Your guide to the Inflation Reduction Act

While the IRA has something for everyone, the most extensive benefits are focused on low-and moderate-income customers (LMI). Traditionally, these folks pay much higher proportions of their household income toward electricity, and therefore, need the most help. Since many LMI communities also live in the least energy-efficient homes, the opportunity for energy savings is even greater. Every improvement made will reduce energy demands, giving utilities a much-needed break.

The funding for most energy efficiency incentives will be distributed on a local level by state energy offices. Each state will have the opportunity to apply or request funds to support the IRA legislation. The details of the application process have not yet been determined. This is different from the 2008 American Recovery and Re-investment Act (ARRA) where states were directly allocated funds.

The implications for utilities will vary state by state. In some states, utilities already collaborate closely with state energy offices and will be able to leverage each other's best practices to roll out the new initiatives and programs successfully.  

In other states, especially those without strong utility programs, the state energy offices will build and expand their current offerings to meet the needs of customers. While a rough framework has been developed by the Department of Energy, each state will have a high degree of autonomy over how/what type of IRA funding they pursue. This eSource blog post addresses this specific question.

Timelines and commitments are still being determined. Legislators are optimistic that the state energy office application process will start in early 2023, and incentives will begin rolling out to customers in the second half of 2023. Stay tuned for more updates—we’re just as eager to learn more.

“Double dipping” is an industry term for when customers receive different rebates for the same work. The IRA specifically says that customers will not be able to access rebates from both the “HOMES Rebate Program” and “The High-Efficiency Electric Home Rebate Program” for the same measure or work. However, people will likely be able to claim tax credits, in addition to the rebates.

There is no specific mention about “double dipping” with utility rebates. Potentially, this would allow customers to access IRA rebates AND local utility rebates where eligible. That means you’ll have two opportunities to maximize your savings.

The bill referenced two different standards, and it’s not yet clear if one or both will be adopted. Most state energy offices and utilities already have standard approaches for confirming customers’ income and benefits. It’s likely the Department of Energy will simply leverage existing standards used in the marketplace.

All the programs and initiatives established through the IRA will be designed to help lower your energy costs and make it easier to transition to cleaner, more sustainable energy choices. The IRA specifically provides:

• Direct funding for energy efficiency improvements

• A path to create new state rebate programs

• Plans for contractor training grants

• Modified, extended and new tax credits for a variety of energy conservation methods and alternative energy sources

There is new program funding through two residential energy efficiency and electrification programs—the Homeowner Managing Energy Savings (HOMES) Rebate Program and the High-Efficiency Electric Home Rebate (HEEHR) Program.

States may apply for grants to develop and implement comprehensive home energy retrofit programs. Each state will then provide rebates to homeowners and popular rebate hubs for whole-house energy-saving retrofits. These projects must have begun on or after the date of enactment (August 16, 2022) and completed by no later than September 30, 2031. 

Eligibility for this program includes single-family homes, multifamily buildings, and income-qualified households. As part of the grant application, states can request approval for higher rebate amounts for LMI households. The program also includes a $200 bonus to contractors or providers for each home located in a disadvantaged community.

States and Indian Tribes may apply for grants to develop and implement a HEEHR program. Eligibility for these programs will be limited to LMI households with a total annual income less than 150% of the median for the area, as well as multifamily building owners with more than 50% LMI residents. If income verification is included at the point-of-sale, HEEHR programs would also allow for instant rebates to be applied upfront.

Rebates for energy efficiency improvements include: 

The IRA modifies and extends existing tax credits through 2032 for residential homeowners. Such a long window provides ample opportunity to take advantage of all the ways to save. For example, the Energy Efficiency Home Improvement Credit has increased to a 30% credit (up to $1,200 per year) that can be applied to projects such as rooftop solar, home energy audits, efficient water heaters and heat pump water heaters, central air conditioning and more. 

There are also additional tax credits for both commercial and residential electric vehicles (EVs). A full breakdown of the tax credits included in the IRA can be found in this summary by the Bipartisan Policy Center.

It’s no secret that the future of transportation is being shaped by electric vehicles. The IRA will accelerate this transition through tax credits and grants. Here are some of the most notable ones:

• Establishes manufacturer tax credits for producing battery cells and modules that will reduce the overall cost of an EV

• Restructures the existing Clean Vehicle Tax Credit for consumers (i.e., eliminates the previous manufacturer quota, which phased out the tax credit for manufacturers as they neared 200,000 clean vehicles sold)

• Introduces a new $4,000 Pre-Owned EV Tax Credit for consumers 

• Creates a new credit for Commercial Clean Vehicles up to $7,500 for smaller vehicles and $40,000 for larger vehicles purchased for commercial use

• Reintroduces the Alternative Fueling Property Tax Credit 

• Delivers $1 billion in grants for zero emission heavy duty vehicles

There are several provisions focused on decarbonization or greenhouse gas (GHG) reduction.

• GHG Reduction Fund (EPA): New fund to invest up to $27 billion to rapidly deploy low- and zero-emission technologies in disadvantage communities. These funds will go to non-profit, state and local financing institutions that also leverage investments from the private sector. 

• Climate Pollution Reduction Grants (EPA):  This includes $4.75 billion in competitive grants to implement GHG air pollution reduction plans and another $250 million in grants for the costs of developing plans to reduce GHG air pollution. It also directs the EPA to make such a grant to at least one eligible entity in each state. 

• Advanced Industrial Facilities Deployment Program (DOE): $5.8 billion will be available through September 30, 2026, to create a new program within the Department of Energy’s Office of Clean Energy Demonstrations (OCED) to invest in projects aimed at reducing emissions from energy intensive industries.  

• Environmental and Climate Justice Block Grants (EPA): $3 billion will be invested in community-led projects in disadvantaged communities to address disproportionate environmental and public health harms related to pollution and climate change. 

• Affordable Housing Energy Efficiency and Water Efficiency (HUD): $837 million available to provide loans and grants for projects targeting affordable housing. The funds can be used for: 

  • Improving energy or water efficiency

  • Enhancing indoor air quality or sustainability

  • Implementing the use of zero-emission electricity generation, low-emission building materials or processes

  • Energy storage

  • Building electrification or to address climate resiliency 

With nearly $370 billion in funding for climate and energy initiatives there are a lot of exciting opportunities in the bill. A few other notable areas include: 

• State-based Home Energy Efficiency Contractor Training Grants that reduce the cost of training as well as provide testing and certification.

• Tax credits over a period of 10 years for qualifying facilities producing renewable energy to promote new wind, solar, battery storage, etc.

• Funding for the USDA Rural Energy for America program that supports the generation, storage, and use of renewable energy in rural communities.  

We will continue to add to this FAQ as more details arise about these and other parts of the IRA. 

The information provided was sourced directly from the Inflation Reduction Act bill or other supporting materials where noted.