Here’s why waiting for the rollout of Inflation Reduction Act home upgrade incentives could cost you.
Since the Inflation Reduction Act’s (IRA) passage in August, there has been a lot of well-meaning media coverage on how homeowners can maximize their slice of the over $20 billion of new energy-efficiency and electrification tax credits and cash incentives.
Often included in this media coverage is the implicit recommendation that homeowners should just wait until these incentives reach the market to move forward with their home efficiency upgrades that fall under the Inflation Reduction Act list of eligible upgrades.
At first pass, the recommendation to wait is logical, but what has been left out of this recommendation are the costs of waiting.
These costs—some obvious and some not—are silently undermining the potential savings from IRA incentives as homeowners wait to be eligible.
Here’s why you shouldn’t wait for Inflation Reduction Act incentives to make energy upgrades to your home
Let’s dig into the top four costs of waiting to make energy-efficient home upgrades and highlight why, for many, the best time to upgrade their house is today.
Here’s a high-level list, and we’ll cover each below.
- The cost of energy
- The cost of “greenflation”
- The cost of regulations
- The climate costs
The cost of energy: This winter’s energy costs are set to skyrocket
As we head into winter here in the U.S., the U.S. Energy Information Administration (EIA) predicts rate increases across the board for energy usage. This is just one hidden cost of waiting to install home upgrades until IRA incentives have rolled out.
Nationally, the EIA estimates that homes relying on natural gas can expect heating bills to be up to 51% higher than last winter. Homes relying on propane or fuel oil should anticipate an up to 37% jump in heating bills. Even homes using electricity will see an expected increase of up to 20%.
The EIA estimates that homes relying on natural gas can expect heating bills to be up to 51% higher than last winter.EIA.gov
The best way to fight rising costs is to reduce or eliminate your home’s usage of fossil fuels, which tend to be highly volatile and more expensive than electricity in many parts of the country.
For example, while the EIA estimates residential natural gas prices will be up to 51% higher this winter compared to last, some industry experts believe that prices could be as much as 100% higher.
If your home is already electrified, making efficiency upgrades—including upgrading your old electric heater to a new cold climate heat pump—will still offer energy savings.
Higher fossil fuel prices combined with an inefficient home heating system will unnecessarily drive up your heating costs this winter.
These extra costs undermine your potential savings from 2023 and 2024 IRA incentives with extra spending on energy.
The cost of “greenflation”: Too much consumer demand, too few contractors
In part due to rising fossil fuel prices, we have all felt the impact of rising costs from inflation. From everyday expenses, like groceries and gas, to bigger investments, like new heating and cooling systems, everything got more expensive in 2022.
While the future of inflation remains uncertain, what is clear is that as more and more people begin to take advantage of IRA’s incentives, America’s energy-efficiency workforce will be challenged to keep up.
Before the pandemic, there was already a shortage of tradespeople qualified to complete home energy improvement work—the total number of electricians in the U.S. decreases by 3,000 yearly, for example—so the labor supply is decreasing as demand rises.
Climate economists call this mismatch in supply and demand in the energy efficiency sector “greenflation,” and experts are predicting rising costs for multiple years as the industry adapts.
The extra costs associated with “greenflation” not only take a bite out of your potential IRA incentive savings, but also eat up the most valuable resource of all: time.
The harder it is to find and hire the skilled tradespeople needed to perform your home energy improvements, the more time you’ll have to spend on the project.
The cost of regulations: New standards will make equipment more expensive
Here’s another hidden cost to waiting for IRA rebates and incentives to roll out (one that’s not on the radar of most homeowners): Over the next two years, two material policy changes will go into effect and increase the costs of all air conditioners and heat pumps.
The first policy change is one the HVAC industry has been preparing for for years.
Starting on January 1, 2023, the national energy efficiency standards (think MPG requirements for air conditioners and heat pumps) will increase by approximately 7%, making 70% of the HVAC industry’s current products ineligible to purchase.
This combination of a low supply of qualified products and higher efficiency requirements will increase prices.
The second policy change goes into effect in two years—but it’s one the HVAC industry is already planning for, and it’s likely to have a big impact on costs.
These policies and standards are important for lowering greenhouse gas emissions, but they also have the indirect effect of raising prices—thus undercutting the total value of IRA’s financial incentives.
The climate costs of waiting: Every day that passes impacts your health, safety, and the planet
Sealed homes are healthier and safer homes, especially as we contend with more frequent and more intense extreme weather events around the country.
We all know we need to stop adding greenhouse gases to the atmosphere, and homes account for 20% of US greenhouse gas emissions.
Homes account for 20% of US greenhouse gas emissionsEIA.gov
Upgrading your home’s efficiency is one of the easiest ways to reduce your impact, with no lifestyle changes required.
In addition to being easy, weatherization (adding/upgrading insulation and sealing air leaks) and upgrading heating and cooling systems to heat pumps are incredibly effective at cutting greenhouse gas emissions.
In fact, a Sealed home that has been weatherized and electrified has the environmental impact of planting 17 trees, every single year!
Delaying your energy-efficiency upgrades two, three, or even five years, has a dramatic impact on your home and family’s climate contributions.
How to avoid these hidden costs of waiting for IRA home upgrade incentives
Though it may seem counterintuitive, we believe it’s important to acknowledge that for many homeowners, the best time to invest in stopping energy waste and electrifying your home isn’t in 2023—or 2024—it is today.
Many homeowners live in states with generous utility rebates for heat pumps and weatherization available right now. And many homeowners are eligible for either a $300 heat pump or a $500 insulation federal income tax credit.
Most importantly, too many homeowners are unnecessarily living in homes with unhealthy air that are too cold in the winter, too hot in the summer, and not resilient to the extremes of climate change.
So to all the homeowners who’ve thought about waiting until 2023 or 2024 for IRA incentives, make sure you consider these four hidden costs and how they’ll undermine your potential savings.
If you are ready to make energy improvements to your home, step to the front of the line.
If I don’t have to spend any extra money to get a huge improvement to my home, it’s just a no brainer at that point.Scott R., Sealed customer