Action by Congress this weekend and next week is expected to put more incentives, mostly through tax credits and rebates, back into the pockets of homeowners who choose energy-efficient options by replacing fossil fuel furnaces, boilers, water heaters and stoves with high-efficiency electric options which can be powered by renewable energy sources.
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Of course, more of the national electricity grid, which currently runs on natural gas NG00, -2.62% along with lingering coal and expanding wind and solar ICLN, +0.76% , will have to be powered by renewable energy sources for home upgrades. really green. However, alternatives are growing in use, and home efficiency has long been considered a good place to start.
The bill, a much-coveted and much-reduced spending bill created by Democrats, now known as the Inflation Reduction Act, includes a rebate or tax break for eligible consumers who add efficient heat pumps (which, despite their name, transfer also cold air. ), rooftop solar, electric HVAC and electric water heaters.
The IRA passed Sunday in the Senate and now heads to the House next week, where it is expected to pass with a narrow majority for Democrats in that chamber. Republicans who opposed the bill did so based on disagreements, they say, with the level of spending, but also because some support U.S. oil and gas production on the grounds of cost savings and global security. And Democrats agreed to a forward-looking look at expediting environmental approvals for fossil fuels and clean energy.
“American families need relief from Democratic policies that are attacking American energy, skyrocketing utility bills and raising prices RB00, -0.57% at the pump,” said Sen. Barrasso, a Wyoming Republican who is member of the Senate Energy Committee. and Natural Resources.
Climate Nexus, an advocacy group, says a survey showed 67% of voters support giving tax credits and other incentives to homeowners, landlords and businesses to buy appliances that don’t use fossil fuels (such as electric water heaters, heat pumps and electric induction hobs).
What does the Home Energy Inflation Act say?
The legislation provides a total of $9 billion in energy rebates, including the $4.28 billion High-Efficiency Electric Home Rebate Program, which gives back a rebate of up to $8,000 for installing heat pumps that can heat and cool homes, and a rebate of up to and $1,750 for a heat pump water heater. Homeowners may also qualify for up to $840 to offset the cost of a heat pump clothes dryer or an electric range, such as a high-efficiency induction range.
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Many homes will need to upgrade their electrical panels before getting new appliances, and the program offers up to $4,000 off that initial step.
“A household with an efficient electric heat pump for space heating and cooling, a heat pump water heater, an electric vehicle and solar panels would save $1,800 a year,” says Jamal Lewis and his team, writing a brief on the legislation for the Rewiring organization. America.
“These savings will be reflected in lower monthly energy bills, reduced volatility and a reduction in disproportionately high energy burdens in disadvantaged communities,” Lewis said. “Importantly, these savings add up — so much so that if a household invests the energy bill savings from electrifying their home appliances, that savings will grow to over $30,000 after 10 years and $140,000 after 25 years ( assuming an annual return of 8%). “
There are also funds in the IRA that must be claimed for smaller actions: a deduction of up to $1,600 for insulating and sealing a home, and a deduction of up to $2,500 for electrical wiring improvements.
The program, which will be administered at the state level, will run through Sept. 30, 2031, and homeowners will be able to collect a maximum of $14,000 in total rebates. To qualify, household income cannot exceed 150% of the area median income.
For homeowners who do not qualify for the rebates, the IRA provides a tax credit of up to $2,000 for installing heat pumps. And, installing an induction stove or new windows and doors, for example, qualifies for tax credits of up to $1,200 per year.
What exactly are heat pumps?
Electric heat pumps, replacing a furnace, for example, are energy efficient because they do not create heat by burning fuel, but rather transfer it (during the heating season) from a cold outside to a warm inside. Disadvantages may include the initial cost and their suitability for all areas.
But over their lifetimes, electric heat pumps generally offer the cheapest way to cleanly heat and cool single-family homes in all but the coldest regions of the U.S. in the coming decades, according to recent research from the American Council for Energy Efficiency . (ACEEE). In very cold places, the analysis finds, electric heat pumps with alternative back-up fuel for cold periods minimize costs.
“Our findings are good news for consumers and for the climate. Electric heat pumps, which heat and cool, are the cheapest clean heating option for many homes, especially now that we have cold climate models,” says Steven Nadel, report author and executive director of ACEEE.
Cold climate models, an advancement in technology, operate efficiently in temperatures as low as 5°F. Their energy costs, however, are minimized if a backup alternative fuel is started when it gets colder than 5°F for long periods of time.
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The analysis finds that higher-income households are more likely to minimize costs with electric heat pumps because they have newer—and more likely, single-family homes—with air conditioning and improved energy efficiency.
The group supports congressional assistance for low- and moderate-income households, whose homes are often the hardest to decarbonize. Specifically, ACEEE is asking for help in reducing the cost of ductless electric mini-split heat pumps in apartment buildings.
And what about solar?
The legislation revives a 30% tax credit for installing residential solar panels and extends the program through December 31, 2034.
The tax credit will be reduced to 26% for solar panels commissioned after 31 December 2032 and before 1 January 2034.
In addition, homeowners who install solar panel systems with at least three kilowatt-hours of capacity will also be eligible for the tax credit.
The heating and cooling provisions are in addition to tax credits of up to $7,500 for the purchase of a new TSLA, -6.63% F, -0.46% electric vehicle and $4,000 for low- and moderate-income families purchasing a used EV. Early versions of this spending bill included aid for e-bikes, but they are excluded in the final. Read more about these EV incentives.
Other programs
Homeowners can look beyond federal programs.
Safak Yucel, an assistant professor of operations management at Georgetown University who studies government policies on renewable energy and carbon emissions, said the legislative uncertainty given the long delay in passing this bill and the risk of challenging executive court action means state and city incentives, as well as those offered by utilities, may make homeowners more confident.
“A lot of state governments, a lot of cities, are offering pretty lucrative deals,” he said. “When it comes to rooftop solar panels, for example, Massachusetts comes to mind, which isn’t necessarily the sunniest state, right, but they have pretty significant rooftop solar adoption thanks to these state-level policies. I think as consumers look forward, they’re more likely to see even broader involvement from state governments.”
The EcoWatch website, for example, allows users to search by zip zode and ranks sun-friendly states.
Will incentives drive consumer buying?
Broadly speaking, the new bill is intended to bring more green technology manufacturers back to the U.S. by tagging $60 billion to speed up domestic production of solar panels, wind turbines and batteries, as well as support the critical mineral processing needed for batteries that they power EVs and help households harness their solar energy.
More domestic production could help ease supply chain problems that have plagued markets during the COVID-19 recovery and could create more jobs, which appears to be helping Americans “green” homes and their businesses at historically lower costs. supporters of the bill argue.
Biden said the U.S. would work to align with most major economies in the world by net zero greenhouse gas emissions by 2050 and at least halve current emissions by 2030.
“Electrification will play a critical role in decarbonizing housing, but the transition will be slow as long as cheap fossil fuels are widely available,” says Lyla Fadali, senior researcher at ACEEE.
Targeting production changes can also affect consumers.
“Instead of focusing on whether or not a consumer will buy the product at this point, what we’re seeing is that consumers’ hand is going to be forced…
