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A practical guide to using the climate law to get cheaper solar panels, heat pumps, and more.
Today marks the one year anniversary of the Inflation Reduction Act, the biggest investment in tackling climate change the United States has ever made. The law consists of dozens of subsidies to help individuals, households, and businesses adopt clean energy technologies. Many of these solutions will also help people save money on their energy bills, reduce pollution, and improve their resilience to disasters.
But understanding how much funding is available for what, and how to get it, can be pretty confusing. Many Americans are not even aware that these programs exist. A poll conducted by The Washington Post and the University of Maryland in late July found that about 66% of Americans say they have heard “little” or “nothing at all” about the law’s incentives for installing rooftop solar panels, and 77% have heard little or nothing about subsidies for heat pumps. This tracks similar polling that Heatmap conducted last winter, suggesting not much has changed since then.
Below is Heatmap’s guide to the IRA’s incentives for cutting your carbon footprint at home. If you haven’t heard much about how the IRA can help you decarbonize your life, this guide is for you. If you have heard about the available subsidies, but aren’t sure how much they are worth or where to begin, I’ll walk you through it. (And if you’re looking for information about the electric vehicle tax credit, my colleague at Heatmap Robinson Meyer has you covered with this buyer’s guide.)
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There’s funding for almost every solution you can think of to make your home more energy efficient and reduce your fossil fuel use, whether you want to install solar panels, insulate your attic, replace your windows, or buy electric appliances. If you need new wiring or an electrical panel upgrade before you can get heat pumps or solar panels, there’s some money available for that, too.
The IRA created two types of incentives for home energy efficiency improvements: Unlimited tax credits that will lower the amount you owe when you file your taxes, and $8.8 billion in rebates that function as up-front discounts or post-installation refunds on equipment and services.
The tax credits are available now, but the rebates are not. The latter will be administered by states, which must apply for funding and create programs before the money can go out. The Biden administration began accepting applications at the end of July and expects states to begin rolling out their programs later this year or early next.
The home tax credits are available to everyone that owes taxes. The rebates, however, will have income restrictions (more on this later).
“The Inflation Reduction Act is not a limited time offer,” according to Ari Matusiak, the CEO of the nonprofit advocacy group Rewiring America. The rebate programs will only be available until the money runs out, but, again, none of them have started yet. Meanwhile, there’s no limit on how many people can claim the tax credits, and they’ll be available for at least the next decade. That means you don’t need to rush and replace your hot water heater if you have one that works fine. But when it does break down, you’ll have help paying for a replacement.
You might want to hold off on buying new appliances or getting insulation — basically any improvements inside your house. There are tax credits available for a lot of this stuff right now, but you’ll likely be able to stack them with rebates in the future.
However, if you’re thinking of installing solar panels on your roof or getting a backup battery system, there’s no need to wait. The rebates will not cover those technologies.
A few other caveats: There’s a good chance your state, city, or utility already offers rebates or other incentives for many of these solutions. Check with your state’s energy office or your utility to find out what’s available. Also, it can take months to get quotes and line up contractors to get this kind of work done. If you want to be ready when the rebates hit, it’s probably a good idea to do some of the legwork now.
If you do nothing else this year, consider getting a professional home energy audit. This will cost several hundred dollars, depending on where you live, but you’ll be able to get 30% off or up to $150 back under the IRA’s home improvement tax credit. Doing an audit will help you figure out which solutions will give you the biggest bang for your buck, and how to prioritize them once more funding becomes available. The auditor might even be able to explain all of the existing local rebate programs you’re eligible for.
The Internal Revenue Service will allow you to work with any home energy auditor until the end of this year, but beginning in 2024, you must hire an auditor with specific qualifications in order to claim the credit.
Let’s start with what’s inside your home. In addition to an energy audit, the Energy Efficiency Home Improvement Credit offers consumers 30% off the cost (after any other subsidies, and excluding labor) of Energy Star-rated windows and doors, insulation, and air sealing.
There’s a maximum amount you can claim for each type of equipment each year:
$600 for windows
$500 for doors
$1,200 for air sealing and insulation
The Energy Efficiency Home Improvement Credit also covers heat pumps, heat pump water heaters, and electrical panel upgrades, including the cost of installation for those systems. You can get:
$2,000 for heat pumps
$600 for a new electrical panel
Yes, homeowners can only claim up to $3,200 per year under this program until 2032.
