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Sep 02 2022
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energy efficiency tax credits and rebates

Energy Efficiency Rebates and Tax Credits in 2024: Home Electrification From the IRA

By How the Inflation Reduction Act of 2022 Can Lower Your Energy Bills, Solar Rebates & Incentives No Comments

From the windows to the walls: The recently signed Inflation Reduction Act is creating energy efficiency rebates and tax credits for all kinds of home electrification upgrades.

We’re talking tens of thousands of dollars per qualified household for appliances like heat pumps, stoves, and dryers, and upgrades like new windows, insulation, and electrical panels.

Some of these incentives took effect on January 1, 2023, and others are expected to kick in later in the year. Heading into 2024, there’s a lot of money on the table to reduce the cost of home electrification projects. So, we’re taking a project-by-project approach to show you which energy efficiency rebates and tax credits will be available to you, and how to claim them.

Click the link below to jump to the project(s) you’re interested in:

First, let’s define the two types of energy efficiency incentives: Rebates and tax credits.

Energy Efficiency and Electrification Rebates for 2024

Update: Per the latest guidance from the US Department of Energy, the home electrification rebates listed below are expected to be available in some areas in the second half of 2024 and available in most areas by early 2025.

The High-Efficiency Electric Homes and Rebates Act (HEEHRA) allocates $4.5 billion dollars to the states to create point-of-sale rebates for home electrification projects for low- and moderate-income households. Program specifics are still being determined and will vary from state to state.

Point-of-sale means the rebate is transferred to the customer at the time of purchase, effectively discounting the price of the appliance or upgrade. Qualifying households can use up to $14,000 in HEEHRA rebates for the following appliances and energy efficiency upgrades.

HEEHRA rebate amounts for appliances

Appliances Maximum rebate amount
Heat pump water heater $1,750
Heat pump for space heating and cooling $8,000
Electric stove, cooktop, range, oven $840
Heat pump clothes dryer $840

HEEHRA rebate amounts for non-appliance upgrades

Non-appliance upgrades Maximum rebate amount
Upgraded electrical panel $4,000
Insulation, air sealing, ventilation $1,600
Electric wiring $2,500

These energy efficiency and electrification rebates are expected to be rolled out in late 2024 and early 2025 and run through September 30, 2031.

Who qualifies for energy efficiency rebates?

Not all households will qualify for HEEHRA rebates. The energy efficiency and electrification rebates in the Inflation Reduction Act are reserved for households making less than 150% of the area median income (AMI) as defined by the Department of Urban Housing and Development (HUD).

  • Households making less than 80% of area median income can use the rebates to cover 100% of the cost of equipment and installation for energy-efficient appliances and home upgrades.
  • Households making between 80-150% can use the rebates to cover 50% of the equipment and installation costs.

Use this calculator from Rewiring America to find out if you will qualify for HEEHRA rebates.

So, for example, a 50-gallon Rheem Pro Prestige heat pump water heater costs $1,500 on the Electrum marketplace. Let’s say installation is another $750 for a grand total of $2,250.

  • If your household income is less than 80% of AMI, you could use the entire $1,750 heat pump water heater rebate to bring the purchase price down to $500.
  • If your household income is between 80-150% AMI, you could only use $1,125 of the rebate to cover the maximum 50% of the all-in cost, and the other $1,125 comes out of your pocket.

Either way, that’s a great deal for a brand-new heat pump water heater that can save you hundreds of dollars per year in energy costs and reduce your carbon emissions.

If you make more than 150% AMI, then you won’t qualify for HEEHRA rebates. Not to worry, there are still energy efficiency incentives in the Inflation Reduction Act for you!

Related reading: Solar and battery incentives by state

Energy Efficiency Tax Credits for 2024

Update: The tax credits listed below became available on January 1, 2023 and can be claimed when you file your income taxes for 2023.

If you don’t qualify for energy efficiency rebates, there are tax credits in the Inflation Reduction Act that can reduce the cost of home electrification projects.

Unlike a point-of-sale rebate, a tax credit does not reduce the purchase price of the project. Rather, it’s claimed when you file your taxes and can increase your refund or reduce the amount of tax you owe.

Beginning in 2023, the Energy Efficient Home Improvement Credit is worth 30% of the total cost of eligible projects up to $1,200 per year (or $2,000 per year for heat pump water heaters and heat pump space heaters).

That means you will be able to spread out your home electrification projects to claim the tax credit in multiple years.

