Transforming the U.S. residential energy market is an ambitious goal, but it also accurately describes the scope of the policy objectives outlined in the Inflation Reduction Act (IRA) of 2022, the single-largest investment in climate and energy in American history. Demanding a clear plan and a set deadline from state energy stakeholders is a crucial mandate within the IRA rebate program. The key question is: How will they achieve it?
IRA Rebate Programs and the Market Transformation Requirement
The IRA channels unprecedented levels of investment toward energy efficiency in general and home performance improvements specifically, including nearly $9 billion for home energy efficiency and electrification rebates.
However, it also comes with strict, if only sometimes entirely clear-cut, expectations and stipulations about the role states must play in bringing broad-based market transformation at scale to life. Further, it sets a hard deadline of January 31, 2025, for state energy offices to either submit detailed outlines of how they plan to administer IRA funds or risk forfeiting those funds altogether.
Why could this pose an initial challenge? Firstly, although state energy offices contribute valuable expertise, home energy efficiency might not be their primary focus, and there are several areas that require clarification for various stakeholders.
Adding to the complexity, state energy offices are managing numerous grant opportunities, such as BIL and IRA, and they need to navigate programs like HOMES and HEEHR alongside various formula applications. Moreover, residential energy efficiency becomes intricate, particularly when the overarching goal is to achieve a lasting impact on the market.
DOE-approved Market Transformation Plans unlock 25% of the available funding for HOMES (50121) & HEEHR (50122):
“Describe how the State program will enable the market to recognize the value of homes that have been upgraded through the Home Energy Rebates, including at time sale/rental. At a minimum, the plan must include a strategy for aggregating home data from the home assessment (as described in 3.2.1) and/or home certification (as described in section 3.2.5) and making such data available to real estate stakeholders.”
The silver lining in working through planning development is the availability of partners with expertise, technology tools, and on-the-ground experience. Collaborating with these partners can amplify efforts, ensuring coordinated and effective market transformation for lasting impact.
Partnership and Certification Drive Market Transformation
How can partners, especially third-party certification providers, play a pivotal role in realizing the ambitious vision outlined in the IRA rebate programs for market transformation?
In addressing the significant obstacles and identifying gaps hindering market transformation, consider scenarios where homeowners utilize IRA funding to enhance their homes, experiencing savings, improved comfort, and resilience. Picture a powerful vision where these improvements contribute immediate benefits and inspire homeowners to recognize the long-term value of their investments.
This realization becomes a driving force, encouraging homeowners to continue upgrading their homes over time, creating an evergreen cycle for home performance work. This sustained engagement goes beyond the rebate period, significantly amplifying the ultimate impact of the IRA and aligning with the transformative goals outlined in the program.
In answering these questions, we’ll focus on the following four areas, addressing them one at a time:
Overcoming data shortcomings and reporting gaps
Building consumer trust and bolstering consumer protections
Adding transparency for all parties
Simplifying the process
1. Overcoming Data Shortcomings and Reporting Gaps
Current homeowner data and reporting on energy efficiency and home performance vary widely, ranging from very little to none for the majority. The existing data fails to provide a comprehensive picture and address homeowners' foremost concerns and priorities. This information gap poses a significant challenge in achieving the transformative goals of IRA rebate programs.
Sure, utility providers in some states will currently show homeowners how their monthly energy use stacks up against, say, the mean for their neighborhood or town. But how effective is this approach in changing behaviors? Not very, it turns out. Its track record of success, insofar as it can be called that, is decidedly lukewarm, with analysts describing “mixed results” and pointing to average per-household reductions in energy consumption of just 1.2 to 2.1%.
Homeowners currently receive data on their energy consumption through various channels, including technologies like Ring Doorbells and smart thermostats. Those with specific upgrades, such as home solar, may have more insights into energy use and costs over time. While this information is valuable for budgeting and validating investments, it falls short in conveying the broader picture of energy efficiency improvements in the context of increased home resale value, a crucial aspect often overlooked in utility-provided data. That's where a consumer portal that houses all documentation on high-performing features, like Green Door, can be really valuable.