Also, one downside to the Energy Efficiency Home Improvement Credit is that it does not carry over. If you spend enough on efficiency to qualify for the full $3,200 in a given year, but you only owe the federal government $2,000 for the year, your bill will go to zero and you will miss out on the remaining $1,200 credit. So it could be worth your while to spread the work out.
The other big consumer-oriented tax credit, the Residential Clean Energy Credit, offers homeowners 30% off the cost of solar panels and solar water heaters. It also covers battery systems, which store energy from the grid or from your solar panels that you can use when there’s a blackout, or sell back to your utility when the grid needs more power.
The subsidy has no limits, so if you spend $35,000 on solar panels and battery storage, including labor, you’ll be eligible for the full 30% refund, or $10,500. The credit can also be rolled over, so if your tax liability that year is only $5,000, you’ll be able to claim more of it the following year, and continue doing so until you’ve received the full value.
Geothermal heating systems are also covered under this credit. (Geothermal heat pumps work similarly to regular heat pumps, but they use the ground as a source and sink for heat, rather than the ambient air.)
Here’s what we know right now. The IRA funded two rebate programs. One, known as the Home Energy Performance-Based Whole House Rebates, will provide discounts to homeowners and landlords based on the amount of energy a home upgrade is predicted to save.
Congress did not specify which energy-saving measures qualify — that’s something state energy offices will decide when they design their programs. But it did cap the total amount each household could receive, based on income. For example, if your household earns under 80% of the area median income, and you make improvements that cut your energy use by 35%, you’ll be eligible for up to $8,000. If your household earns more than that, you can get up to $4,000.
There’s also the High-Efficiency Electric Home Rebate Program, which will provide discounts on specific electric appliances like heat pumps, an induction stove, and an electric clothes dryer, as well as a new electrical panel and wiring. Individual households can get up to $14,000 in discounts under this program, although there are caps on how much is available for each piece of equipment. This money will only be available to low- and moderate-income households, or those earning under 150% of the area median income.
Renters with a household income below 150% of the area median income qualify for rebates on appliances that they should be able to install without permission from their landlords, and that they can take with them if they move. For example, portable appliances like tabletop induction burners, clothes dryers, and window-unit heat pumps are all eligible for rebates.
It’s also worth noting that there is a lot of funding available for multifamily building owners. If you have a good relationship with your landlord, you might want to talk to them about the opportunity to make lasting investments in their property. Under the performance-based rebates program, apartment building owners can get up to $400,000 for energy efficiency projects.
For the most part, yes. But the calculus gets tricky when it comes to heat pumps.
Experts generally agree that no matter where you live, switching from an oil or propane-burning heating system or electric resistance heaters to heat pumps will lower your energy bills. Not so if you’re switching over from natural gas.
Electric heat pumps are three to four times more efficient than natural gas heating systems, but electricity is so much more expensive than gas in some parts of the country that switching from gas to a heat pump can increase your overall bills a bit. Especially if you also electrify your water heater, stove, and clothes dryer.
That being said, Rewiring America estimates that switching from gas to a heat pump will lower bills for about 60% of households. Many utilities offer tools that will help you calculate your bills if you make the switch.
The good news is that all the measures I’ve discussed in this article are expected to cut carbon emissions and pollution, even if most of your region’s electricity still comes from fossil fuels. For some, that might be worth the monthly premium.
Tax Credit #1 offers 30% off the cost of energy audits, windows, doors, insulation, air sealing, heat pumps, electrical panels, with a $3200-per-year allowance and individual item limits.
Tax Credit #2 offers 30% off the cost of solar panels, solar water heaters, batteries, and geothermal heating systems.
Rebate Program #1 will offer discounts on whole-home efficiency upgrades depending on how much they reduce your energy use, with an $8,000 cap for lower-income families and a $4,000 cap for everyone else.
Rebate Program #2 is only for low- and moderate- income households, and will offer discounts on specific electric appliances, with a $14,000 cap.
Read more about the Inflation Reduction Act:
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The energy secretary's philosophy is all over the Senate mega-bill.
As the Senate Finance Committee worked on its version of the reconciliation bill that would, among things, overhaul the Inflation Reduction Act, there was much speculation among observers that there could be a carve out for sources of power like geothermal, hydropower, and nuclear, which provide steady generation and tend to be more popular among Republicans, along the lines of the slightly better treatment received by advanced nuclear in the House bill.
Instead, the Senate Finance Committee’s text didn’t carve out these “firm” sources of power, it carved out solar and wind, preserving tax credits for everything else through 2035, while sunsetting solar and wind by 2028.
