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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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CoreWeave signed a deal for a new facility in New Jersey, behind-the-meter power on the side.
The cloud computing company CoreWeave announced Monday that it is leasing a former medical research facility and turning it into a data center. Along with it comes a 25-megawatt power plant that once provided power and steam directly to the former Merck headquarters in Kenilworth, New Jersey, but began to sell more and more power to the grid, the plant’s owner said in a filing with the Federal Energy Regulatory Commission. In 2023, the facility was purchased by Onyx, a real estate firm, and Machine Investment Group, with the intention to market the site to another life sciences or biotechnology company.
Then the AI revolution happened.
CoreWeave, which started as a miner of cryptocurrency, is now raising and spending billions of dollars to acquire and install the chips necessary to train and run artificial intelligence systems for companies that rent out access to them. According to the deal announcement, the company plans to pour $1.2 billion of investment into the 280,000 square foot facility, along with electrical upgrades from the utility PSE&G and investments from Onyx. The power plant will stop serving the grid and go “behind the meter,” the plant’s owner Atlantic Power said in a letter to PJM Interconnection, the regional electricity market, in September.
The deal confirms that when it comes to power, data centers will take what they can get — and that the long timelines necessary to bring on new power in much of the country may end up benefiting existing owners of generation, especially natural gas.
Data centers require both large amounts of power — sometimes 100 megawatts or more — and the ability to surge up and down quickly. “Renewable power generation is well placed to capture mounting demand from data centers and AI in the long term,” analysts at BNEF wrote in a report in September, “but time constraints for grid interconnection and intermittency issues could support natural gas-fired output.”
Goldman Sachs analysts expect data center power demand to rise from about 3% of the U.S. total to 8% by 2030, with growth running at 15% annually. They assume that capacity will be met mostly by natural gas, but actually finding — let alone building — new natural gas generation is a challenge.
“The hyperscalers are evolving from single data centers dependent on 60 to 100 megawatts to starting to look at multiple gigawatt-size data center parks that support a number of data centers in one location,” GE Vernova chief executive Scott Strazik said on a recent earnings call with analysts.
Building a new natural gas plant on the grid — and especially the transmission infrastructure to serve it — can be a prospect well beyond the build-it-now timelines of big technology companies with a desperate need for computing power.
“Thanks to 10-year delays in permitting for new transmission lines and connecting generation capacity to the grid, the most viable near-term option is behind-the-meter,” Tim Fist and Arnab Datta wrote in a report for the Institute for Progress, a technology and science policy think tank. In other words, one way to get around grid interconnection and intermittency issues is to have your own power plant.
“The economics of developing the power on site don't really hurt the data center economics that much. These things are just really profitable,” Carson Kearl, an analyst at Enverus, told me.
Some data centers have developed their own natural gas generation on site, such as XAi’s cluster in Memphis, Tennessee, which ispowered by gas generators.
CoreWeave, meanwhile, is one of the most talked-about and well-funded companies in cloud computing, with access to a huge number of chips made by Nvidia, the leading designer of high-end processors, and which is also an investor in CoreWeave. But the chips can only perform when they’re powered, turning the data center business into a hunt for electricity wherever it can be found.
“Access to reliable power could be a roadblock towards the timely buildout” for a data center, Francois Poirier, the chief executive of TC Energy, the Canadian pipeline company, told analysts on an earnings call in August. “We’re seeing a shift in siting preferences from regions where big telecom infrastructure is in place to regions where energy and supply infrastructure is in place.”
CoreWeave, PSE&G, Onyx, and Atlantic Power’s owner, I Squared Capital, did not respond to requests for comment.
This situation has not come about for lack of effort on the part of the several electricity markets that have been trying to get new natural gas generation on the grid. PJM, for example, has been working to entice new supply, but even following a record auction for power capacity that paid out billions to natural gas plants, few producers have indicated their willingness to make large new investments. Texas has established a multibillion-dollar loan fund to provide low-cost financing to new natural gas plants.
While several large technology companies have announced their intention to buy nuclear power from refurbished or new plants, those deals will take at least several years to actually get any new electrons on the grid.
That leads data center developers like CoreWeave scrambling to find what power they can. In interviews, the company’s chief strategy officer Brian Venturo told Wired that they are avoiding Northern Virginia’s “data center alley” precisely because it’s “a food fight to get power.”
“There's a lot of growing backlash in that market around power usage,” he told Bloomberg. “We're kind of siting our plants and markets where our data centers and markets where we think the grid infrastructure is capable of handling it.”
And what better place than where the power already is.
Key projects for the Energy Department’s hydrogen hubs are dropping like flies. And it’s really not obvious why.
Three hubs DOE selected for potential federal support have lost projects that were linchpins. Industrial giant Fortescue is no longer publicly committing to a hydro-powered hydrogen production plant proposed in Washington state that was key to the Pacific Northwest hub. News of a pause at the project was previously reported, but the company notably declined to even say the project was still getting built when asked about it this week.
“While Fortescue will continue to maintain a portfolio of other projects for the future, our financial discipline always comes first. We will never do projects that are not currently economically viable,” the company said in a statement provided to me this morning.
Meanwhile CNX, a natural gas company, has indefinitely put the kibosh on a blue hydrogen ammonia plant in West Virginia crucial to the Appalachian hydrogen hub known as ARCH2. Marathon Petroleum’s midstream subsidiary MPLX also confirmed to me they’ve canceled a hydrogen storage facility planned for that hub, and Chemours is no longer involved with the hub either.
