New incentives through federal Inflation Reduction Act

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Federal legislation includes $369 billion in climate and clean energy investments, distributed through grants, loans, and tax incentives.

The 2022 Inflation Reduction Act represents a long-term, massive investment in a clean energy economy. Elements of the bill are intended to support beneficial electrification–the term used by WEC and others to describe replacing devices powered by fossil-fuel combustion with devices powered by electricity in order to reduce greenhouse gas emissions. Overall, the act aims to cut U.S. carbon emissions by more than 40% by 2030.

The funding exists, but the plan is just now coming together. Incentives will be available for decades to come. Those charged with implementation are only just exploring the details: how to stack or roll back existing state and utility incentives with the new federal funding, and how the act will interweave with Vermont’s nascent Clean Heat Standard, which was just passed in May as S.5 through a legislative override of the governor’s veto. Nationally, political wrangling over the U.S. debt ceiling is another factor affecting funding deployment. More guidance for residential rebates is expected later this season.

States will manage how incentive funding is disbursed. In Vermont’s case, this responsibility falls to the Department of Public Service, which will partner with energy efficiency utility Efficiency Vermont and existing programs, such as those run by community action agencies, to deliver services and incentives. The vast majority of Vermont’s greenhouse gas emissions are from home heating and transportation. Specific incentives in the bill aim to both increase home energy efficiency and to replace combustion engine vehicles with EVs.

Tax credits are not attractive to all members: they’re designed as incentives for people who pay income tax. If this describes you, the Residential Energy Efficiency Tax Credit, new in 2023, offers tax credits for electric panels, energy audits, weatherization, and heat pumps and heat pump water heaters.

Residential Energy Efficiency Tax Credits
Electric panel$600
Energy audit$150
Heat Pump / Heat Pump Water Heater< $2,000

The High Efficiency Electric Homes and Rebates Act, or HEERA, provides rebate incentives for making homes more comfortable and efficient. Households with incomes between 80-150% of AMI (area median income) will have 50% of costs covered through the bill; households earning below 80% of AMI will have 100% of their costs covered. The maximum payment for any household is $14,000. More details are still to come.

Costs Covered Through HEERA
Heat Pump Water Heater$1,750
Heat Pump$8,000
Electric Stove$840
Insulation, Air Sealing, Ventilation$1,600

A separate program, called HOMES, offers tiered rebates for upgrades that achieve whole-house energy savings up to certain percentages. At the highest end, an efficiency upgrade that achieves energy savings greater than 35% activates a rebate of $4,000 or 50% of the project cost, whichever is less. For households with income below 80% of AMI, the rebate is the lesser of $8,000 or 80% of the project cost.

Questions? Contact or 802-224-2329.

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