The climate law’s $8.8B in home energy rebates are starting to roll out

Two years ago this week, President Joe Biden signed the Inflation Reduction Act, the major climate legislation brimming with clean energy subsidies — including a marquee $8.8 billion in home energy rebates to help hundreds of thousands of households decarbonize their homes.

But the rebates, which can add up to $14,000 per qualifying household and be used on upgrades from heat pumps to insulation, aren’t yet available to the majority of Americans. The rebate money will be doled out at the state level, and most states are still in the midst of waiting for DOE approval of their program designs — or have yet to even apply for their portion of the climate law’s funding.

So far, only New York and Wisconsin have officially started offering home energy rebates to residents. Though exact timelines for other state program launches are hazy, they are taking shape.

Fifty out of 56 states and territories have signaled to the agency that they intend to set up rebate programs. Twenty-three of those have actually applied — for a combined $3.1 billion in funding — to set up rebate initiatives. And DOE has approved applications for 10 of those states; besides New York and Wisconsin, these are Arizona, California, Hawaii, Indiana, Maine, New Mexico, Rhode Island, and Washington.

Six states — all in which Republicans control the governorship and both chambers of the state legislature — have not applied to the DOE for administrative funds to pursue rebate program applications: Arkansas, Idaho, Iowa, South Dakota, Tennessee, and Wyoming.

The rebates come in two flavors: the Home Electrification and Appliance Rebates (HEAR) program provides hundreds of dollars in discounts on appliances and electrical upgrades for low- and moderate-income households; and the Home Efficiency Rebates (HOMES, also known as HER) program takes thousands of dollars off the cost of retrofits that make deep cuts to home energy use. State energy offices have the ability to fine-tune eligibility requirements beyond what the law itself says.

Creating new programs — or bulking out existing ones, as some states are doing — takes time, said Amanda Sachs, policy associate at pro-electrification nonprofit Rewiring America. Even choosing which rebate program to prioritize has been a hurdle.

The DOE, too, has been ​“learning the ropes,” to guide states with widely varying housing stocks, weather, and ideas for how to distribute the rebates equitably, Sachs said.

To set up the Home Energy Rebates program, which administers both HEAR and HOMES, the agency has needed to build a team, develop program requirements and instructions, institute consumer protections, and more. The agency ​“has been all-hands-on-deck for rebates since the IRA passed and has not let up since,” according to a DOE spokesperson. ​“Our goal from the outset has been to help the states make rebates available to consumers as quickly as possible while standing up top-notch programs.”

Once deployed, the DOE estimates, the home energy rebates will help save consumers up to $1 billion in annual energy costs and support an estimated 50,000 U.S. jobs in construction, manufacturing, and other sectors. They’ll also help clean up buildings, one of the biggest sources of carbon pollution in the country.

Here’s how the first two programs in the U.S. are shaping up.

Ready, set, rebate-launch! New York’s electrification rebates

In May, New York became the first state in the nation to launch a rebate program — and the state opted to expand an existing program rather than build a new one entirely.

With an initial $39.6 million out of $158 million for its HEAR program, the New York State Energy Research and Development Authority increased funding for its EmPower+ program for low-income families. Through the program, households earning up to 80 percent of the area median income (AMI) can qualify for a limited subset of the potential HEAR incentives for upgrades including air sealing, insulation, and ventilation ($1,600); electrical wiring ($2,500); electrical service updates ($4,000); heat-pump water heaters ($1,750); and heat pumps ($8,000).

Both single-family homeowners and building owners with up to four units can qualify for the rebates. In the coming months, the state plans to offer the rest of the HEAR measures, including induction stoves and heat-pump clothes dryers, and to expand the eligibility to moderate-income households (making up to 150 percent of the AMI) and owners of larger multifamily buildings.

The infusion of federal funds is substantial. In recent years, the EmPower+ budget has been about $130 million, according to a NYSERDA spokesperson, and the IRA funding could boost the program by $30 million to $40 million each year over the next three to four years. The agency said it had seen about a 30 percent increase in EmPower+ applications since the HEAR program rebates were announced.

As for New York’s $159 million HOMES program, the state is still awaiting DOE approval.

Wisconsin makes HOMES rebates available

Early this month, Wisconsin became the first state to launch a HOMES rebate program, with $74.8 million in IRA funding. The state’s rebates are accessible to all income levels, however 60 percent of the funding is reserved for low-income households.

Administered by a 14-year-old statewide program called Focus on Energy, the Wisconsin HOMES rebates vary depending on income and energy savings. For households earning less than 80 percent of the AMI, the rebates can climb to 100 percent of the project costs (up to $10,000) for efficiency solutions with projected energy savings of at least 35 percent. The rebates, which are deducted upfront from the contractor bill, can be used to cover everything from new insulation and skylights to heat pumps and induction stoves. Households with higher incomes are eligible for smaller rebates that cover up to half of the project costs.

To claim the rebates, program participants need to first get a home energy audit with a qualifying contractor. Then the homeowner can choose among different potential pathways the contractor provides for cutting energy use. Under the program, multifamily building owners can also qualify for hundreds of thousands of dollars in rebates.

Homeowners can combine the home efficiency rebates with federal tax credits as well as existing state incentives. What’s more, DOE requires states, including Wisconsin, to offer the efficiency rebates retroactively so long as projects were begun no earlier than August 16, 2022, and meet all state eligibility requirements. (HEAR rebates, in contrast, are not retroactive.)

According to a spokesperson for the Public Service Commission of Wisconsin, which delegated the rebate program to Focus on Energy, more than 120 customers have begun the process of prequalifying for the upfront discounts. The commission anticipates that the rebates will reach about 8,400 buildings when all is said and done.

Wisconsin plans to launch its $74.8 million HEAR program, which DOE has approved, later this year.

More rebates to come

Rewiring America’s Sachs, who has been closely tracking state updates, said that 15 more state energy offices plan to launch at least one of the two rebate programs by the end of the year and nine others aim to do so by the end of the first half of 2025. That’s the current snapshot, though she noted targets could certainly shift.

To help consumers stay on top of the latest offers, Rewiring America is updating its incentives calculator as states roll out rebates.

“A lot of the IRA is to spur manufacturing … and improve our position as a green leader in this world,” Sachs said. ​“But the rebate program is, in addition to the tax credits, really meant to actually touch the lives of Americans” — and bring the clean energy transition home.