Inflation Reduction Act Home Energy Rebates The Department of Energy’s Home Energy Rebate guidance is a big win for data, innovation, and equity

Consumer protection, including a focus on the accuracy of energy savings, enables states to turn homes into virtual power plants

Andy Frank
Andy Frank Founder and President, Sealed

Consumer protection, including a focus on the accuracy of energy savings, enables states to turn homes into virtual power plants

Never before has more money been available for millions of homeowners across the country to make their homes cleaner, greener, and more comfortable. 

The Inflation Reduction Act (IRA), signed into law in August 2022, included $8.8 billion for Home Energy Rebates, an historic federal investment in energy efficiency and electrification. These critical investments will help decarbonize our homes, which account for 20% of U.S. greenhouse gas emissions.

Equally historic is the way that money will be distributed. 

These rebates are divided into two programs: the Home Efficiency Rebates Program (HOMES) and the Home Electrification and Appliance Rebates Program (HEEHRA), also known as the Electrification Rebates Program.

On July 27, the U.S. Department of Energy (DOE) released guidance specifying how states should allocate those rebates to help homeowners slash energy waste and pay for energy-saving weatherization and electrification upgrades. 

This guidance is a big win for data-driven approaches to incentivizing energy efficiency, unlocking innovation like virtual power plants, and increasing equity. 

Energy data is crucial for the rebate programs, especially HOMES

For these rebates to be effective, data-driven programs that pay incentives based on real (and realized) energy savings are key. And data specifications must be standardized across states to enable companies, nonprofits, and other stakeholders to create innovative tools that will help deploy these rebates effectively. 

This new DOE guidance strongly supports these data-driven strategies. So much so that the DOE guidance included Utility Data Access Guidelines.

For the HOMES program in particular, the focus, after all, is on providing rebates based on energy data whenever and wherever possible.

The data-driven approach leads to real energy savings for customers and taxpayers because it enables modeled and measured programs that lead to greater accountability, virtual power plants, and, most importantly, more investment for comprehensive weatherization and electrification home retrofit projects — particularly for low-income families.

Energy data is required in the HOMES program as an input for calculating rebates, with common-sense exceptions for homes that do not have access to energy data. The modeled pathway requires data to calibrate energy models, which should make those models more accurate than they otherwise would be. 

Importantly, the guidance requires regular program-level calibration to ensure that modeled estimates are at least 70% of real energy savings on average. This is also true for the measured savings pathway. 

Even better, the measured savings pathway relies on energy usage both before and after project installation—which means those rebates are paid out only if actual energy savings are generated. Importantly, savings will be measured by open source software that keeps everyone honest when it comes to energy savings estimates versus actuals.

Either way, consumers can be confident that they will receive good-faith estimates of energy bill impacts, particularly since the guidance requires this information to be shared with homeowners or renters receiving the energy efficiency improvements. This is particularly true given DOE requirements for states to develop a Consumer Protection Plan that must include robust quality assurance components. 

And given the focus on data, it should be easier for states to roll out both the modeled and measured program options in parallel (what Sealed recommends as a best practice), enabling a no-regrets strategy that provides a safe foundation (modeled) with a path to future market transformation (measured). 

Data drives innovation and market transformation priorities

While energy data is an important input into the calculation of the Home Energy Rebates, DOE’s focus on data doesn’t stop there. Equally important is a thoughtful (and detailed) approach to ensure standardization of data, leveraging long-standing protocols like HPXML

Companies like Sealed operate across many states, and therefore plan to work with different state rebate programs. While the DOE guidance enables lots of important flexibility for states to design programs based on their unique circumstances, having standardized data specifications dramatically reduces the friction associated with building software and other tools necessary to effectively and efficiently deliver rebates to homeowners. 

DOE guidance also focuses heavily on consistent program reporting and evaluation to ensure that market transformation, equity, and other goals are being met. Given the historic nature of this funding, it is important that we learn what works, what doesn’t, and how public funding for energy efficiency can be improved. 

The DOE also knows that IRA funding alone is not nearly enough to transform our nation’s housing stock. Its guidance therefore requires a Market Transformation Plan that asks states to “consider how their programs will stimulate additional and continued investment in residential energy upgrades beyond the tenure of the rebates.” In other words, impact beyond the Home Energy Rebates is just as (if not more) important than the impact of the IRA rebates. 

Equity combined with fair wages are non-negotiables

Perhaps the most important component of the DOE’s Home Energy Rebate guidance is the strong dedication to equity that goes beyond President Biden’s historic Justice40 Initiative.

States are required to devote at least 50% of the rebate funds for low-income households, including at least 10% for low-income multi-family households.

For this commitment to be realized, however, states must play their part in ensuring that income verification is conducted in a simple, quick, and judicious manner. Luckily, DOE guidance provides states with multiple tools and options to verify income, including identifying programs that provide “Categorical Eligibility,” geotools to identify disadvantaged communities, and an option to provide attestations (with accountability mechanisms). 

Similarly, the guidance focuses heavily on jobs and fair wages. States are required to submit “Community Benefit Plans” that engage their local community (including labor stakeholders), support a skilled workforce, and incorporate diversity, equity, inclusion, and accessibility. 

In short, the DOE has demonstrated a strong commitment to saving energy and growing a clean energy workforce in the places that need it the most. 

And this week’s guidance is only the beginning. The DOE plans to provide additional templates and support for states preparing their funding applications.

That means that states are on the clock. It’s time to craft plans on how to get rebates to homeowners for energy-saving home improvements like insulation and heat pumps. 

Luckily, we now know that those plans are likely to unlock energy data and innovation while meeting or exceeding climate justice goals. 

July 28, 2023