The American Council for an Energy-Efficient Economy, AnnDyl Policy Group and Building Performance Association published a paper last week showing how states can maximize the impact of federal funds for home energy retrofits. 

“Federal funding for residential energy retrofits will make a huge difference, but what’s most important now is that states put it to use effectively,” said ACEEE Buildings Program Senior Fellow Jennifer Amann, who co-authored the report. “Existing programs lay the groundwork for improved retrofit efforts and market approaches that will make it easier and more affordable to retrofit housing to enhance comfort, improve health, and cut energy costs and climate-warming emissions. With the new funding now available, states can improve on these programs and continue to innovate.” 

The federal government has put up $53 billion in rebates, grants and other incentives, on top of tax credits and deductions for home energy retrofits that are not capped. The Infrastructure Investment and Jobs Act and the Inflation Reduction Act offered billions in funding to agencies including the departments of Energy and Housing and Urban Development, EPA and the IRS. The biggest chunk is $27 billion from the IRA for the Greenhouse Gas Reduction Fund administered by EPA. 

An additional $30 billion is available from nonfederal sources, including state and local programs, utility offerings and housing funds. The biggest chunk of those funds comes from banks which on average put out $24 billion in loans that can be used for upgrades, while utility programs come in at just under $2 billion across the country. 

The funding can help make up for the fact that homeowners and landlords often have less access to capital than the owners of commercial buildings, which can cause them to defer efficiency investments. 

Combining the federal funds with other sources can help states increase the overall impact and invigorate longer-term transformation for the home retrofit industry. States can successfully combine funding sources by reaching out to key stakeholders to identify program gaps, reviewing and expanding their own goals, and matching new and existing program objectives. 

States have to ensure that funds that have separate requirements are not blended together, but combining funds can make retrofits more successful, and programs that appear as a single incentive are less confusing for consumers, the report said. 

The impact of the federal programs is going to vary by state because they all have different programs themselves, for their utilities and from other sources. 

“Some states have access to deep funding streams from ratepayer programs, government agencies with a wealth of capacity and history in clean energy, and access to secure energy data, whereas other states are beginning now with none of this existing infrastructure,” the report said. “However, states with less history are also less burdened by past decisions and precedents in building their future policies and innovations.” 

The report suggests that states make customer utility data available in order to take full advantage of the federal funds. 

“Secure access to their own energy use data provides utility customers with information they can use to change their behavior and to partner with third parties (e.g., contractors) to reduce their energy use,” the report said. “Advanced metering infrastructure facilitates data access; federal and state governments are working with utilities to develop best practices to support data access while addressing privacy concerns.” 

The report also suggests incorporating grid flexibility to bridge traditional and “dynamic” efficiency, meaning smart thermostats, grid-enabled water heaters and other products that can offer flexibility for the grid. 

The current federal investment can support longer-term market transformation so that eventually, the residential retrofit agency can be self-sustaining absent incentives and other market interventions. 

“Key steps for market transformation include consideration of long-term goals in program design; collaboration with contractors, distributors and suppliers to build a robust industry infrastructure; and demonstration of the long-term value of retrofit investments,” the report said. “By considering opportunities to drive lasting changes in both market supply and demand, programs can generate benefits well beyond the life of the program.” 

Prioritizing historically underserved communities is important, with the report noting that renters have long seen much fewer benefits from such programs. Bringing programs to multifamily and single-family rental homes while protecting renters themselves from displacement is possible, it said.