The Energy Efficient Home Improvement Credit applies to:

Energy efficiency upgrade Annual tax credit limit
Home energy audits $150
Exterior doors $250 for one door; $500 for all doors
Exterior windows and skylights $600
Central air conditioners $600
Electrical panels and related equipment $600
Natural gas, propane, oil water heaters and furnaces $600
Heat pump water heaters $2,000
Heat pump space heaters $2,000
Biomass stoves and boilers $2,000

The Energy Efficient Home Improvement Credit is basically a reboot of the Nonbusiness Energy Property Credit that expired in 2021 and was worth only 10% of the project costs.

The new credit will be in effect from January 1, 2023 to December 31, 2032.

Can You Combine Energy Efficiency Tax Credits and Rebates?

HEEHRA rebates and Energy Efficient Home Improvement tax credits are two separate incentives created by the Inflation Reduction Act — so can they be combined to maximize savings?

“Technically, you can use both,” said Sam Calisch, Head of Special Projects at Rewiring America, an organization involved with drafting theses programs. “But it’s important to understand that there’s very, very few households that actually fall into that little overlap.”

The HEEHRA program was designed to help low- and moderate-income households, so there’s an upper cap on the income it’s based on. According to Calisch, these households tend not to have enough tax liability to claim the tax credit.

“Some of the previous programs, like the previous EV tax credit, generally went to wealthier households — and that’s not equitable,” Calisch said. “So it’s really important to have both of these programs because things like HEEHRA serve low- and moderate-income households, and they have really generous incentives. Their amounts are higher and they’re upfront, so they’re a direct discount off the price.”

Energy Efficiency Tax Credits and Rebates By Project

Okay, now that we have the policy mumbo-jumbo out of the way, let’s take a project-by-project approach to what you can save once the new energy efficiency tax credits and rebates take effect in 2023.

It’s important to note that these are only the federal incentives created by the Inflation Reduction Act. There may be additional state and local incentives in your area.

Let’s start with the biggest savings potential.

Heat pump space heating and cooling incentives

When HEEHRA rebates roll out in late 2024, qualified Americans will be able to save up to $8,000 on a heat pump for space heating and cooling. For some, that covers 100% of the cost of a major appliance which will also save them hundreds of dollars a year in energy costs.

  • Households with income less than 80% of AMI: $8,000 rebate up to 100% of equipment and installation costs
  • Households with income between 80-150% AMI: $8,000 rebate up to 50% of equipment and installation costs
  • Households with income at or above 150% AMI: 30% tax credit worth up to $2,000 per year

The tax credit also applies to biomass stoves and boilers and is an exception to the $1,200 yearly limit.

Heat pump water heater incentives

Water heating is another area of major energy savings potential. The IRA creates substantial incentives that put heat pump water heaters in reach for Americans at all income levels.

  • Households with income less than 80% of AMI: $1,750 rebate up to 100% of equipment and installation costs
  • Households with income between 80-150% AMI: $1,750 rebate up to 50% of equipment and installation costs
  • Households with income at or above 150% AMI: 30% tax credit worth up to $2,000 per year

The tax credit also applies to biomass stoves and boilers and is an exception to the $1,200 yearly limit.

Get multiple quotes on heat pump water heaters here.

Electrical panel upgrade incentives

For many households, the first step toward electrification and energy savings is upgrading the electrical panel or breaker box. You bet there are incentives for this upgrade.

  • Households with income less than 80% of AMI: $4,000 rebate up to 100% of equipment and installation costs
  • Households with income between 80-150% AMI: $4,000 rebate up to 50% of equipment and installation costs
  • Households with income at or above 150% AMI: 30% tax credit worth up to $600 per year

Electrical panel upgrades can also be included in the 30% federal solar tax credit.

Electrical wiring incentives

In some houses, new electrical wiring may be required before making additional energy efficiency upgrades. The new tax credits and rebates can help lower the cost of these upgrades.

  • Households with income less than 80% of AMI: $2,500 rebate up to 100% of equipment and installation costs
  • Households with income between 80-150% AMI: $2,500 rebate up to 50% of equipment and installation costs
  • Households with income at or above 150% AMI: Electrical wiring may be included in the 30% tax credit worth up to $600 per year for electrical panel upgrades. Consult a licensed tax consultant with questions about tax credits.

Insulation, air sealing, and ventilation incentives

Insulation, sealing, and ventilation are part of the home envelope – the structures that make a home airtight. A secure envelope can lead to major energy savings over the long term.