For much of the last few months — and for years before he was sworn in as Secretary of Energy — Chris Wright has been expounding on his philosophy of energy and climate. If anything, the Senate Finance draft seems to hew closer to Wright’s worldview than Trump’s, which is less specific, even more critical of renewables (especially wind), and largely in favor of nuclear power when it comes to non-carbon-emitting generation.
“I’m sure Secretary Wright’s strong support for firm technologies over the past few months played a role in Chairman Crapo’s approach to energy tax credit reform,” Pavan Venkatakrishnan, an infrastructure fellow at the Institute for Progress, told me.
Wright argues that climate change is real but not a top-tier concern and that it certainly should not be addressed by restricting energy usage, which he sees as foundational to the good life here and abroad.
And among energy sources, the former fracking executive is no opponent of fossil fuels but is also enthusiastic about energy innovation.
In his company Liberty Energy’s Bettering Human Lives report, published last year, which doubles as a kind of manifesto, Wright wrote that “viable paths to reducing greenhouse gas (GHG) emissions can only come from reliable and affordable low-carbon energy technologies,” and specifically listed next-generation nuclear and geothermal, which Liberty had invested in through the geothermal company Fervo and nuclear company Oklo.
“To achieve largescale human betterment, we will need significant future energy additions from nuclear, hydropower, geothermal, and all other viable energy technologies,” the report read.
And he’s often been skeptical of renewables along the lines of many Congressional Republicans, that they aren’t reliable enough and require additional resources to fully support the grid.
“Maybe the biggest problem is intermittency,” Wright said at a Liberty Energy event last year.
“You can build a lot of wind and solar, and then at night, the sun’s not shining and then sometimes the wind doesn’t blow, and you have no energy. So to keep society running, you have to have a whole second separate energy system,” Wright said.
In testimony to the House of Representatives last week, Wright said “If you’re not there at peak demand, you’re just a parasite on the grid, because you just make the other sources turn up and down as you come and go.”
Many critics of the Republican reconciliation bills have noted that much of the electricity generation pipeline is solar, wind, or storage, and so cutting off their tax credits risks leaving the country at an energy shortage while gas turbines take years and years to actually get on the grid.
But as Congress was working on the reconciliation bill, Wright made a series of widely noted public appearances where he promoted clean firm power and continued government support for it.
“My recommendation has been to leave behind the equivalent of the wind and solar tax credits — through if you start construction by 2031 — for nuclear fission and fusion and geothermal,” Wright said at an event earlier this month.
In May, Wright addressed the Nuclear Energy Institute, outlining his support for sunsetting wind and solar tax credits will working to kickstart nuclear power. “My personal goal would be to much more rapidly sunset the technologies that have been around and have been living on decades of subsidies,” Wright said. He also supported a “window” of “favorable treatment” for nuclear and geothermal.
“I’m in favor of every nudge, every incentive we can get from the federal government to restart this industry,” Wright said.
While Wright has been skeptical of wind and solar and optimistic about nuclear and geothermal for years, he’s also started talking more positively about energy storage. In the past, he’s talked up hydrocarbons for “coming with their own storage,” as he put it in a 2018 podcast.
But at an appearance at ARPA-E in March, Wright gave some of his most extended thoughts on energy storage, which sits somewhat awkwardly between variable resources like solar and wind and firm resources like nuclear and geothermal.
“Solar is growing very fast, getting more efficient and taking panels, cheaper materials and developing energy,” Wright said. “The biggest problem there is the sun doesn’t always shine, and we don’t know when clouds are going to come and when it’s not going to shine, but if we can get energy storage better, that’s a game changer.”
At least until 2035.
When I reached out to climate tech investors on Tuesday to gauge their reaction to the Senate’s proposed overhaul of the clean energy tax credits, I thought I might get a standard dose of can-do investor optimism. Though the proposal from the Senate Finance committee would cut tax credits for wind and solar, it would preserve them for other sources of clean energy, such as geothermal, nuclear, and batteries — areas of significant focus and investment for many climate-focused venture firms.
But the vibe ended up being fairly divided. While many investors expressed cautious optimism about what this latest text could mean for their particular portfolio companies, others worried that by slashing incentives for solar and wind, the bill’s implications for the energy transition at large would be categorically terrible.
“We have investments in nuclear, we have investments in geothermal, we have investments in carbon capture. All of that stuff is probably going to get a boost from this, because so much money is going to be flowing out of quote, unquote, ‘slightly more established’ zero emissions technologies,” Susan Su, a climate tech investor at Toba Capital, told me. “So we’re diversified. But for me, as a human being, and as somebody that cares about climate change and cares about having an abundant energy future, this is very short-sighted.”
