By Perry Bryant
The Inflation Reduction Act established two energy efficiency rebate programs to transform households’ energy usage: the Electrification and Appliance Rebate program (referred to as the Electrification program) and the Home Efficiency Rebate program (the Efficiency program). Unlike tax credits, rebates don’t require consumers to pay upfront for home efficiency measures and then get reimbursed when they file a tax return. Rebates are provided at the point of sale, offering consumers immediate savings.
In July 2023, the United States Department of Energy released requirements for these two programs and instructions for how states can apply for these funds. This is a summary of the DOE requirements.
The Electrification Program: This program provides rebates of up to $14,000 to low-income homeowners and some owners of multifamily buildings. These rebates include:
|Heating and Cooling Heat Pump||$8,000|
|Electrical Service Box||$4,000|
|Insulation, Air Sealing, and Ventilation||$1,600|
|Heat Pump Water Heater||$1,750|
|Electric Stove or Heat Pump Clothes Dryer||$840|
Low-income is defined as households earning less than 80% of the Housing and Urban Development’s Area Median Income. Using West Virginia as the area, that would include individuals earning less than $40,000 a year and families of four earning less than $57,150 a year.
Moderate-income households qualify for half of the rebate amounts listed in the chart above (e.g., a $4,000 rebate for a heating and cooling heat pump). Moderate income is defined as households who earn between 80% and 150% of the Area Median Income. For an individual in West Virginia that’s someone who earns between $40,000 and $75,000; and for a family of four that includes households who earn between $57,150 and $107,100 a year. Households with incomes above 150% of Area Median Income do not qualify for any rebates under the Electrification program. These are 2023 numbers for Area Median Income and will be adjusted by HUD in spring 2024.
Owners of multifamily buildings qualify for the rebates listed in the chart above if at least 50% of the residents in the building are low-income, earning less than 80% of the Area Median Income. If at least 50% of the residents qualify as moderate income, then the building owner can receive 50% of the rebates listed in the chart above.
To qualify for rebates, the measures listed in the chart above can only be part of a new construction; or to replace a non-electric appliance, (e.g., switching from a gas furnace to a heating and cooling heat pump); or for the first-time purchase of a heating and cooling heat pump. Upgrading an existing heating and cooling heat pump for a more efficient one does not qualify for a rebate.
This is a lot of numbers. But the bottom line is that there are significant rebates for home electrical improvements for a lot of West Virginians.
Efficiency Program: Unlike the Electrification program, the efficiency program does not have a list of rebates for specific home improvements. Rather a home energy audit is conducted and a contractor either models what energy savings are projected to be achieved with the installation of selected energy efficient measures (adding insulation, for example); or the contractor can measure the impact on energy consumption that the installed energy efficiency measures have over time. The state’s Office of Energy decides whether to approve one or both of these approaches (modeling or measuring).
Under either approach the more energy savings, the greater the rebate. For example, under the modeling approach, if the selected energy efficiency measures are projected to reduce a low-income household’s energy usage by more than 35%, the homeowner receives a rebate of $8,000 or 80% of the project cost, whichever is less. If the projected energy savings are only 20% to 34%, then the low-income homeowner receives a rebate of $4,000 or 80% of the project cost, whichever is less.
Households with incomes above the low-income threshold qualify for reduced benefits. There are no upper income limits to qualify for rebates under the Efficiency program. Millionaires could qualify for a rebate. If, for example, a homeowner with income at say 200% of the Area Median Income installs energy efficiency measures under the Efficiency program and the projected energy savings are 35% or more, the rebate is $4,000 or 50% of the project cost whichever is less.
Owners of multifamily buildings where 50% of the renters qualify as low income, and where the energy savings are projected to be more than 35%, will receive a rebate of $8,000 per dwelling or 80% of the projected cost whichever is less. Where a majority of renters have incomes above the low-income threshold, and energy consumption is projected to be greater than 35%, the rebate is $4,000 per dwelling capped at $400,000 per building.
Total Funding with Specific Funding for Low-Income Households: if the U.S. Department of Energy approves West Virginia’s application, the State will receive $44 million for each of these programs with a requirement that a portion must be spent on low-income households. Of the $44 million in the Electrification program, $10.4 million must be spent on low-income homes and an additional $2.6 million must be spent on low-income multifamily buildings. Similarly, of the $44.3 million in the Efficiency program funding, $10.5 million must be spent on low-income homes and an additional $2.7 million must be spent on low-income multifamily buildings.
When Will These Rebates Be Available? Good question. The West Virginia Office of Energy will need to submit an application to the United States Department of Energy. In seeking federal approval, the State must develop a Community Benefit plan that has strong consumer and labor protections. The Department of Energy will need to approve this application before rebates can be made. January 1, 2024, is probably a reasonable target.
Conclusion: West Virginians have a once-in-a-life time opportunity to decrease greenhouse gas emissions from their homes and apartments as well as save money on skyrocketing utility bills. The state has some of the highest home ownership percentages in the country. Yet our housing stock is some of the least energy efficient in the country. Perhaps no state in the country can benefit more from these two energy efficiency rebate programs than West Virginia.
Unfortunately, the parameters of these two energy efficiency rebate programs are complex and confusing. Making the benefits clear to the thousands of West Virginians whose homes can be improved through these two programs will be a dauting task. We should all do what we can to educate our friends and neighbors on how they can take advantage of these two programs. An opportunity like this is unlikely to occur again any time soon.