Deploying both the modeled and measured programs will help assure equity, accessibility, and impact. States have a no regrets option when it comes to the IRA’s HOMES program

To make the most of the HOMES program— and truly transform the market for clean energy in a speedy and accessible way—states should deploy both the modeled and measured program options.

To make the most of the HOMES program— and truly transform the market for clean energy in a speedy and accessible way—states should deploy both the modeled and measured program options.

In an historic first, the U.S. Department of Energy (DOE) released guidance on July 27 specifying how states should allocate the $8.8 billion included in the Inflation Reduction Act for home energy rebates. On the one year anniversary of the Inflation Reduction Act being signed into law, states now have the opportunity to bring Home Energy Rebates to the American people. 

These rebates will help millions of homeowners slash energy waste and pay for energy-saving weatherization and electrification upgrades. And the guidance is a big win for data-driven approaches to energy efficiency, unlocking innovation like virtual power plants, and increasing equity. 

The rebates include the Home Electrification and Appliance Rebates Program—also known as HEEHRA or the Electrification Rebates Program—and the equally important Home Efficiency Rebates Program, also known as HOMES or the Efficiency Rebates Program.

The money, however, is just one piece of the pie. Now that the DOE has released its all-important guidance, it’s up to the states to decide how to implement the HOMES program.  

One important question? How to distribute the cash. Two options are on the table. 

  1. There’s the “modeled” program option that gives rebates upfront based on estimates informed by home energy usage and building models.
  2. And there’s the “measured” program option that gives rebates over time based on actual energy savings by comparing energy usage before and after project installation. 

More specifically, states can offer one or both of these program options to contractors and homeowners.

While it’s not a secret that Sealed is a big fan of measured savings, we also believe that to make the most of the HOMES program—and truly transform the market for clean energy in a speedy and accessible way—states should deploy both the modeled and measured program options.

Both program options provide benefits to the market while offering a data-driven approach to home efficiency.

Let’s dive in to find out how. 

Modeled program option: A safe foundation

The modeled program option is the one most familiar to program administrators and contractors alike. There are well-established program playbooks tested over many years to offer a modeled program option. And states like New Jersey, for example, already offer rebates based on energy modeling. 

The HOMES program also requires calibrated modeling wherever possible, which means that a home’s past energy usage is used as an input to ensure the model is as close to reality as possible.

There is strong evidence to suggest that calibrated energy modeling can significantly increase the accuracy of energy models, ensuring that energy savings estimates provided to homeowners are as close to reality as possible. 

One of the other benefits of energy modeling is that it can be applied to any home or project, including households that don’t yet have enough energy data to qualify for the measured program option (or bill calibration). 

While not as accurate as bill-calibrated models, that means that families who moved into their home six months ago can still install a heat pump or upgrade their insulation even though they don’t have 12 months of energy-usage history—which is the minimum threshold to qualify for calibrated energy models or the the measured program option.

Contractors, too, will benefit. 

Many are familiar with rebate levels driven by energy modeling outputs, a method that has been in place for years.

Energy models—and the software these models rely upon—are well-established with defined protocols (The IRA references BPI-2400, an energy modeling protocol written by the Building Performance Institute, the leading organization dedicated to quality, health, and safety for weatherization and electrification.) 

Measured program option: A path to the future

At the same time, the measured program option—offered in tandem with the modeled program option—will help states maximize the potential impact of the HOMES program on market transformation efforts. 

True, the money available for whole-home energy efficiency under the HOMES program alone isn’t enough to transform America’s housing stock.

But the measured savings program option can demonstrate the impact of a next-generation program design to scale energy efficiency as a clean energy resource.

Measured savings can simplify program participation for homeowners and contractors. It also demonstrates that energy efficiency can be a real, measured clean energy resource by turning every home that installs upgrades into a virtual power plant. 

And based on the HOMES funding formula, low-income homeowners pursuing weatherization and electrification retrofits will almost always be eligible for higher rebates under the measured pathway which can help ensure equitable program outcomes.

Aggregators, organizations that are key to the implementation of the HOMES program, will also push forward market transformation by rewarding contractors based on their ability to install projects that meet or exceed expected energy savings for homeowners. 

Aggregators also provide the potential for leveraging a diverse and innovative set of market actors—contractors, marketplaces, banks, etc.—to animate the market. 

For example, over 60 companies signed a Flex Coalition letter expressing interest in participating in or supporting the aggregation of home energy retrofits through a measured savings approach. 

Modeled and Measured: The no-regrets strategy

There are benefits to both the modeled and measured savings program options. 

Luckily, states don’t have to choose. 

Both the modeled and measured programs can be deployed simultaneously—which was reinforced by the Department of Energy’s recently released program guidance.

And this is not only legally possible, but also eminently practical.

A core tenet of the IRA HOMES program is that household energy savings are driven by analysis of energy data, regardless of whether savings—and rebates for energy upgrades—are provided via the modeled or measured program option.

The experience will also be similar for homeowners under either option, and contractors will have the ability to choose which program option to use for a particular project.

The administrative costs associated with deploying both the modeled and measured programs will also be minimal, since the IRA requires that energy data must be shared across program options.

States can also take an additional step to minimize those costs by applying similar data specifications for both the modeled and measured programs to ensure the simplest implementation pathway for aggregators, contractors, and other market actors.

Great work is already being done by states on both the modeled and measured program options 

New York, through the NYSERDA Comfort Home Program, for example, has been working hard to create energy models that balance simplicity and accuracy with a focus on load reduction to prepare for an electrified future. 

This is even more important due to a recent order from the state energy regulator that, for the first time, explicitly prioritizes deep weatherization and electrification retrofits to meet New York’s ambitious energy and climate goals. 

Similarly, California continues to be a pioneer when it comes to measured savings, with four active measured programs that make it easy for companies like Sealed to participate as aggregators.

And California is doubling-down on measured savings, with regulators putting out a recent order that commits the state to making savings measurement the default option for most future retrofit programs.

(It is no accident that Sealed has heavily invested in both of these states, having partnered with the NY Green Bank to provide the first residential performance financing product to the market and now piloting rebate aggregation software in California.)

More than anything, states should learn from each other as well as from market actors that have developed technology and tools to scale both the modeled and measured program options. 

We have a once-in-a-generation opportunity to ensure the billions of dollars under the HOMES program will truly help American homeowners stop energy waste while modernizing their homes to be healthier and more comfortable for their families. 

Deploying both the modeled and measured programs is the best no-regrets strategy to assure equity, accessibility, and impact when it comes to the HOMES program.

August 14, 2023