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Rebates tied to home energy efficiency created by the Inflation Reduction Act could flow to many consumers within a few months.
The federal government is providing $8.8 billion for Home Energy Rebates programs through states, territories and tribes that must apply for the funding. The U.S. Department of Energy approved New York's first application on April 18, initially granting it $158 million.
The Energy Department hopes New York will open its program to consumers by early summer, according to Karen Zelmar, the agency's Home Energy Rebates program manager. The state has the fourth-largest overall funding allocation, behind California, Texas and Florida.
The federal rebates — which range up to $14,000 or more per household depending on the state's program design — are essentially rebates for homeowners and landlords who make certain efficiency improvements to their property.
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The rebates aim to offset some or all of the costs of efficiency projects such as installing electric heat pumps, insulation, electrical panels and Energy Star appliances.
Their value and eligibility varies depending on factors such as household income, with more money going to low and middle earners.
The Energy Department also expects the programs will save households $1 billion a year in energy costs due to increased efficiency, Zelmar said.
Eleven other states have also applied for funding: Arizona, California, Colorado, Georgia, Hawaii, Indiana, Minnesota, New Hampshire, New Mexico, Oregon and Washington. Many other states are also well along in their application process, Zelmar said.
“We certainly hope to have all programs up and running by this time next year, and hopefully much sooner for many states,” she said.
States must notify the Department of Energy by August 16, 2024 that they wish to participate. Applications must be submitted by January 31, 2025.
These are the most important details about the discounts
The Inflation Reduction Act allocated $369 billion in spending to combat climate change, representing the largest climate legislation in U.S. history. President Biden signed the measure into law in August 2022.
The IRA divided a total of $8.8 billion in rebate funds between two programs: the Home Efficiency Rebates program and the Home Electrification and Appliance Rebates program.
New York's application for the latter program was approved. So far, only four states — Georgia, Oregon, Indiana and New Mexico — have requested both.
“I hope that by this time next year we will have 50 states with rebate programs,” said Kara Saul Rinaldi, CEO and founder of AnnDyl Policy Group, a consulting firm focused on climate and energy policy.
While their goals are the same — broadly reducing household energy use and greenhouse gas emissions — the two programs' approaches to household energy conservation differ, Saul Rinaldi said.
The Home Electrification and Appliance Rebates Program
The Home Electrification and Appliance Rebates program pays consumers a maximum amount to purchase certain technologies and services, Saul Rinaldi said.
Here are some examples from the energy department:
- ENERGY STAR Electric Heat Pump Water Heater – valued up to $1,750
- ENERGY STAR electric heat pump for room heating and cooling – up to $8,000
- ENERGY STAR electric heat pump clothes dryer – up to $840
- Electric range, stovetop, range or oven with ENERGY STAR – up to $840
- Electrical Load Service Center – up to $4,000
- Electrical Wiring – up to $2,500
- Insulation, air sealing and ventilation – up to $1,600
This program pays consumers up to $14,000. It is only available to low- and middle-income households, that is, households with less than 150% of the average income for a region. (These geographic income limits are set by the U.S. Department of Housing and Urban Development.)
Low-income earners – those whose income is 80% or less of the area average – are entitled to 100% of the project cost. Others are limited to half the project cost. (Both are subject to the $14,000 cap.)
Tenants can also use the program as long as they inform their landlord about purchasing a device, Zelmar said.
Home Efficiency Rebate Program
In contrast, the Home Efficiency Rebates program is technology neutral, said Saul Rinaldi.
The value of the rebates depends on how much energy a household saves overall through efficiency improvements. The deeper the energy cuts, the higher the rebates, said Saul Rinaldi.
For example, the program is worth up to $8,000 for households that reduce their energy consumption by at least 35%. For those that reduce energy consumption by at least 20%, it is worth a maximum of $4,000.
The program is available to all households regardless of income. As with the other discount programs, low earners are entitled to the most money.
With approval from the Department of Energy, states can increase the maximum rebate for low-income earners to more than $8,000. In this way, the value of home efficiency rebates could technically exceed that of home electrification and appliance rebates, Zelmar said.
How consumers can access the discounts
However, consumers cannot double-dip. For example, a consumer who receives a rebate for purchasing an electric heat pump typically cannot apply that heat pump's energy savings to calculating a rebate for the entire household, experts say.
However, consumers may be able to use the rebates in conjunction with existing programs offered by states and local utilities, experts said. Consumers who want to make upgrades before these rebate programs take effect may be able to take advantage of other Inflation Reduction Act financing, such as tax breaks tied to home efficiency.
Discounts should also be given at the point of sale. This can be done with a retailer through an upfront discount on the purchase price, or with a contractor providing consumers with a discount on the project cost at the point of sale, Zelmar said.
Those details vary by state, experts said. States must establish and publish a list of approved contractors as part of their program design.