  • Households with income less than 80% of AMI: $1,600 rebate up to 100% of equipment and installation costs
  • Households with income between 80-150% AMI: $1,600 rebate up to 50% of equipment and installation costs
  • Households with income at or above 150% AMI: N/A

Exterior windows and doors incentives

Energy savings can literally fly out the window if your windows and doors aren’t airtight. The Energy Efficient Home Improvement Credit can help you upgrade windows and doors.

  • Households with income less than 80% of AMI: 30% tax credit worth up to $600 per year for exterior windows and skylights, $250 per year for one exterior door, and $500 per year for all exterior doors
  • Households with income between 80-150% AMI: 30% tax credit worth up to $600 per year for exterior windows and skylights, $250 per year for one exterior door, and $500 per year for all exterior doors
  • Households with income at or above 150% AMI: 30% tax credit worth up to $600 per year for exterior windows and skylights, $250 per year for one exterior door, and $500 per year for all exterior doors

Electric stove, cooktop, range, and oven incentives

According to reporting by NPR, gas stoves emit nitrogen dioxide, carbon monoxide, and formaldehyde into the air, which can trigger breathing problems, especially in young children.

Luckily, there are incentives for switching to electric stoves, which are cleaner and more cost-effective over time.

  • Households with income less than 80% of AMI: $840 rebate up to 100% of equipment and installation costs
  • Households with income between 80-150% AMI: $840 rebate up to 50% of equipment and installation costs
  • Households with income at or above 150% AMI: N/A

Heat pump clothes dryer incentives

Heat pump clothes dryers are more efficient than conventional dryers and create water as a byproduct instead of exhaust. That means no dryer exhaust smell, no hole in your house, and no wrestling the machine from the wall to clean the exhaust pipe.

Thanks to the new tax credits and rebates, they’ll come at a significant discount for qualified households.

  • Households with income less than 80% of AMI: $840 rebate up to 100% of equipment and installation costs
  • Households with income between 80-150% AMI: $840 rebate up to 50% of equipment and installation costs
  • Households with income at or above 150% AMI: N/A

Energy-efficient central air conditioners, furnaces, and water boilers

Breaking from the electrification theme, the IRA still lays out incentives for energy-efficient appliances like central air conditioners, furnaces, and water boilers that run on fossil fuels.

  • Households with income less than 80% of AMI: 30% tax credit up to $600 per year for conditioners and natural gas, propane, and oil furnaces and water boilers
  • Households with income between 80-150% AMI: 30% tax credit up to $600 per year for conditioners and natural gas, propane, and oil furnaces and water boilers
  • Households with income at or above 150% AMI: 30% tax credit up to $600 per year for conditioners and natural gas, propane, and oil furnaces and water boilers

Home energy audit incentives

Maybe you don’t know where to start with upgrading your home’s energy efficiency. That’s ok, you use a home energy audit to figure out the best bang-for-your-buck.

  • Households with income less than 80% of AMI: 30% tax credit up to $150 per year
  • Households with income between 80-150% AMI: 30% tax credit up to $150 per year
  • Households with income at or above 150% AMI: 30% tax credit up to $150 per year

A Decade of Energy Efficiency Tax Credits and Rebates Ahead

With the IRA officially law, homeowners of all income levels have access to new and improved energy efficiency tax credits, and lower-income households will soon have substantial rebates to reduce the cost of electrification upgrades.

Although these incentives will be around for the next decade, energy efficiency is about long-term savings. The sooner you invest in home electrification, the more time you have to compile savings and reduce your carbon footprint.

Of course, these energy efficiency upgrades become even cleaner and cost-effective when paired with home solar.

 

 

Energy Efficiency Rebate and Tax Credit Frequently Asked Questions

Are there any Federal rebates for heat pump water heaters?

Beginning in late 2024 and early 2025, a point-of-sale rebate can be used to reduce the purchase price of a heat pump water heater by up to $1,750 by households with income less than 150% of the area median income (defined by HUD). Households with incomes less than 80% of AMI can use the rebate to cover 100% of the cost of equipment and installation. Households with incomes between 80-150% AMI can use the rebate to cover 50% of the cost of equipment and installation.

There is also a tax credit currently available for heat pump water heaters. The Energy Efficient Home Improvement Credit is worth 30% of the total cost of a heat pump water heater up to $2,000. This credit can be used to reduce your tax liability. Consult a licensed tax professional for advice regarding using tax credits.

