IRA Rebates Rolling Out Slowly
TL/DR –
The Inflation Reduction Act (IRA) rebate program has been slowly picking up and is set to provide about $8.8 billion in direct-to-consumer rebates for high-efficiency residential HVAC equipment and energy-saving home improvements. The program is divided into two parts, Home Electrification and Appliance Rebates (HEAR) and Home Efficiency Rebates (HER), with HEAR funds applicable for low- to moderate-income homeowners to purchase and install qualified electric appliances, and HER funds applicable for homeowners of any income level to make home improvements for energy savings. According to Peter Troast, founder and CEO of Energy Circle, contractors should prepare marketing plans, gather information, leverage Energy Efficient Home Improvement Tax Credits, and collaborate with state energy officials to best utilize the IRA rebates.
The Inflation Reduction Act and Its Impact on Contractors
The Inflation Reduction Act (IRA) rebate program is gradually gaining momentum, with pertinent steps now required from contractors to prepare for the forthcoming cash influx.
This was highlighted in a webinar by Peter Troast, CEO of Energy Circle, a marketing agency catering to energy-efficient building companies such as HVAC, insulation, and solar contractors.
The IRA, enacted in August 2022, allocates approximately $8.8 billion for consumer rebates on energy-saving home improvements and high-efficiency residential HVAC equipment. Troast revealed that 19 states have petitioned the U.S. Department of Energy for IRA rebate funds, five requests have been approved, and only New York has released rebate funds so far.
Understanding the Rebate Program
The rebate program encompasses two sections: the Home Electrification and Appliance Rebates (HEAR) for low to moderate-income homeowners and the Home Efficiency Rebates (HER) for homeowners at all income levels. HEAR provides for the purchase and installation of qualified electric appliances and associated electrical work, offering up to $14,000 in total. HER rebates are designated for home improvements resulting in measured or modeled energy savings.
As per Troast, contractors should proactively gather information, draft a marketing strategy, and liaise with state energy officials to be included in the list of contractors permitted to apply IRA rebates to their sales, thereby gaining a competitive edge.
Leveraging Energy Efficient Home Improvement Tax Credits
Contractors are also urged to utilize the Energy Efficient Home Improvement Tax Credits, known as 25C. These apply to specific home energy-efficiency upgrades, including qualified HVAC systems and insulation, with a cap of $1,200 annually per household, except for heat pumps which have a $2,000 credit.
HEAR Program and Moderate-Income Households
For the HEAR program, a moderate-income household is defined as one earning up to 150% of the median income of the area in which they reside. Troast emphasized that in some regions, 150% of the median income exceeds $140,000, hence contractors should not overlook HEAR due to the “low and moderate income” label. As per the DOE, 70% of single-family homes in the US fall under moderate or low income.
Effective Use of HEAR Program
Troast advised contractors to consider existing state incentives when deciding how to leverage the HEAR program, as the IRA rebates may significantly alter market dynamics in certain states.
Key points from the webinar included the likelihood of more states using energy-saving modeling to determine eligibility for the HER program, the importance of focusing marketing efforts on audiences motivated by incentives, and the need for contractors to offer clear information about IRA incentives on their websites. The webinar also categorized rebate-centered marketing audiences into three groups: young families and retirees, environmentally conscious homeowners, and residents of states with a robust heat pump market.
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