The pathways have more similarities than differences, making it easier to roll out both in tandem Implementing the no regrets strategy: how states can run HOMES measured & modeled together

The Inflation Reduction Act (IRA) Home Efficiency Rebates (HOMES) Program holds great potential. When the funding is available, it will help people install energy upgrades like heat pumps to improve the energy efficiency and comfort of their homes. On a larger scale, it could unleash market transformation across the country to make energy efficiency a truly valued clean energy resource — which is critical for addressing 21st century challenges like electric grid reliability issues and climate change.  

To be successful, the HOMES Program requires thoughtful and forward-looking implementation. As part of this, states are currently making a key policy decision: whether to offer the measured and/or modeled pathways of the program, a decision that will be made on a state-by-state basis. 

Luckily, states don’t have to choose.

Both the IRA and the U.S. Department of Energy’s (DOE) program guidance make it clear that both pathways can work in harmony. For states, that means they have a chance to introduce a “no regrets” option by rolling out both pathways and allow the market to select whichever pathway is better for a particular project. 

You might be asking yourself: How can a state implement both? Read on to understand why — and how — states can’t afford to forgo one pathway in favor of the other.

Advantages of running both modeled and measured pathways

Both pathways have their merits.

The measured pathway provides rebates based on actual, measured energy savings by looking at energy usage before and after a project was installed, while the modeled pathway provides rebates based on estimated energy savings using models that are calibrated with past energy usage data whenever possible. 

By implementing both the measured and modeled pathways, states can cater to a broader range of homes and project types.

For example, the modeled pathway can be used for households that don’t have 12-months of historical energy data, while the measured pathway enables a broader range of contractors to participate that are not proficient with energy modeling software. Including the measured pathway also enables state energy offices and their implementation partners to accelerate program launch and minimize administrative costs by leveraging aggregators for many of the day-to-day program activities (contractor recruitment, training, QA/QC, management, etc.). This is particularly important given the limited administrative budgets imposed on these programs.  

Making both the measured and modeled options available opens up even more benefits to states.

Much of the administrative and operational groundwork can be shared regardless of the pathway chosen, which means efficiency and simplification for states as they begin distributing rebates.

It also makes the rebate structures themselves more flexible: aggregators and contractors will be able to choose the pathway that better suits the unique characteristics of a project, providing the best value for households. 

The pathways are actually similar when it comes to implementation

We could talk about benefits all day. Perhaps the top reason to implement both pathways, however, comes down to how making that choice is not only valuable, but also exceptionally practical. 

To be sure, implementing two different pathways using the same pot of rebate money might seem both difficult and expensive — especially when only 20% of the IRA HOMES funding is set aside for implementation. Yet based on the DOE’s guidance, the setup for both pathways is really quite similar.

Nearly 80% of the required workflows are the same for each pathway. And of the 31 required tasks for implementation, there’s overlap among 24 of them. (See the table below.)

Each pathway does include steps that are different. The measured pathway requires energy usage to be tracked post-project installation to measure energy savings. Even here, however, there is more overlap than you might think. 

For one, the modeled approach requires an evaluation within two years to calculate realization rates by comparing post-project energy usage to pre-project energy usage. If states need to set up systems to measure energy savings over time regardless of the rebate pathway, why not implement both approaches? The same infrastructure that tracks energy data for the measured pathway can be used to evaluate energy usage in the modeled approach. 

Plus, tracking post-project energy usage can be done by aggregators, reducing the amount of administrative costs that states and program implementers face.

The modeled approach also has an additional step. As the pathway name implies,  you have to create and verify energy models for each household. These models typically take anywhere from 30 minutes to an hour to build and additional hours of review by program implementers. States will likely save more money by pushing more projects to the measured option — assuming, of course, both pathways are available.

Modeled AND measured is the practical decision

Implementing both the modeled and measured pathways is a “no regrets” decision for every state. As we’ve outlined in a different blog post, the modeled pathway will lay a solid foundation for the program, while the measured pathway will provide a path for market transformation after IRA funding runs out.  

By offering both modeled and measured options to the market, states and their implementation partners can ensure a comprehensive and effective approach that delivers the greatest benefit to American households. 

At the end of the day, the measured and modeled pathways have more similarities than differences, making it easier to roll out both in tandem—a practical move that’s entirely possible.