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By now, you’ve probably heard that the 2022 Inflation Reduction Act (IRA) means big things for homeowners. How big, exactly? The IRA has allocated $8.8 billion in rebates for energy efficiency and home electrification projects, and homeowners may also qualify for additional rebates via their utility providers, state, or even municipality.
So what are these rebates for, and how do you take advantage of them?
In this article, we'll explain what home energy rebates are, what products they apply to, how to qualify for them, and more — all so you can enjoy a more efficient, higher-performing home for a much friendlier price.
In simplest terms, home energy rebates are discounts offered on certain high-efficiency products and appliances designed to reduce your home's energy consumption. Many of the most impactful rebates are offered through two programs brought to life by the 2022 IRA (more on those in a bit), but rebates are also available through states, cities, and in some cases, utility providers.
While the amount of these rebates vary, there are two general mechanisms for receiving these rebates: point-of-sale and after-the-fact applications. Most point-of-sale rebates are offered through a federal program we'll cover below, while most state, local, and utility rebates can be received by successfully applying after purchase and installation.
But no matter how you receive them, these rebates can reduce the cost of making your home more energy efficient by as much as 30% of the project cost of purchase and installation — so they're often well worth the effort of securing.
Lastly, it's important to note that home energy rebates are different than home energy tax incentives. While both of these are financial rewards for improving your home’s energy efficiency, they work differently, are secured differently, and in some cases, cover different appliances and projects.
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There are a range of federal home energy rebates that will soon be available to homeowners today, and they come from two programs created by the 2022 IRA: the Homeowner Managing Energy Savings (HOMES) program and the High-Efficiency Electric Home Rebate Act (HEEHRA). While both HOMES and HEEHRA serve the same purpose — making it more affordable for homeowners to create high-efficiency homes — how they achieve that goal is markedly different.
HEEHRA has allocated $4.5 billion dollars to state governments to help low- and moderate-income homeowners make their homes more energy efficient, help them save on monthly utilities, and reduce carbon emissions. HEEHRA does this through point-of-sale — meaning "when you buy it" — rebates on equipment and appliances used for home electrification projects.
HEEHRA can be particularly impactful for low-income homeowners, which it defines as households making less than 80% of their area median income (ARI). In fact, HEEHRA offers 100% rebates (up to $14,000) on electrification projects for low-income households. Moderate income households — those making 80-150% of their ARI — can receive 50%. Note that these income definitions apply to both HEEHRA and HOMES programs (below).
HEEHRA rebates are expected to be available later in 2023 and will be available until September 30, 2031 — so you've got plenty of time to plan your home electrification project.
| Qualifying Improvement | Maximum Rebate |
|---|---|
$8,000 | |
Breaker box | $4,000 |
Electric wiring | $2,500 |
$1,750 | |
Weatherization | $1,600 |
Heat pump clothes dryer | $840 |
Electric stove or cooktop | $840 |
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The Homeowner Managing Energy Savings (HOMES) program also comes from the 2022 IRA, and like HEEHRA, it allocates $4.3 billion dollars to individual states to disperse through their energy departments. Again, these allocations are intended to provide homeowners with rebates on projects related to energy efficiency.
HOMES offers rebates based on expected or actual home performance. These rebates are offered via two distinct models: modeled-performance and measured-performance rebates. Here's how each of these rebate types work.
To receive modeled-performance rebates, first, your home’s historic energy consumption use must be calculated using BPI-2400-compliant energy modeling software. That same software can be used to propose a new target energy-consumption model — depending on the type of upgrades you've made — based on the updates you plan to make to your home.
So how much of a rebate can you expect from this model?
For low- and moderate-income homes:
Retrofits that achieve energy system savings of at least 35% are eligible for the lesser of $8,000 or 80% of the project cost.
Retrofits that achieve energy system savings of less than 35% but more than 20% are eligible for the lesser of $4,000 or 80% of the project cost.
For high-income homes:
Retrofits that achieve energy system savings of at least 35% are eligible for the lesser of $4,000 or 50% of the project cost.
Retrofits that achieve energy system savings of less than 35% but more than 20% are eligible for the lesser of $2,000 or 50% of the project cost.
