A Toolkit to Help Make the Most of the Federal Home Energy Rebates

Posted by Harry Godfrey on Sep 28, 2023 12:33:27 PM

A guide to maximizing the IRA efficiency & electrification rebatesThe Inflation Reduction Act (IRA) contained a variety of incentives, grants programs, and policies to help catalyze not only the growth of clean generation, but also energy efficiency and building electrification. Among the notable measures in the landmark law were a pair of residential rebate programs - the Home Efficiency Rebates and the Home Electrification and Appliance Rebates Programs – for which the IRA provided $8.6 billion.

Now, the U.S. Department of Energy (DOE) is prepared to begin allocating these funds out to all 50 states and tribes across the country, to help them provide upfront rebates on efficiency projects, new heat-pump HVAC systems, smart electric panels, and more. While Congress and DOE have attached some requirements to these funds, state energy offices (SEOs) are responsible for designing specific rebate programs. They will decide which households receive rebates, which technologies they finance, and how the rebate programs serve larger public policy goals.  

To help states navigate the application process for these funds, and design effective programs, Advanced Energy United and Rewiring America teamed up to produce a new guide: “Making the Most of the Federal Home Energy Rebates.” Informed by the experience and expertise of companies, advocates, and industry experts working in the efficiency, electrification, and distributed energy resource (DER) space this guide is crafted to help states serve low- and moderate-income consumers while also spurring a larger market for residential efficiency, electrification, and DERs broadly.  

Over the course of four sections, the guide walks policymakers through two central goals for these rebate programs articulated by Congress and DOE - reducing household energy burden, and catalyzing market growth in the residential energy sector – and provides quick, easy-to-understand overview of the twin rebate programs. It likewise places the programs in the larger context of other federal incentives and resources for efficiency and electrification and lays out a detailed set of recommendations around program design and complimentary policies. 

One of the paramount challenges faced by state energy offices will be finding ways to stretch these funds by stacking, braiding, and substituting them with other incentives and resources. To that end, the guide details complementary federal tax provisions, energy assistance programs, and funding mechanisms. While the rules, and practical considerations, about how these resources may be used in conjunction with the Home Energy Rebates can be complex, the takeaway is clear: Federal resources and incentives, as well as those from the state and utility, should be utilized to optimize the Home Energy Rebates. That is just one of a series of themes threaded throughout the 25 specific recommendations in the guide.  Below we’ve summarized those recommendations, which comprise the final section of the guide: 

  • To Get Started, SEOs should review existing state rebate programs to see if they might be “Quick Start” eligible. They should also ensure they’re fully aware of the efficiency and electrification programs offered by utilities, and work to proactively build trust in communities – especially disadvantaged communities – they intend to serve. 
  • As states consider which Technologies and Upgrades to Prioritize for rebates, they should start with an analysis of household energy burdens. Despite regional variation, space heating and cooling consistently lead household energy use, so we recommend focusing there first, followed by water heating. Rebate programs should also cover technologies that automate household energy use and enable remote management.  
  • Serving Low-Income Households is a significant priority of the rebates. States should devote more than 40% program funds towards these households. Sequencing WAP funds and Appliance rebates, states can fully finance household retrofits while using LIHEAP dollars to address arrearages, an acute issue for this constituency. Finally, enrolling these households in high bill alerts will help avoid future bill shock. With more financial resources, Middle-Income Households present policymakers with more options, but also limitations as the IRA shrinks the share of project and appliance costs the rebates can cover. We recommend sequencing the rebates to maximize their efficacy, stacking residential tax credits (e.g. 25C and 25D) to further reduce costs, and establishing or expanding state energy financial institutions to provide low-interest loans.  
  • Multifamily buildings present their own set of challenges and opportunities when it comes to program design. Given the opportunity to provide benefits at scale, we recommend SEOs devote a substantial share of Rebate funds to them (more than the 10% minimum established by DOE), focusing particularly on buildings with shared systems and ensuring the building owners stack relevant tax deductions (e.g. 179D).  
  • To maximize program efficacy, policymakers should also make sure they adopt complementary policies, and tap into available resources, around data access and contractor training. Ensuring that program implementers and third-party service providers have the data they need to effectively serve households, while protecting consumer information, we recommend an “opt-out” process around data access. States should also apply for contractor training grants from the DOE to help train a well-equipped workforce to undertake efficiency projects and install electric appliances.
  • State policymakers also have to choose where to focus appliance rebate dollars, whether in new construction, retrofits for existing households, or both. Given the growing economic case for all-electric new construction, and the 45L tax credit specifically focused on new construction (which the IRA only strengthened), we recommend rebate funds are focused on retrofits for existing homes.
  • Program design should likewise reflect and track the ongoing Residential Energy Transition we see across the country. In states where policymakers are already planning for the future of natural gas and / or where communities are committed to residential electrification, rebates should help low- and middle-income households make the transition away from gas. In other states, rebates should focus on enabling the transition off of delivered fuels.
  • Last, but certainly not least, to unlock the full value of residential efficiency and electrification, policymakers should also ensure broader state policies enable Virtual Power Plants (VPPs). SEOs should engage with state utility regulators around related policies and regulations. Regulators should, in turn, help to catalyze VPP growth through open retail markets, and work with regional RTOs / ISOs to ensure FERC Order #2222 is effectively implemented, enabling DER participation (and thus VPPs) in wholesale markets. 

Designing effective rebate programs that stretch the IRA dollars while serving consumers in need, all while working to spur a broader market for residential efficiency, electrification, and DERs writ-large is a tall order. Advanced Energy United and Rewiring America are here to help. 

Click here to download the guide from Advanced Energy United and Rewiring America “Making the Most of the Federal Home Energy Rebates.” 

Topics: Federal Policy, Energy Efficiency, Manufacturing and Infrastructure



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