria.”

Hallowell says that although the company is unhappy with the time frames related to applying for waivers and re-testing the equipment, he would not want to be in the Department of Energy’s position either. “My heart bleeds for them a bit too, if you think about the number of energy standards that they’ll need to address and change,” he says. “There are so many emerging technologies that are highly efficient, but they have to fight the system. It’s irritating from a production standpoint, but also from a general consumer standpoint. We need to be independent, technology leaders around the world, but by not recognizing new technologies when we write new legislation, we’re letting others come in and step on our toes.” --Lauren Hunter, associate editor, REMODELING.