Be aware, however, that projects resulting in energy savings of less than 20% are ineligible for rebates.
The other type of rebate available under HOMES are measured-performance rebates. These are calculated based on your actual energy usage. Requiring the use of an approved open-source measurement and verification (M&V) software to verify your home's energy efficiency, measured-performance rebates are similar to the model described above.
For low- and moderate-income homes:
Retrofits that achieve energy system savings of at least 15% are eligible for a rebate paid based on the number of kilowatt hours saved. Rates will be set at the state level based on the energy usage of an “average home” in that state. Alternatively, rebates may be issued up to 80% of the project cost.
For high-income homes:
Retrofits that achieve energy system savings of at least 15% are eligible for a rebate paid based on the number of kilowatt hours saved. Rates will be set at the state level based on the energy usage of an “average home” in that state, and will be lower than the rates for low- and moderate-income homes on a per kilowatt hour basis. Alternatively, rebates may be issued up to 50% of the project cost.
Like modeled-performance rebates, measured-performance rebates have a minimum threshold for activation, but be aware that this threshold is actually lower than their modeled-performance counterparts, meaning they're easier to qualify for. In this case, the threshold is 15%.
Note that while the bill doesn't specify whether or not homeowners looking for measured-performance rebates are given the lesser of the amounts described above, it may be safe to assume that that will be the case.
Again, like the rebates granted by HEEHRA, these are expected to be available later in 2023 and will remain available to homeowners until September 30, 2031.
Related Post: An Introduction to Home Energy Rebates and Tax Credits
By now, you know what home energy rebates are and what they cover, but how do you actually take advantage of them to save money on your home performance upgrades?
In the case of the HEEHRA rebates, there's really not much you'll need to do — at least in theory. As it stands, your rebate is supposed to be applied when you buy your equipment or appliances in a store or online. That means they'll be automatically deducted from your purchase price, so you'll be able to save up to 30% the moment you make the purchase.
In the case of the rebates available through HOMES, however, guidance isn't yet available, but it's likely you’ll have to work with your contractor or a rebates aggregator to provide some level of utility bill documentation so they can calculate your modeled or measured usage and savings. Industry experts anticipate that significant documentation will likely be required — the costs involved, when and where the work was performed, and the amount of energy saved or expected to be saved will likely be required come tax time.
It's also worth noting that it's possible for individual states to elect not to participate in these programs, even though the funding is already available. So do your research before you start buying and building! Check the website of your state's energy office before planning any purchases to ensure you don't undertake a project that ultimately won't be eligible for a refund.
An easier route is to use the Rebates Finder feature in Pearl’s free Green Door app. Rebates Finder gathers available federal, state, and utility rebates and tax credits based on your location, and is always updating, so you’ll know when new rebates come online through IRA.
HOMES and HEEHRA are certainly among today's most lucrative and most publicly visible rebates, but they're hardly the only home efficiency rebates available to homeowners today.
One great source of rebates are utility suppliers themselves. After all, efficient homes put less strain on their grids, so they're eager to incentivize homeowners to make their homes more energy efficient. For example, in California, Golden State Rebates — a program funded by a coalition of utility providers — offers as much as $500 for high-efficiency upgrades. Meanwhile, in North Carolina, Duke Energy offers rebates of up to $350 for similar upgrades.
And these aren't the only rebates available! Many municipalities offer their own rebates, as well as some product manufacturers. To find these and other available rebates, visit your utility’s website or simply log in to Pearl’s free Green Door app and use Rebates Finder to populate a list of available rebates with eligibility and application information.
Related Post: Save Thousands on Your Home Improvement Projects with Rebates Finder in Green Door
The rebates available through HOMES and HEEHRA look like extremely promising levers for making home performance upgrades more affordable. While we don't yet know all the details, the Department of Energy is expected to provide administrative guidance to states later in 2023, so stay tuned to Facebook and Instagram and sign up for our Homeowner Newsletter to receive the latest updates and developments right in your inbox.
Meanwhile, you can see all the existing rebates available to you in the Rebates Finder in the Green Door app. To learn more about ways to save on home performance upgrades, get your copy of our comprehensive guide to existing and upcoming home energy rebates and tax incentives today.
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