Guide to IRA incentives

Guide to new energy incentives

By Matt Christie of the Strafford Energy and Climate Committee. "For my career I help utilities and government agencies create policies and incentives for energy efficiency and low-carbon technologies in homes. So this is my wheelhouse."

Watch Matt's January 2023 presentation and Q&A on these new energy incentives. The slide deck is also available.

The 2022 Inflation Reduction Act (IRA) should really have been called the energy incentives act because that is what it is: a huge list of incentives for manufacturers, developers, utilities, and plenty also for homeowners and renters.

So what can you hope for from the IRA? For existing homes, there are two main buckets: one is for lower income residents; the other is for higher-income households that have tax liability.

Bucket #1 is the High Efficiency Electric Home Rebate Act (HEEHRA), which will support households that earn under 150% of the Area Median Income (AMI). AMI in Norwich is about $90,100; 150% is $135,150.

This program will be a full point-of-sale rebate and is not fully operational yet. It will likely launch late summer 2023 once the program rules and structures have been put in place, and likely flow through Efficiency Vermont.

Under this program, you can get up to $14,000 in total, but with limits in place by each individual upgrade. The rebates will cover: heat pumps (up to $8,000), heat pump water heaters ($1,750), an electric/induction stove ($840), a heat pump clothes dryer ($840), upgrades to your electric service panel ($4,000), electric wiring ($2,500) and various weatherization work like insulation and air-sealing ($1,600).

Households under 80% of AMI can get the full cost of their upgrade covered within the limits above. Those 80% to 150% of AMI can get 50% of their cost covered within the limits. While the dollar figure going into HEEHRA seems massive ($4.275 billion), when split across the whole country, it's actually a bit limited. I would expect the funding to run out rather quickly. So if you're in this income bracket, and know you want to take advantage of these fairly substantial incentives, do some research ahead of time to be ready to get the work done as soon as the program is live.

Bucket #2, for households with tax liability, consists of two tax credits: the Energy Efficiency Home Improvement Tax Credit (25C) and the Residential Clean Energy Tax Credit (25D).

The 25C tax credit covers many of the same types of home upgrades as HEEHRA, but as a tax credit, and with different financial limits: heat pumps and heat pump water heaters ($2,000), insulation ($1,200), doors ($500), windows ($600), electric panels ($600), and an energy audit ($150). For these, the credit covers 30% of the cost, up to those limits, but there's also an annual limit of $2,000 for heat pumps, and $1,200 for all others. So there's some logic to making steady progress year-to-year and spreading it out.

Air source heat pumps need to meet some cold-climate capability specifications, but nothing particularly limiting relative to the types of heat pumps you'd want to put in around here anyway. There are also similar qualilty requirements for other measures. A good contractor should be able to talk you through all the requirements, get you the upgrade that qualifies, and provide you with the paperwork you'll need to document everything for tax season.

25D, on the other hand, is a 30%-of-cost credit, uncapped, for solar, battery storage, and geothermal (ground source heat pumps) heating.

So it's a good time to improve and electrify everything and start to pivot to all-electric, low carbon lives! If you're feeling daunted about where to start, it's always a good idea to look at attic insulation and air-sealing first. Get an energy audit, learn about how your home uses energy and heat, and make some informed decisions on how to stage improvements.

Bring down your load first (reduce heating need), then switch to heat pump heating. Heat pump heating costs about 40% less to run than oil or propane at 2023 winter pricing. If you're worried about a polar vortex, or extreme cold, you can start with a medium-sized heat pump in your living room. It might be able to cover as much as 85% of your annual heating use at lower cost, while still keeping propane or oil in place for the coldest nights.