Federal Funding for Buildings
Federal initiatives and funding for decarbonizing buildings
Over the past two years, two major federal initiatives prioritized funding for decarbonizing buildings. The 2021 Infrastructure, Investment and Jobs Act (IIJA) (also referred to as the Bipartisan Infrastructure Law, or “BIL”) represents an investment of $1.2 trillion for expansive transportation and infrastructure spending. $107.5 billion of this funding is focused on energy, power, and grid reliability, including opportunities for building decarbonization, the advancement of codes, and bolstering of the buildings technologies workforce.
The 2022 Inflation Reduction Act (IRA) directs $500 billion towards accelerating clean energy investments and reducing carbon emissions, in addition to other healthcare and tax investments. The suite of buildings-related rebates and incentives under the IRA will support electrification and efficiency, with a special focus on low-income households. Households will be able to take advantage of a range of upfront rebates and tax credits towards energy efficient electric appliances and energy efficiency improvements in their homes.
The State Energy Office at Commerce is working to make these resources available to households and other partners in a timely, equitable and effective manner.
Rebates will be available through IRA funding, which Washington is expected to receive in late 2023 or early 2024, and begin to make available in 2024. The U.S. Department of Energy will release guidelines to states, expected in Summer 2023; following the release of these guidelines, Commerce plans to conduct public listening sessions to determine how Washington’s rebate programs will be structured.
High Efficiency Electric Home Rebate Program – Section 50122
The State Energy Office will receive federal funding to develop a new high efficiency electric home rebate program. This new program will allow rebates at the point of sale for income-eligible consumers on a range of highly efficient electric equipment and electrification projects, including:
- Heat pumps for space and water heating
- Heat pump dryers
- Electric stoves, cooktop range, or oven (includes induction)
- Electric load service center upgrade
- Insulation, air sealing, and ventilation
- Electric wiring
Current Status: The DOE is expected to release funds to states in late 2023 or early 2024. Rebates are expected to be available in 2024. Commerce expects to combine this funding with additional funding allocated by the state legislature for the 2023-2025 biennium.
Home Energy Performance-Based, Whole Home Rebates – Section 50121
The State Energy Office will receive federal funding to develop and implement an efficiency rebate program, which will provide rebates to homeowners and aggregators for whole-house energy savings retrofits. Rebates will vary by depth of energy savings and income qualification.
Current Status: The DOE is expected to release funds to states in late 2023 or early 2024. Rebates are expected to be available in 2024.
Frequently Asked Questions (FAQs)
The Inflation Reduction Act introduced two new programs for home energy upgrades.
The first is for Electrification rebates, sometimes referred to as is the High Efficiency Electric Home Rebate Program (HEEHR), which will provide point-of-sale rebates to low- and moderate-income customers (households with incomes up to 150% of Area Median Income) for home electrification measures, including heat pumps.
The second program is for Efficiency rebates, also referred to as the Home Energy Performance Based, Whole House Rebates (HOMES) program. This program will grant funds to states, who will then develop rebate programs for whole-house energy saving retrofits.
Commerce is currently planning for these rebate programs to determine how these rebates will best work with other programs in Washington. However, we do not anticipate detailed guidance from the USDOE until Summer 2023. Until we have more specific guidance from our federal partners, we will not have the ability to determine eligibility or potential rebate amounts for any individual or household.
At this time, the Department of Commerce expects rebates to be available in 2024. The program will be developed in summer and fall 2023 after states receive guidance from USDOE, and then federal funding is expected to be available in late 2023 or early 2024. It may take some time to establish contracts and program processes before money can be distributed to households.
At this time, we do not expect to set up a retroactive program, meaning that eligible purchases will likely need to be made after the program officially launches in Washington. The federal tax credits renewed under the IRA are currently in effect (meaning purchases in 2023 qualify for these tax credits). You can find more information about tax credits on the Clean Energy tax credit webpage. If you have further questions on the tax credits, we recommend you consult a licensed tax professions for information which pertains to your situation.
While the Inflation Reduction Act provides some federal guidelines for what products are qualifying and who may be eligible, the state of Washington will design its own program to distribute rebates. At this time, we cannot guarantee that any one Washingtonian will qualify for rebates when we begin providing rebates in 2024, or that sufficient funds will be available for all who apply for rebates. We plan to hold listening sessions later this year to gather input from Washingtonians on how we should design these programs – please sign up here on the right-hand side of the page to be notified when we schedule these if you are not already signed up.
At this time, Commerce expects to hold one or more listening sessions following release of USDOE’s guidance for these programs. Please use the listening session interest form to sign up to be notified when these are announced.
Commerce staff also welcome the opportunity to attend community events (virtual or in-person) to hear feedback on what Washingtonians are interested in with regards to these programs. Reach out to email@example.com to discuss an upcoming event.
IRA Tax Credits
Tax credits under the IRA are made available through the Internal Revenue Service (IRS) and are available beginning in tax year 2023. For more on tax credits under IRA, please visit the US Department of Energy’s Clean Energy Tax Credit webpage.
Home Clean Electricity Products
Solar (electricity), fuel cells, wind turbines, and battery storage are eligible for a tax credit of 30% of the cost in tax years 2023-2032. See the US DOE’s Clean Energy Tax Credit webpage to find a list of eligible products and additional information.
Heating, Cooling, and Water Heating
- Heat pumps, heat pump water heaters, and biomass stoves are eligible for a tax credit of 30% of the cost, up to $2,000 per year.
- Geothermal heat pumps and solar (water heating) are eligible for tax credits of 30% of the cost.
- Efficient air conditioners, heating, and water heating equipment is eligible for 30% of the cost, up to $600.
See the US DOE’s Clean Energy Tax Credit webpage to find a list of eligible products and additional information.
Other Energy Efficiency Upgrades
- Electric panel or circuit upgrades for new electric equipment, and windows (including skylights) are eligible for a tax credit of 30% of cost, up to $600.
- Exterior doors are eligible for a tax credit of 30% of cost, up to $250 each
- Home energy audits are eligible for a tax credit of 30% of cost, up to $150.
- Insulation materials are eligible for a tax credit for 30% of cost.
See the US DOE’s Clean Energy Tax Credit webpage to find a list of eligible services and additional information.
We will be hosting public listening sessions in 2023 related to IRA Home Energy Rebates. Please use the listening session interest form to sign up to be notified when these are announced.
Liz Reichart, MPA
Sr. Energy Policy Specialist