In most energy efficiency rebate programs today, contractors are responsible for taking on risk, as we covered in Part 1. As a result, programs are often expensive, time consuming, and cumbersome for contractors to participate in. And this ultimately hurts efforts to transform the market for home energy retrofits and consumer adoption of efficient, clean technologies.
With $8.8 billion in Inflation Reduction Act Home Energy Rebates, business as usual isn’t going to cut it. Luckily, the IRA enables a different and simple addition to rebate programs: aggregators.
What is an aggregator?
The U.S. Department of Energy’s guidance for the IRA Home Energy Rebate Programs defines an aggregator as: “An entity that engages with multiple single-family homes and/or multifamily buildings for the purpose of combining or streamlining projects as allowed by the State.”
In other words, aggregators are companies or non-profits that make it easier for contractors to participate in rebate programs, including by:
- Providing upfront and immediate rebates
- Marketing to customers and/or contractors
- Collecting customer energy data (both before and after energy upgrades)
- Predicting energy reductions
- Submitting project information to government programs and market administrators
- Taking project performance risk in the measured pathway
- Providing other value-add services to contractors (financing, training, sales support, etc.)
In measured savings programs, aggregators pay rebates immediately, so contractors and households do not have to wait during the measurement period. Aggregators then take on the program risks of rebate payment and, for measured savings programs, the performance risk of retrofit projects achieving the expected energy savings. If the savings are not realized, aggregators take the hit—not contractors or households.
Ultimately, aggregators help contractors and programs reduce costs while creating program simplicity that will scale home energy upgrades—a win-win for all involved.
Aggregators can be helpful for all program designs—whether they be measured, modeled, or deemed. That means that aggregators can be useful for both the IRA Home Efficiency (HOMES) and Home Electrification and Appliance (HEAR) Rebate Programs.
Aggregators drive contractor participation in programs
As described in Part 1, there are different contractor personas. There are program jockeys, which are contractors that build their business around rebate programs. There are program curious contractors that sometimes participate in programs or are interested in opportunities to further engage. And lastly, there are program adverse contractors who don’t want anything to do with programs and avoid them at all costs.
To achieve market transformation, all contractors must be comfortable recommending efficient, clean technologies when they’re having the kitchen table conversation with customers. Therefore, IRA rebates must engage all of the contractor personas—and to do so they must make it easier for them to participate.
Enter aggregators. At the end of the day, aggregators help reduce the hard and soft costs of rebate programs while also helping contractors cut through the complexity. Aggregators therefore allow more contractors to be able to participate in programs.
For example, Sealed is an aggregator in the 3C-REN Residential Single-Family Program, a measured savings program serving three counties in Southern California. In that program, 80% of the contractors Sealed enrolled in the program had not previously participated.
Importantly, aggregators enable program administrators and implementers to work with a few larger entities that are experts in complying with rebate rules, which can help reduce program administrative costs. This is an improvement from how energy efficiency programs are mostly structured today where they are primarily working with many small contractors.
Measured savings can further simplify programs
Project complexity is driven by two main factors: ensuring project quality and estimating energy savings. Measured savings programs eliminate both of these.
With measured savings, project quality is baked in. Rebates are only provided based on the actual, measured energy savings. If a project didn’t save as much energy as expected, aggregators will work with contractors to investigate what went wrong. As a result, measured savings offers huge consumer protection and taxpayer accountability benefits that can reduce the risk of waste, fraud, and abuse.
This is a huge improvement from how rebate programs currently work where contractors have to provide extensive documentation to ensure the project was installed correctly. Ultimately, measured savings rewards contractors that do the highest quality work and save the most energy. This creates an incentive that rewards good contractors and allows them to grow their businesses, which can build the workforce we need to scale home energy retrofits.
And say goodbye to complex energy models with measured savings. There’s no need for traditional energy models because you’re basing rebates on the measured energy savings. Aggregators work with contractors and households to gather energy usage data before and after the project. That means contractors can more easily participate in rebate programs.
But how are aggregators paid?
Aggregators empower contractors to focus on what they do best: installing great projects for their customers. Contractors pay aggregators to help them offset the cost of participating in energy efficiency rebate programs. That’s good for contractors and consumers, as well as taxpayers and ratepayers.
In other words: aggregators act as a one-stop rebate shop for contractors. And contractors pay aggregators for this service and/or other services.
Aggregators unlock market transformation
With the influx of federal rebate money available through the IRA, it’s as important as ever for contractors to focus on scaling their businesses and for energy efficiency programs to focus on getting money to the market.
To do that, we need to simplify rebate programs, and aggregators are key for achieving that goal.
That means embracing aggregators as new market actors, just as the U.S. Department of Energy outlines in its guidance on the IRA Home Energy Rebate programs. Aggregators will help cut through market friction to reach households and contractors at the scale needed to achieve our goals.
We have one shot to get this new, massive investment in home energy efficiency right. Let’s make sure we roll out these rebate programs so that they’re easy for contractors and consumers nationwide.
Explore the full series
For more on the challenges and costs associated with energy efficiency rebate programs, check out Part 1: The uncomfortable (and expensive) truth about rebate programs.