Can you get a tax credit for energy-efficient windows?

As of January 1, 2023, there is a federal tax credit for exterior windows and doors. The Energy Efficient Home Improvement Credit is worth 30% of the total cost of the project, up to $600 for exterior windows and skylights, $250 for a single exterior door, and $500 for all exterior doors.

There may also be state and local incentives for windows and doors in your area.

How do I apply for energy efficiency and electrification rebates?

HEEHRA rebate programs will be administered by the states and are still being implemented. The latest guidance from the Department of Energy (DOE) suggests that programs will begin rolling out in the second half of 2024, with most programs ready by early 2025. Program guidelines may vary from state to state, however, included in the bill text of the Inflation Reduction Act is language that states that households that already qualify for other income-specific programs (SNAP, Medicaid, weatherization assistance) will automatically qualify for HEEHRA.

Check back for updates on how to apply for HEEHRA rebates.

Aug 31 2022
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planned safety power shutoff psps

What Is Public Safety Power Shutoff (PSPS) And Can Solar and Battery Help?

By Solar Battery No Comments

What’s worse than facing a heat wave and imminent wildfire threat? How about facing a heat wave and imminent wildfire threat without power.

As extreme heat and wildfire events increase in frequency and intensity, power utilities are using Public Safety Power Shutoffs (PSPS) to reduce the risk of power lines sparking potentially devastating wildfires.

PSPS is basically the lesser of two evils. Being without power is disruptive and uncomfortable, but it’s far less destructive than a major wildfire.

But there is a third option. By pairing solar with battery storage, homeowners supply their own power during Public Safety Power Shutoffs.

 

What is Public Safety Power Shutoff (PSPS)?

Public Safety Power Shutoff is, well, exactly what it sounds like. It’s a planned power outage that utilities use to keep customers safe by reducing the risk of power lines sparking wildfires.

Although it’s not a preferred option for anyone, PSPS is one of several tools utilities use to prevent electricity infrastructure from sparking wildfires. From 2011-2015, electrical power was the third most common cause of wildfire in California, including some of the largest and most devastating events.

According to the California Public Utilities Commission (CPUC):

“Electric utility infrastructure has historically been responsible for less than 10% of reported wildfires. However, fires attributed to power lines consist of roughly half of California history’s most destructive fires.”

Also known as rolling blackouts or de-energization, PSPS events occur most frequently during peak wildfire season (September and October in California). But with wildfire season extending nearly year-round, they may occur throughout the year.

For example, California investor-owned utility PG&E performed five PSPS events in 2021, including one in January.

  • January 19
  • August 17-19
  • September 20-21
  • October 11-12
  • October 14-16

PSPS events can be short, but typically last for 24-48 hours until weather conditions improve and the electric infrastructure has been inspected and deemed safe to re-energize.

Where Do Planned Safety Power Shutoff Events Occur?

PSPS events are most common in California. Between 2013 and 2019, the state averaged 8,000 wildfires per year and the three largest utilities performed 33 PSPS de-energization events (5.5 per year, on average).

To minimize disturbance to their customers, utilities target the highest-risk areas of the grid to shut down. Even so, a single PSPS event can leave tens of thousands of customers and hundreds of critical facilities without power for days.

The higher the wildfire risk, the greater the chance of utilities shutting down the grid to prevent starting a fire. Below is a map of the Tier 2 and Tier 3 high-fire threat zones in California. Use this map to zoom in for more detail.

Example PSPS event timeline

Utilities monitor weather conditions weeks ahead to try to plan for potential PSPS. Conditions such as low humidity, strong winds, and dry vegetation elevate the risk of fire danger, which can trigger a PSPS event. When possible, utilities send notifications days before a possible planned outage.

Here’s a typical PSPS timeline, according to Southern California Edison (SCE):

Planning and monitoring:

  • 4-7 days ahead: Extreme weather conditions forecasted, PSPS planning begins
  • 3 days ahead: Notifications of possible PSPS event sent to community leaders (government officials, first responders, hospitals, etc)
  • 2 days ahead: Initial notifications sent to customers
  • 1 day ahead: Updates with timing information sent to customers and community leaders
  • 1-4 hours before: Notifications that power will be shut off sent

Outage and re-energization:

  • Power shutoff: Notifications sent to costumers and community leaders
  • Preparing for re-energization: Field crews inspect infrastructure to determine if re-energization is safe. Notifications are sent out before restoring power
  • Power restoration: Notifications are sent when power is restored
  • PSPS All Clear: Final notification that PSPS is no longer being considered

Of course, extreme weather can be unpredictable and PSPS can occur more suddenly based on conditions. It’s best to prepare for PSPS events ahead of time, especially if you rely on medical equipment that requires electricity.