Bigger picture aside, the idea that the Senate proposal could lead to more capital for non-solar, non-wind clean energy technologies was shared by other investors, many of whom responded with tentative hope when I asked for their thoughts on the bill.
“The extension of the nuclear and geothermal tax credits compared to the House bill is really important,” Rachel Slaybaugh, a climate tech investor at DCVC, told me. The venture firm has invested in the nuclear fission company Radiant Nuclear, the fusion company Zap Energy, and the geothermal startup Fervo Energy. As for how Slaybaugh has been feeling since the bill’s passage as well as the general sentiment among DCVC’s portfolio companies, she told me that “it's mostly been the relief of like, thank you for at least supporting clean, firm and bringing transferability back.”
Indeed, the proposed bill not only fully preserves tax credits for most forms of zero-emissions power until 2034, but also keeps tax credit transferability on the books. This financing mechanism is essential for renewable energy developers who cannot fully utilize the tax credits themselves, as it allows them to sell credits to other companies for cash. All of this puts nascent clean, firm technologies on far more stable footing than after the House’s version of the bill was released last month.
Carmichael Roberts of Breakthrough Energy Ventures echoed these sentiments via email when he told me, “the Senate proposal is a meaningful improvement over the House version for clean energy companies. It creates more predictability and a clearer runway for emerging technologies that are not yet fully commercial.” Breakthrough invests in multiple fusion, geothermal, and long-duration energy storage startups.
Amy Duffuor, co-founder and general partner at Azolla Ventures, also acknowledged in an email that it’s “encouraging” that the Senate has “seen the way forward on clean firm baseload power.” However, she issued a warning that the unsettled policy environment is leading to “material risks and uncertainties for start-ups reliant on current tax incentives.”
Solar and wind are by far the most widely deployed and cost-competitive forms of renewable energy. So while they now mainly exist outside the remit of venture firms, there are numerous climate-focused startups that operate downstream of this tech. Think about all the software companies working to optimize load forecasting, implement demand response programs, facilitate power purchase agreements, monitor grid assets, and so much more. By proxy, these startups are now threatened by the Senate’s proposal to phase out the investment and production tax credits for solar and wind projects beginning next year, with a full termination after 2027.
“I think solar and wind will survive. But it's going to be like 80% of the deals don't pencil for a long time,” Ryan Guay, co-founder and president of the software startup Euclid Power, told me. Euclid makes data management and workflow tools for renewable project developers, so if the tax credits for solar and wind go kaput, that will mean less business for them. In the meantime though, Guay expects to be especially busy as developers rush to build projects before their tax credit eligibility expires.
As Guay explained to me, it’s not just the rescission of tax credits that he believes will kill such a large percent of solar and wind projects. It’s the combined impact of those cuts, the bill’s foreign entity of concern rules restricting materials from China, and Trump’s tariffs on Chinese-made components. “You’re not giving the industry enough time to actually build that robust domestic supply chain, which I agree needs to happen,” Guay told me. “I’m all for the security of the grid, but our supply chains are already very constrained.”
Many investors also expressed frustration and confusion over why Senate Republicans, and the Trump administration at large, would target incentives for solar and wind — the fastest growing domestic energy sources — while touting an agenda of energy dominance and American leadership. Some even used the president’s own language around energy issues to deride the One Big Beautiful Bill’s treatment of solar and wind as well as its repeal of the electric vehicle tax credits.
“The rollbacks of the IRA weaken the U.S. in key areas like energy dominance and the auto industry, which is rapidly becoming synonymous with the EV industry,” Matt Eggers, a managing director at the climate-tech investment firm Prelude Ventures, wrote to me in an email. “This bill will still ultimately cost us economic growth, jobs, and strategic positioning on the world stage.”
“The only real question is, are we going to double down on the future and on American dynamism?” Andrew Beebe, managing director at Obvious Ventures, asked in an emailed response. “Or are we going to cling to the past by trying to hold back a future of abundant, clean, and affordable energy?”
Su wanted to focus on the bigger picture too. While the Senate’s proposal gives tax credits for solar and wind a much longer phaseout period than the House’s bill — which would have required projects to start construction within 60 days of the bill’s passage and enter service by 2028 — Su still doesn’t think the Senate’s version is much to celebrate.
