In Part 1, we explored how small program design decisions — like accommodating emergency replacements, equipment requirements, contractor certifications, and income verification — can make or break contractor and household participation in home energy rebate programs. But beyond those details, there’s a bigger structural question at play: How do program incentives shape outcomes?
The success of a home energy rebate program doesn’t just depend on how much money is available — it also depends on how that money is used. Smart program design is what turns funding into real-world impact. That means thinking carefully about what behaviors the program encourages, how much support it provides, and how it ensures quality.
Below, we take a closer look at the big-picture program elements that determine whether contractors engage in programs, how their work aligns with high levels of quality (and energy savings), and whether households can realistically access and benefit from these programs.
How Much You Incentivize Matters
It may seem obvious, but rebate size has a powerful effect on whether homeowners say “yes” to home energy upgrades.
It’s a bit like Goldilocks. When rebates are too small, households walk away from the project. The incentive just isn’t enough to make the project feel worth it. Contractors are also less likely to participate in programs that offer small incentives. If the financial incentive isn’t high enough to make that extra effort worthwhile, many contractors simply opt out of program participation, and households will choose a lower cost (and lower efficiency) project (or often no project at all). But when rebates are too large, programs risk overspending without meaningfully and cost-effectively increasing uptake. The goal is to find the sweet spot: an incentive level that’s “just right.”
Based on Sealed’s data from thousands of projects, conversion rates for weatherization projects start to rise once the rebate reaches around 25% of the total project cost. For heat pump projects, you don’t see significant gains until rebates exceed roughly 35% of the total project cost. And for projects that combine weatherization and heat pumps, conversion rates take off when incentives go above 40% of the total project cost. These conversion rates reflect how likely homeowners are to proceed with a project after receiving a quote.
Some programs swing in the opposite direction, covering 75% to 100% of a project’s cost through rebates, leading to a different problem. Extremely high incentives make programs costly and limit the total energy savings that can be achieved with limited public dollars. Instead of maximizing impact, oversized rebates often result in fewer total projects completed and a diminished return on investment. In most cases — particularly for market-rate programs — the goal shouldn’t be to eliminate all customer costs, but to strike the right balance: providing enough support to drive participation while maximizing the number of homes upgraded and the energy savings achieved.
The takeaway is simple: programs need to calibrate their incentives carefully. Too little support, and households don’t move forward. Too much, and programs may waste resources. But when the incentive level is aligned with the value and complexity of the work, participation grows, deeper retrofits happen, and everyone wins.
What You Incentivize Matters
Programs need to be intentional about what they’re incentivizing, because what you incentivize is what you get. For example, if incentives focus on blower door tests and home energy audits, the program will get plenty of blower door tests and audits — but not necessarily more installations or meaningful energy savings. These diagnostic tools can of course be useful, but treating them as end goals instead of part of a larger strategy distorts program outcomes.
Instead, programs should focus on what they’re truly trying to achieve and design incentives accordingly. In most programs, the goal is to drive projects that improve homes and save energy. That means designing incentives to reward the installation of upgrades — like comprehensive weatherization or high-efficiency HVAC — rather than just paying for diagnostics and paperwork.
The same principle applies to equity goals. If a program wants to drive upgrades in low-income households, it must also incentivize the contractors who do that work, particularly those who handle health and safety issues that are common in older or underserved homes. That means setting aside funding specifically for health and safety remediation. When programs provide support for this kind of work, contractors respond by building business models and processes tailored to serving these markets.
What You Require from Contractors Matters
Most rebate programs rely on contractors to collect extensive documentation — such as photos, invoices, detailed equipment specs, and energy models — to prove a project meets the program’s requirements. This paperwork can help ensure projects are installed correctly and deliver the expected savings. But all that documentation comes at a cost: time. Every extra form, photo, or model number means more time behind a desk and less time in the field doing installs that keep their crews working and their business running.
Over time, these heavy data collection requirements filter the market. Contractors that can afford dedicated office staff or have built their businesses specifically around navigating complex rebate rules stick around, while many high-quality contractors who focus on delivering good work, not filling out forms, bow out. This dynamic is especially tough on newer contractors and mom-and-pop shops that many programs want to attract. The result? A smaller pool of contractors, slower jobs, higher costs, and a market that struggles to grow beyond a niche group of “program jockeys.”
Luckily, there’s a better way to maintain accountability without drowning contractors in paperwork: measured savings. Instead of relying on mountains of inputs to predict energy savings, measured savings programs verify results based on actual utility data, tracking what the energy use was before and after the project. This outcome-based approach rewards real performance, keeps paperwork simple, and makes it easier for more contractors to participate, helping programs scale up, not narrow down.
That’s why we’re dedicating Part 3 to measured savings, because when done right, it can deliver real accountability without burying contractors in red tape.