Can You Use Solar Power During a Planned Safety Power Shutoff?

The short answer is maybe. Whether you can use solar panels to power your home during a Planned Safety Power Shutoff – or any power outage, for that matter – depends on a few things.

Most solar systems are designed to automatically shut down during any power outage. This prevents the flow of electricity onto the grid, ensuring the safety of utility workers and emergency responders.

However, there are two ways to keep your keep your solar panels producing during a power outage:

  1. Use a special inverter system that automatically disconnects from the grid during outages
  2. Use solar battery storage to store and use your own energy

According to CPUC, both can be viable options during Planned Safety Power Shutoffs. However, there are pros and cons to both options.

Inverters for opportunity power

One way to continue producing solar power during an outage is to use special inverter systems that produce opportunity power by forming a “grid-agnostic” system. Most notably, the SMA Sunny Boy and Enphase Ensemble systems can be used to produce opportunity power when the grid is down.

 

However, there are limits to how much opportunity power your solar system can produce.

For example, the SMA Sunny Boy system is designed to produce a maximum of 2,000 watts of power. That’s enough to power essential appliances like a fridge, along with phones, a fan and maybe a TV. But that’s not enough to keep the air conditioning going.

And, of course, off-grid solar without battery storage will only provide power while the sun is shining.

Opportunity power may be enough for some homeowners during Planned Safety Power Shutoff events. However, solar paired with battery storage is a much more robust solution.

Solar with battery storage during power outages

By pairing solar with battery storage, which now qualifies for a 30% federal tax credit, you essentially create your own mini-utility to power your home during Planned Safety Power Shutoff events.

Exactly how much power solar and battery can provide depends on the size of the system, your energy usage, and the sun exposure. A typical solar battery can store 10kWh of electricity, which is usually enough to power priority appliances (fridge, lighting, phone charging) for 24-48 hours.

If the sun is shining and your solar panels are producing enough electricity to power your home and charge your battery, you may be able to run your entire house – including air conditioning – during the PSPS.

Talk about energy independence!

Connect with a solar.com Energy Advisor to design a solar and battery system that meets your needs.

everything you need to know about solar battery incentive programs

Should You Use A Gas Generator During PSPS?

Gas and diesel generators can provide backup power during planned and unplanned power outages, but they are not as clean, quiet, and seamless as solar backup.

According to the CPUC, “(Generators) can also be noisy and pose safety hazards, including fire and carbon monoxide poisoning… If you don’t understand how to use your generator, you risk damaging your property, endangering your life, and endangering the lives of repair crews and first responders working in your community.”

Not only are they loud and polluting, fuel for generators can be expensive, cumbersome to handle, and dangerous to store (especially during wildfire season). Gas generators may also violate community noise ordinances.

The Bottom Line

In many areas of California, Planned Safety Power Shutoff events are a part of life that can leave tens of thousands of people without power for a few hours to several days. It’s expected that PSPS events will become more common as wildfires increase in frequency and intensity.

Pairing solar with battery storage is the best option for keeping your power on during PSPS events or any power outage.

PSPS Frequently Asked Questions

What is PSPS?

PSPS stands for Planned Safety Power Shutoff – which is exactly what it sounds like. When wildfire conditions intensify, electricity utilities will shut off certain parts of the grid to reduce the risk of power lines sparking a wildfire. Also known as de-energizations, this is a common practice in California and other Western states during peak wildfire season in September and October.

Can I use solar during a power outage?

Unless connected to battery storage, most home solar systems are automatically shut down during planned and unplanned power outages. This prevents them from putting energy onto the grid and ensures the safety of repair workers and emergency responders.

If the solar system is connected to battery storage, it can be used to power a home during grid outages, such as Planned Safety Power Shutoffs. There are also special inverters that automatically detach from the grid during outages, enabling the solar system to directly power the house to an extent.

Why are they turning off the power in California?

Utilities in California perform Planned Safety Power Shutoff events to reduce the risk of electrical infrastructure starting a wildfire. On average, there are five to six PSPS events per year that typically last 24-48 hours. Your electricity provider should notify you before, during, and after PSPS events.