“The specific changes that came through in the Senate version are really kind of nibbling at the edges and at the end of the day, this is a huge blow for our emissions trajectory,” Su told me. She’s always been a big believer that there’s still a significant amount of cutting edge innovation in the solar and wind sectors, she told me. For example, Toba is an investor in Swift Solar, a startup developing high-efficiency perovskite solar cells. Nixing tax credits that benefit the solar industry will hit these smaller players especially hard, she told me.
With the Senate now working to finalize the bill, investors agreed that the current proposal is certainly not the worst case scenario. But many did say it was worse than they had — perhaps overly optimistically — been holding out for.
“To me, it's really bad because it now has a major Senate stamp of approval,” Su told me. The Senate usually tempers the more extreme, partisan impulses of the House. Thus, the closer a bill gets to clearing the Senate, the closer it usually is to its final form. Now, it seems, the reconciliation bill is suddenly feeling very real for people.
“At least back between May 22 and [Monday], we didn't know what was going to get amended, so there was still this window of hope that things could change more dramatically." Su said. Now that window is slowly closing, and the picture of what incentives will — and won’t — survive is coming into greater focus.
Rob and Jesse talk with John Henry Harris, the cofounder and CEO of Harbinger Motors.
You might not think that often about medium-duty trucks, but they’re all around you: ambulances, UPS and FedEx delivery trucks, school buses. And although they make up a relatively small share of vehicles on the road, they generate an outsized amount of carbon pollution. They’re also a surprisingly ripe target for electrification, because so many medium-duty trucks drive fewer than 150 miles a day.
On this week’s episode of Shift Key, Rob and Jesse talk with John Henry Harris, the cofounder and CEO of Harbinger Motors. Harbinger is a Los Angeles-based startup that sells electric and hybrid chassis for medium-duty vehicles, such as delivery vans, moving trucks, and ambulances.
Rob, John, and Jesse chat about why medium-duty trucking is unlike any other vehicle segment, how to design an electric truck to last 20 years, and how President Trump’s tariffs are already stalling out manufacturing firms. Shift Key is hosted by Jesse Jenkins, a professor of energy systems engineering at Princeton University, and Robinson Meyer, Heatmap’s executive editor.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, YouTube, or wherever you get your podcasts.
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Here is an excerpt from our conversation:
Robinson Meyer: What is it like building a final assembly plant — a U.S. factory — in this moment?
John Harris: I would say lots of people talk about how excited they are about U.S. manufacturing, but that's very different than putting their money where their mouth is. Building a final assembly line, like we have — our team here is really good, that they made it feel not that hard. The challenge is the whole supply chain.
If we look at what we build here in-house at Harbinger, we have a final assembly line where we bolt parts together to make chassis. We also have two sub-component assembly lines where we take copper and make motors, and where we take cells and make batteries. All three of those lines work pretty well. We're pumping out chassis, and they roll out the door, and we sell them to people, which is great. But it’s all the stuff that goes into those, that's the most challenging. There's a lot of trade policy at certain hours of the day, on certain days of the week — depending on when we check — that is theoretically supposed to encourage us manufacturing.
But it's really not because of the volatility. It costs us an enormous amount to build the supply chain, to feed these lines. And when we have volatile trade policy, our reaction, and everyone else's reaction, is to just pause. It’s not to spend more money on U.S. manufacturing, because we were already doing that. We were spending a lot on U.S. manufacturing as part of our core approach to manufacturing.
The latest trade policy has caused us to spend less money on U.S. manufacturing — not more, because we're unclear on what is the demand environment going to be, what is the policy going to be next week? We were getting ready to make major investments to take certain manufacturing tasks in our supply chain out of China and move them to Mexico, for example. Now we’re not. We were getting ready to invest in certain kinds of automation to do things in house, and now we're waiting. So the volatility is dramatically shrinking investment in US manufacturing, including ours.
Meyer: And can you just explain, why did you make that decision to pause investment and how does trade policy affect that decision?
Harris: When we had 25% tariffs on China, if we take content out of China and move it to Mexico, we break even — if that. We might still end up underwater. That's because there's better automation in China. There's much higher labor productivity. And — this one is always shocking to people — there’s lower logistics costs. When we move stuff from Shenzhen to our factory, in many cases it costs us less than moving shipments from Monterey.
Mentioned:
CalStart’s data on medium-duty electric trucks deployed in the U.S.
Here’s the chart that John showed Rob and Jesse:
Courtesy of Harbinger
It draws on data from Bloomberg in China, the ICCT, and the Calstart ZET Dashboard in the United States.
Jesse’s case for EVs with gas tanks — which are called extended range electric vehicles