Another blue hydrogen ammonia plant in North Dakota crucial to a different hub – known as the Heartland hub – has been canceled by Marathon and TC Energy.
In other words: a year after the Biden administration made a big announcement about the seven hubs that could potentially receive billions of dollars in government funding, almost half of them are running into serious trouble.
The companies that have quietly pulled out or paused projects are laying blame on implementation of the federal hydrogen production tax credit, claiming rules enforcing the “three pillars” and carbon intensity requirements are too onerous. Meanwhile critics of the hydrogen hubs are seizing on project cancellations and delays to argue against their construction outright; the Ohio River Valley Institute, an environmental group opposed to the ARCH2 hydrogen hub, has received a lot of press in recent days for a report claiming the hub is “coming apart.”
I’m already hearing whispers from industry insiders in D.C. who are trying to spin these cancellations as evidence the credit implementation has been too favorable to climate activists and is constraining growth in the nascent hydrogen space.
But what’s really going on?
Conversations with experts and stakeholders indicate to me this could be evidence of broader macroeconomic issues hitting the hydrogen industry, from inflation pushing up the price of electrolyzers to the stubbornly low price of natural gas. We saw this with the Plug Power project in New York, which we were first to report problems with. These market issues may be overpowering the subsidies and demand-side benefits of the bipartisan infrastructure law and Inflation Reduction Act.
These hiccups may also be a calm before a storm of hydrogen investment and a reshuffling of capital that’ll become more evident after the IRA’s production tax credit is fully implemented with final regulations. Perhaps it’ll take final rules to see the companies supportive of the “three pillars” move more projects forward.
It could also be a mixture of these things and other factors, like issues with the specific sites companies had selected for their plants.
No matter the cause for these hubs stuttering, these projects falling out of the fold is a shock to no one, especially supporters of the “three pillars” approach to the tax credit. Though it may indicate flaws with a disorganized approach to the energy transition.
“I’m not surprised if at the end of the day some of the many projects supported by DOE are not viable in the end,” said Jesse Jenkins, an assistant professor at Princeton University and expert in energy systems engineering. In addition to co-hosting Heatmap’s Shift Key podcast, Jenkins leads the REPEAT Project, which produced influential policy analysis supporting the “three pillars” approach to Treasury’s implementation of the hydrogen production tax credit.
Irrespective of the reasons, it’s important to remember that on some level both industry and the Biden administration stumbled into this mess. That’s because Congress passed the bipartisan infrastructure law mandating the creation and financing of these hubs before the IRA was even introduced. The infrastructure law itself required DOE to start soliciting proposals for hub funding mere months after it was enacted. This means the hub program was crafted independent of a tax subsidy boosting supply.
The hubs may be lobbying for a specific version of the hydrogen production credit to be implemented, as many D.C. lobbyists like to point out, but the program wasn’t referenced in the tax credit’s statute either.
As Jenkins put it, any conflict between the hubs and tax credit provisions is evidence “that reflects that many of the projects [selected] are not compliant.”
Biden administration officials spoke to me for a half hour this morning about the canceled projects on the condition of anonymity to candidly discuss the tax credit and hubs. To them, this can be explained as the process working as intended, and they emphasized how the credit and hub are independent programs. They also expect more capital to be unleashed after the credit is finalized, as companies who’ve supported the “three pillars” get certainty to make final investment decisions.
The administration’s view sounded akin to the optimistic vision relayed to me by Clean Air Task Force’s Conrad Schneider: “This is what progress looks like. It’s slow, it’s steady. It’s not [a] steady state though.”
My take? This is further proof we live in a disorganized energy transition. So far in The Fight, we’ve covered the struggles to get projects built because of opposing forces at a grassroots level. That same dynamic applies to the federal climate programs incentivizing a switch from carbon-intensive business practices. And sometimes, there’ll be tug-of-war competing interests between the climate programs themselves.
And more of the week’s most important conflicts around renewable energy.
1. Douglas County, Kansas – A legal headache is consuming Kansas Sky Energy Center, a 159-megawatt solar project proposed by Savion and Invenergy… and showcasing how “agri-voltaics” may not be the community engagement panacea some in industry are praying for, according to legal filings reviewed by Heatmap.
2. Worcester County, Maryland – We finally get to see the contours of the legal strategy against the Maryland Offshore Wind Project, after Ocean City and surrounding local business and government officials filed their lawsuit last week.
3. Barnstable County, Massachusetts – Another blow to offshore wind came Friday in the coastal town of Barnstable where leaders voted to oppose cable landings for Avangrid’s New England Wind 2 project.
3. Somewhere near Houston, Texas – The small city of Katy rejected a 500-megawatt battery storage project proposed by Ochoa Energy despite the community struggling with regular blackouts.
Here’s what else I’m keeping tabs on…
In Iowa, a county fighting the Worthwhile Wind farm proposed by Invenergy is asking outside legal counsel for help after a federal judge ruled the project could resume construction.
In Kentucky, the mayor of Lexington city Linda Gorton testified against construction of a 40-megawatt solar farm proposed by the East Kentucky Power Cooperative.
In Massachusetts, a private non-profit that operates historic sites in Nantucket has withdrawn from the Vineyard Wind good neighbor agreement.
In Michigan, the tiny town of Groveland Township is trying to get a restrictive battery storage ordinance in place before a new state law curbing local control comes into effect. (Sorry you’re dealing with this one, Vesper Energy.)
In Virginia, Dominion Energy has sold a non-controlling 50% stake in Coastal Virginia Offshore Wind as public comments resume on the proposed project (which haven’t always been favorable).