What the Inflation Reduction Act May Mean for Your Home Appliances, and Other Upgrades

You probably heard about the Inflation Reduction Act over the summer, but how can it help yousave money on your bills? As the temperature drops and sweater weather kicks in,snuggling up at home by a gas fireplace可能会稍微expensive this year amid record-high utility bills. If you’ve felt like more of your money has gone toward your gas and electric bills, you’re not alone.

A federal estimate of residential power costs in September showed thatelectricity prices had risen 7.5% from the year before—and that they could rise by another 3.3% in 2023. And if you use gas toheat your home, your monthly bill mayjump 34% this winter season, according to a recent report issued by an association of utility regulators.

What is the Inflation Reduction Act?

TheInflation Reduction Act, signed into law last August, contains a slew of provisions attempting to prevent the worst impacts of the climate crisis by curtailing greenhouse gas emissions and boosting the clean energy industry witha $370-billion investmentin spending and financial incentives. This bill also includes rebates, to improve residential energy efficiency and weatherization. For instance, a high-efficiency electric home rebate for a cooktop can go upward of $840 and up to $1,600 for insulation, air sealing, and ventilation. The exact variety of eligible products or services will be unveiled in the first half of 2023, says Michael Stoddard, executive director ofEfficiency Maine, a quasi-state agency that administers energy efficiency programs.

Why does energy efficiency matter?

When your home is using outdated technology, it’s working harder to heat, cool, or power your living space. And that means you might end up paying more for running a dishwasher than a neighbor with a more efficient appliance.

But it’s not all about the money. Electrifying your home and making it more energy efficient also helps reduce avoidable climate-changing emissions. Although your individual energy efficiency is a relative blip in the climatological cosmos, the collective efficiency of residences across the country is critical to mitigating the worst effects of climate change.

“Residential energy use is responsible for about 20% of total greenhouse gas emissions in the US,” according to research by theWestern Cooling Efficiency Center at the University of California at Davis. “Growing housing stock and continued use of fossil fuels to heat homes is making it more challenging to meet emissions reduction targets set forth by various states.”

Who benefits from the Inflation Reduction Act?

According toJennifer Amann, a senior buildings program fellow with theAmerican Council for an Energy-Efficient Economy, “Really low-income families, renters, rural families, and BIPOC communities tend to have the most-inefficient housing and have the highest energy burden.” Meaning they spend a larger percentage of their income on keeping the lights on, compared to other groups.

The Inflation Reduction Act, Amann says, has “quite a few elements” that specifically assist low- or moderate-income families. But even if your household doesn’t feel the sting of its energy burden, making your house more efficient and electrified has other benefits.

“These projects can help improve the comfort of your home and improve health outcomes,” Amann says, explaining that children with asthma or related issues can certainly see benefits once health hazards are removed. “If you move from a gas furnace and install a heat pump instead, you’re removing the major source of potential carbon monoxide poisoning.”

What products does the Inflation Reduction Act cover?

A comprehensive list has yet to be published, but we do know some items that arespecifically detailed in the act. Heat pumps, heat pump water heaters, electric stoves, electric cooktops, electric ranges, electric ovens, and electric heat pump clothes dryers are all eligible for rebates, which vary in amount depending on the product. Certain electrical upgrades and wiring projects also qualify for rebates, as do insulation, air sealing, and ventilation services.

Tax credit–eligible products and services include windows, skylights, doors, heat pumps and heat pump water heaters, biomass stoves and boilers, and building envelope components that meet certain efficiency standards as well as home-energy audits. The US Department of Energy outlines some of theclean energy tax credits for efficient products, like solar and air conditioners.

When can I start taking advantage of these incentives?

That’s going to depend on eligibility. If you have a tax burden and are looking to benefit from tax credits, you can start planning now. If you’re not low-income, access to tax credits will be effective starting on January 1. You don’t have to wait to take advantage of the home improvement tax deductions for insulation, or heat pumps and heat pump water heaters.

These tax credits have an annual—not a lifetime—cap, meaning you can potentially plan out your projects over several years to take advantage of even more incentives. Stoddard recommends planning as a balancing act. “On the one hand, it’s going to be tempting to try and maximize the amount of tax deductions you can take,” he explains. “On the other hand, we all knowhow challenging it can be to schedule contractorsand get projects done in a timely manner that doesn’t interfere with life.”

For products and services that fall under the rebate program, check with you state on how soon you can tap into them. “We don’t even expect the rebate programs to be available to the states until the second half of 2023, and then the states are going to have to come up with their own programs,” Stoddard continues. “And in my experience, that usually takes another six to 12 months. I would say that states like Maine that already have agencies [to administer these kinds of rebate programs] will be able to get these programs up and running much more quickly.”

However, your state may already have incentives. Check the N.C. Clean Energy Technology Center’sstate-level renewable energy and efficiency incentive databasefor relevant information. (TheUS Department of Energycalls this the most comprehensive source for such info.)

Should I wait for the incentives?

Some observers—like Lauren Salz, CEO ofSealed, a climate tech company—say you shouldn’t wait until the incentives are available tomake upgrades. One reason: The sooner you switch to more efficient or greener appliances, the sooner you’ll start seeing utility bill benefits and emissions reductions.

In Amann’s eyes, you shouldn’t make upgrades just because incentives are available, unless it makes sense to replace appliances and the rest. “You don’t want to go around and replace things that you’ve replaced recently just to try to get energy savings, that’s not going to make sense,” Amann says. “But when you go to purchase something because your product is near the end of its life, which for most kitchen or appliances is usually somewhere between 10 and 15 years, it does make sense to find the most efficient products that are out there.” Upgrading appliances purchased a long time ago will absolutely yield savings, although the exact amount will depend on the make, model, and power source of the product you’re replacing.