Rebates for energy-efficient appliances are coming, finally

By Todd Woody | Bloomberg

Remember the US Inflation Reduction Act’s lucrative rebates for heat pumps, induction stoves and other high-efficiency electric appliances? If you don’t, it might be because the money from that particular slice of the 2022 climate law has yet to begin flowing. But a payday is finally in sight, at least for a handful of US states.

California, Hawaii, New Mexico and New York have submitted applications to the Department of Energy (DOE) for state programs to deduct IRA rebates from the purchase price of certain appliances designed to replace fossil fuel furnaces, water heaters and stoves. Several other states are expected to follow suit in coming months.

A DOE spokesperson said the agency aims to review and approve applications within 60 to 90 days of receiving them, a necessary green light for any state or US territory to receive its allocated funding. Awards range from $50 million for American Samoa to $690 million for Texas.

While the $8.5 billion rebate program is baked into the IRA, the long lag time is a byproduct of the need to distribute those incentives through individual states, each of which must craft its own program and obtain approval from the DOE. The requirement that rebates be deducted from the appliances’ price at the point of sale complicates that rollout, as do eligibility requirements based on income. Every state must figure out how to verify buyers’ earnings when they walk into a big-box store to purchase an induction stove, for example.

The IRA incentives include an $8,000 rebate for heat pumps that can warm and cool homes, which could cover roughly half the installation costs of some systems. There’s also a $1,750 rebate for heat pump water heaters, $840 for induction stoves and heat pump clothes dryers and $4,000 for electrical system upgrades.

Households are eligible for up to $14,000 in rebates if they earn less than 150% of their area’s median household income. If not, families can still claim a $2,000 tax credit for heat pumps and other appliances.

Hawaii submitted its application at the end of December. “Our current plan is to phase in a limited rebate offering beginning in the second half of 2024, with the aspirational goal of having the program fully operational by the end of 2024, contingent on DOE approvals,” said Claudia Rapkoch, the public affairs officer with the Hawaii State Energy Office.

A spokesperson for the California Energy Commission said the state doesn’t yet have a target date for making the rebates available. New York is aiming to begin rolling out rebates in the summer of 2024, according to a representative of the New York State Energy Research and Development Authority. New Mexico expects to begin making rebates available by the end of the year, said a spokesperson for the state’s Energy, Minerals and Natural Resources Department.

Alisa Petersen, federal policy manager for the US program at RMI, a nonprofit that promotes decarbonization, said manufacturers should be ready to fulfill demand for heat pumps and other appliances. But contractors — whom most consumers rely on when they need new equipment — will be key to the programs’ success.

“For contractors that typically install heat pumps, they are largely aware and poised to promote these rebates to their customers,” Petersen said. “For contractors where heat pumps are not currently a large part of their business, they likely will need to hear from customers before they change their business model and are not as up to speed on these rebate programs.”

The states that have already submitted applications for rebate programs are taking a variety of approaches to verifying residents’ income eligibility. New Mexico and New York will allow residents to submit proof of their income online prior to making a purchase. In Hawaii, residents whose incomes are already  corroborated through participation in federal programs for low-income households will be deemed automatically eligible. The state is still determining how to verify the income of other households.

“We are moving ahead with procurement for a program implementer while the DOE process continues, so that we can move quickly to issue rebates to low- and moderate-income households,” Rapkoch said. “Given that we have some of the highest electricity rates in the country, our focus is geared toward improving energy efficiency to reduce the household energy burden and make housing more affordable for families.”

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