Electricity discounts may be coming soon under the Inflation Reduction Act

Home energy efficiency rebates created by the Inflation Relief Act could begin arriving to many consumers within a few months.

The federal government will provide $8.8 billion for Home Energy Discounts programs through states, territories and tribes that must apply for funding. US Department of Energy approved New York’s first bid was filed on April 18, awarding an initial amount of $158 million.

The Energy Department hopes New York will open its program to consumers by early summer, said Karen Zelmar, manager of the agency’s Home Energy Rebates program. The state ranks fourth in total funding, behind California, Texas and Florida.

The federal rebates—up to $14,000 or more per household, depending on the state program—are essentially rebates for homeowners and landlords who make certain efficiency improvements to their properties.

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The rebates are designed to offset some or all of the cost of efficiency projects such as electric heat pump installations, insulation, electrical panels and Energy Star-rated appliances.

Their cost and eligibility vary depending on factors such as household income, with more money flowing to low- and moderate-income people.

The Energy Department also expects the programs to save households $1 billion a year in energy costs due to improved efficiency, Zelmar said.

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

“We certainly hope to see all the programs up and running… by this time next year, and hopefully much sooner than many states,” she said.

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

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

The IRA split $8.8 billion in total rebate funding between two programs: the Home Efficiency Rebate Program and the Home Electrification and Appliance Rebate Program.

New York’s application to participate in the latter program was approved. So far, only four states—Georgia, Oregon, Indiana and New Mexico—have applied for both.

“My hope is that by this time next year we will have 50 states with rebate programs,” said Cara Saul Rinaldi, CEO and founder of AnnDyl Policy Group, a consulting firm specializing in climate and energy policy.

While their goals are the same—basically reducing household energy use and greenhouse gas emissions—the two programs’ approaches to household energy savings are different, Saul Rinaldi said.

Discount program for home electrification and household appliances

The home electrification and appliance rebate program pays consumers the maximum amount of money for purchasing specific technologies and services, Saul Rinaldi said.

Here are some examples from the Department of Energy:

• ENERGY STAR electric water heater with heat pump – costing up to $1,750.
• ENERGY STAR Electric Heat Pump for Space Heating and Cooling – Under $8,000.
• ENERGY STAR Electric Heat Pump Clothes Dryer – Under $840
• ENERGY STAR electric range, cooktop, range or oven – up to $840.
• Electric load service center – up to $4000
• Electrical wiring – up to $2500
• Insulation, sealing and ventilation – up to $1600.

This program pays consumers up to $14,000. It is only available to low- and moderate-income households, defined as income below 150% of the area median income. (These geographic income thresholds proposed by the US Department of Housing and Urban Development.)

Low-income individuals—those whose income is 80% or less of the area median—are entitled to 100% of the project cost. Others are limited to half the project cost. (Both are subject to a $14,000 cap.)

Tenants can also take advantage of the program if they notify their landlord about purchasing appliances, Zelmar said.

Home Efficiency Rebate Program

In contrast, the Home Efficiency Rebates program, according to Saul Rinaldi, is technology neutral.

The value of the rebates depends on how much energy a household saves through increased efficiency. The deeper the blackouts go, the greater the discounts, Saul Rinaldi said.

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

The program is available to all families, regardless of income. People with low incomes may qualify for more of the money, as with the other rebate program.

With DOE approval, states can increase the maximum rebate to more than $8,000 for low-income communities. So the value of home efficiency rebates may technically exceed the value of home electrification and appliance rebates, Zelmar said.

However, consumers cannot double down. For example, a consumer who receives a rebate when purchasing an electric heat pump typically cannot also apply the energy savings from that heat pump to the rebate calculation for the entire home, experts say.

However, consumers may be able to use rebates in conjunction with existing programs available through states and local utilities, experts say. Consumers who want to upgrade before these rebate programs go into effect can take advantage of other sources of Inflation Relief Act funding, such as home efficiency tax credits.

Discounts are also available for delivery to point of sale. This can be done through a retailer through an upfront discount on the purchase price, or through a contractor who gives consumers a discount off the project cost at the point of sale, Zelmar says.

Those details will vary by state, experts say. States must develop and publish an approved list of contractors as part of their program development.