All told, what these examples hopefully illuminate is that data around home performance represents an area of considerable unmet need for homeowners.
But they don’t just need more of it per se. Instead, they need data that’s more actionable, that connects more directly with the outcomes that matter the most to them and that answers questions like “How can I ensure the quality of this equipment, contractor, or installation?” or “What’s my updated timeline to ROI?” To the extent that third-party partners can help answer questions like these, it may be a good example of the role that organizations like Pearl Certification have to play.
2. Building Consumer Trust and Bolstering Consumer Protections
In a nutshell, the issue is that it’s imperative for homeowners to feel confident that their home performance improvements are being thoroughly documented wherever certification is concerned since doing so attests to the viability of the upgrade, the cost-savings opportunity it makes possible, the quality of the installation, and other things.
Fortunately, state energy offices can turn to a trusted partner to manage this and likely achieve cost savings through such an arrangement.
An important component to HOMES and HEEHR plans to be submitted to DOE is the inclusion of a Consumer Protection Plan. Being able to point to third-party certification and achievable yet rigorous contractors credentials to mitigate waste, fraud, and abuse will set states up for safe programs for consumers while also establishing a baseline for long-term supply (quality contractors) and demand.
3. Adding Transparency for All Parties
Borrowing elements of the data- and trust-related challenges already mentioned, adding transparency is another key pillar of driving market transformation at scale. Why?
In the real estate market, agents need help understanding how to incorporate the added value of home performance upgrades as they make list price recommendations. They also need help identifying and properly marketing high-performing home features in their marketing materials and the multiple listing service. Transparency facilitated by technology and educational efforts is crucial to address this common challenge, as stakeholders often need to pay more attention to the long-term value of home performance investments.
Integrating energy efficiency considerations into the way homes are priced and marketed would be a step in the right direction — on the transparency front, having that information represented in the MLSs means it is memorialized in a searchable database used by appraisers and real estate agents as part of their existing business flows..
Finally, expanding on existing initiatives and partnering with other certifying bodies, such as the National Association of Realtors’ GREEN Designation program, might also help empower agents with educational resources, market research, and more. This could be another good place to start in the interest of increasing transparency.
4. Simplifying the Process
This one really couldn’t be simpler: Reliable and secure energy efficiency home certifications, readily available to any homeowner who completes a transparent, easy-to-follow process not only add much-needed clarity over the short term but will ultimately ensure that the process of market transformation endures over the long term. Even better: having the appropriate documentation so homeowners can increase the value of their homes, providing more motivation to make additional improvements. And that’s also part of the key value that Pearl Certification can bring to the state-level implementation of IRA rebate programs.
Key Takeaways
The bold investments contained in the IRA — and the extent to which the legislation aims to effect far-reaching changes, of which market transformation is one — were front-page news when announced in 2022, and with good reason. With the implementation of IRA rebate programs right around the corner, however, it appears that challenges remain to drive enduring market transformation at scale. Yet these same challenges may foreground the crucial role that partnerships in general, and third-party certifications in particular, have to play in bringing about the needed change.
With that in mind, look at our latest white paper, “From Rebates to Market Transformation: Driving Homeowner Demand for Efficiency.” It’s filled with data, insights, and strategies state energy offices and more can use as they prepare their market transformation plans before the 2025 IRA application submission deadline.
While you’re at it, take a moment to learn more about Pearl Certification, including how we can help drive market transformation specifically, as well as the value we offer state energy offices, program administrators, and other stakeholders nationwide — especially during such a pivotal moment in our country’s clean energy transition. Or head to our blog if you’re looking for deeply informed analysis, in-depth takes on the latest market trends, energy efficiency case studies, and much more.
