The Energy Reductions of the Inflation Reduction Act can be implemented soon

Rebates tied to home energy efficiency, created by the Inflation Reduction Act, could start flowing to many consumers within months. a

The federal government is spending $8.8 billion on this Energy discounts for the home programs through states, territories and tribes, which must apply for the funding. The US Department of Energy approved the first application for New York on April 18, initially awarding $158 million.

The DOE is hopeful that New York will open its program to consumers in early summer, said Karen Zelmar, the agency’s Home Energy Rebates program manager. The state has the fourth largest total funding allocation, behind California, Texas and Florida. Â Â

The federal rebates – worth up to $14,000 or more per household, depending on a state’s program design – are essentially rebates for homeowners and landlords who make certain efficiency improvements to their properties.

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The rebates are intended to offset all or part of the cost of efficiency projects such as installing electric heat pumps, insulation, electrical panels and Energy Star-rated appliances.

Its value and suitability vary depending on factors such as household income, with more money flowing to low- and middle-income earners.

The DOE also expects the programs to save households $1 billion per year in energy costs due to increased efficiency, Zelmar said.

Eleven other states have also registered for funding: Arizona, California, Colorado, Georgia, Hawaii, Indiana, Minnesota, New Hampshire, New Mexico, Oregon and Washington. Many other states are also far along in their application process, Zelmar said. a

“We certainly hope that all the programs will be launched around this time next year, and hopefully much sooner than that for many of the states,” she said.

States must notify the Energy Department of their intent to participate by August 16, 2024. Applications must be submitted by January 31, 2025.

The Inflation Reduction Act set aside $369 billion in spending for policies to combat climate change, marking the largest piece of climate legislation in U.S. history. President Biden signed the measure into law in August 2022.

The IRA distributed $8.8 billion in total rebate funding across 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 applied for 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 – largely reducing household energy consumption and greenhouse gas emissions – the two programs’ approaches to household energy savings differ, says Saul Rinaldi.

The Home Electrification and Appliance Rebates Program

The Home Electrification and Appliance Rebates program pays consumers a maximum amount for purchasing specific technologies and services, Saul Rinaldi said.

Here are some examples from the Energy Department:

• ENERGY STAR electric heat pump water heater – worth up to $1,750
• ENERGY STAR Electric Heat Pump for Space Heating and Cooling – Up to $8,000
• ENERGY STAR Electric Heat Pump Clothes Dryer – Up to $840
• ENERGY STAR electric range, cooktop, stove or oven – up to $840
• Electrical charge service center – up to $4,000
• Electrical wiring – up to $2,500
• Insulation, air sealing and ventilation – up to $1,600

This program pays up to $14,000 to consumers. It is only available to low- and moderate-income households, defined as less than 150% of an area’s median income. (These geographic income thresholds are prepared by the U.S. Department of Housing and Urban Development.)

Low-income people – those whose income is 80% or less of the average area – are eligible for 100% of the project costs. Others are limited to half the project cost. (Both are subject to the $14,000 limit.)

Renters can also take advantage of the program, as long as they communicate with their landlord about purchasing a unit, Zelmar said.

Home Efficiency Rebate Program

The Home Efficiency Rebates program, on the other hand, is technology neutral, Saul Rinaldi said.

The value of the rebates depends on how much energy a household saves in total through efficiency upgrades. The deeper the energy cuts, the bigger the reductions, Saul Rinaldi said.

For example, the program is worth up to $8,000 for households that reduce energy consumption by at least 35%. It is worth up to $4,000 for those who reduce their energy by at least 20%.

The program is available to all households, regardless of income. Low-income people can qualify for the most money, just like with the other discount program.

With approval from the Energy Department, states can choose to increase the maximum rebate to more than $8,000 for low earners. This way, the value of the Home Efficiency Rebates could technically be greater than that of the Home Electrification and Appliance Rebates, Zelmar said.

However, consumers cannot double dip. For example, a consumer who receives a rebate for purchasing an electric heat pump generally cannot also apply the energy savings from that heat pump to the calculation of the rebate for the entire household, experts say.

However, consumers may be able to use the rebates in conjunction with existing programs available through states and local utilities, experts said. Consumers looking to make upgrades before these rebate programs are in effect may be able to take advantage of other Inflation Reduction Act funding, such as tax credits tied to home efficiency.

Discounts are also intended to be provided at the point of sale. That could be with a retailer through an upfront discount on the purchase price, or with a contractor who gives consumers a discount on the project cost at the point of sale, Zelmar said.

These details will vary by state, experts said. States must develop and publish a list of approved contractors as part of their program design.