Expected to be signed into law, the Inflation Reduction Act (IRA) could make it a lot easier for Americans to decarbonize their homes. The legislation stands to make electric vehicles much more affordable by subsidizing prices, and similarly, may do the same for household appliances and energy sources that, in their traditional forms, rely heavily on fossil fuels.
From replacing fuel furnaces, boilers and stoves with climate conscious heat pumps, water heaters, battery storage systems, and other energy-efficient options, the IRA could make individual decarbonization efforts a lot less daunting and a lot less costly.
In fact, there are so many incentives to installing solar panels in the bill, that Todd Woody of Bloomberg writes, the Act would be more aptly titled the “Electrify Your Life Act.”
Much of our nation’s electricity grid is still run on natural gas. While the climate bill within the IRA heavily incentives industry to convert to renewables, household alternative energy, which is rising in use, will be necessary for the country to truly go green.
Headline this section of the climate bill is the $9 billion fund in total energy rebates. With so many opportunities to take advantage of the programs covered by the fund, let’s break down how you can use the IRA to help reduce your household’s carbon footprint and electric bill.
A central goal of previously stalled climate agreement between Senators Joe Manchin and Chuck Schumer that now also has the support of Senator Kyrsten Sinema, seems to be getting homes to go solar.
When passed, the climate bill will restore a 30 percent tax credit on residential solar systems, Bloomberg reports. Like many of the IRA’s initiatives, it will last for at least a decade, applying to all panels installed in 2022 and through January 1, 2034. Likewise, leased or purchased battery storage systems will qualify for a 30 percent credit. According to the publication, the credit can also be taken in 2023 for homeowners who buy batteries.
The solar tax credit was incepted in 2006, but was repeatedly expired and revived, often during dire conditions. This year, the tax credit was 26 percent and was set to decrease even further to 22 percent before again expiring in 2024.
“There's no question in my mind that all these incentives will make the difference for consumers on the fence about solar, accelerating access to the technology for Americans across the country,” Suzanne Leta, a senior director and head of policy and strategy at residential solar company SunPower Corp, told Bloomberg. “Especially those that are low to moderate income.”
When looked at holistically, the IRA’s initiatives are mutually reinforcing and help consumers save money. If a homeowner drives an EV, they not only eliminate personal fossil fuels costs, but help reduce greenhouse gas emissions. The same is said when that EV is charged in home powered by the sun: panels save money and emissions. Finally, let’s say the homeowner stores all that extra sun power in a battery. They can then tap into the battery’s cache at night when the sun goes down, and avoid high utility costs. Not to mention, the home with a battery on the block will keep the lights on and internet running during climate-driven blackouts caused by extreme weather.
A report from the climate advocacy group Climate Nexus found that 67 percent of voters support providing tax credits and other incentives to homeowners, landlords and businesses to purchase appliances that don’t use fossil fuels.
Despite consensus, like many homeowners, you might have been hindered by electrifying your home with renewable energy in the past due to the long payback period. For some consumers, the upfront cost of solar panels outweighed the money saved in the long run. But with the new incentives, experts expect this payback period to shorten thanks to savings on electricity costs. Why? Depending on local utility rates, once a homeowner recoups the cost paid for the panels the electricity it generates would essentially be free outside of maintenance and service fees charged by a utility to connect to the power grid.
However, when calculating the payback times, it's important to note that this depends not only on local utility rates, but also on your home’s power demand in relation to rooftop solar’s size, especially if you plan to electrify your house and charge electric cars.
It’s also important to note that due to big economic issues like inflation, tariffs, supply chain snarls, and labor costs, the price of solar is rising for the first time after two decades of steady decline. Between 2021 and 2022, the median cost per watt of a solar system in the US rose 3.4 percent according to a forthcoming report from EnergySage.
Lastly, consumers must note if they actually need solar. Return-on-investment calculators can only give a rough estimate. Smaller households in temperate climates might not use enough electricity to justify their installation. However, adding other technologies like EVs and heat pumps to replace fossil fuel burning appliances, makes the installation more valuable.
Electric AC, ovens driers, and more
The Act makes adding many of these technologies cheaper too with its secret weapon: rebates. These rebates include $8,000 for a heat pump. Heat pumps, which are generally more cost effective and efficient than traditional AC systems, are more affordable with the IRA’s incentive, as rebate covers about a third of the cost of most heating and cooling systems. The incentives don’t stop there.
A rebate of up to $1,750 for heat pump water heaters would cover the entire cost of several models. According to MarketWatch, climate bill also includes a rebate of $840 for either a heat-pump clothes drier or for switching to an induction stove, the climate friendly cousin of the natural-gas burning stove and the less safe electric stove. With $840, the rebate would cover two-thirds of the cost of many high-efficiency induction stoves.
When adding solar and battery to a house, upgrades to the home’s electrical system are often necessary. Thus, the package in the IRA is topped off with a $4,000 rebate for upgrades.
“These savings will be reflected in lower monthly energy bills, reduced bill volatility and a lessening of disproportionately high energy burdens within disadvantaged communities,” said Jamal Lewis and team, writing a brief on the legislation for the organization Rewiring America. “Importantly, these savings add up — so much so that if a household invests their energy bill savings from electrifying their home appliances, these savings will grow to over $30,000 after 10 years and $140,000 after 25 years (assuming an 8 percent annual return).”
Am I eligible?
By now, you might be wondering if you qualify. Like the IRA’s EV program, the electrification initiatives are aimed towards the mass market. Thus, through September 30, 2031, households earning up to 150 percent of the median income in their area can claim a maximum of $14,000 in total rebates.
So if your family earns up to $146,000 in Los Angeles, California or up to $99,600 in Fayetteville, North Carolina, for example, you qualify for the home electrification program.
With such a comprehensive bill addressing solar and all of the technologies that make panels immediately more valuable, the Inflation Reduction Act will undoubtedly have a drastic impact on people’s willingness to convert to electric appliances.
For folks who don't know where to start, companies like FootPrint Coalition portfolio companies Sealed, and power management and home energy management startups like Span can be good places to start.
On top of the the bill’s objectives in bolstering domestic manufacturing, the IRA’s home electrification initiatives could simultaneously accelerate America’s race to cut carbon emissions.