Inflation Reduction Act, Maryland EmPOWER program, Rebates & Tax Credits
Read about the Inflation Reduction Act, Maryland's EmPOWER program, heat pumps, solar energy and more! Information is provided by our Tamarack Triangle neighbor, Mike Zasadil. You can contact Mike at: mzasadil@verizon.net
As a homeowner who has been interested in energy efficiency and climate change for some time, I was pleased to see Congress pass the Inflation Reduction Act (IRA), which offers homeowners a range of incentives to improve the efficiency and reduce the emissions of their homes. But, the IRA is not the only show in town. Maryland’s EmPOWER Maryland program has been in effect for years. I’ve had a chance to use EmPower Maryland and some of the technologies being subsidized by the IRA. In the process I was able to reduce my home’s energy consumption by 50% and offset 10% of my remaining consumption with solar. In the next couple of pages I’ll share what I’ve learned about these programs and some of the technologies they promote.
EmPower Maryland and the IRA overview
The IRA provides tax credits and/or rebates for installing HVAC systems, major electrical appliances and other equipment that uses energy efficiently. It also subsidizes residential generation of clean energy including solar panels, wind turbines and fuel cells.
Empower Maryland is more focused on improving the envelope of the home - the walls, floors and ceilings that keep the inside in and the outside out.
The IRA is more generous than EmPower Maryland, but it’s also more complicated. One complication stems from the fact that the rebate programs will be administered by the states. As a result, IRA rebates are not currently available or even fully defined. And, they won’t be until the states develop their programs and they’re approved by Washington.
Empower Maryland, on the other hand, has been up and running for years and is fairly simple. It starts with a home energy audit by one of PEPCO’s participating contractors. The audit costs $100 for most homes and provides an in-depth look at the home and it’s systems. It includes a “blower door test” to determine how leaky the house is and to identify the source of the main leaks. The problems found and the suggested solutions are itemized in an audit report along with the estimated costs of these solutions, the resulting savings and the EmPOWER Maryland rebates.
EmPower Maryland in Tamarack Triangle
Spoiler alert - the audit for virtually every home in Tamarack Triangle will report that the attic is poorly insulated and leaky, with air leaking between the living space and the attic. This isn’t a subtle problem. On frosty or snowy days you can actually see it from the street.
In this picture, the fact that the snow melted off the part of the roof directly above the attic, but not the eves or carport, indicates that the snow is being melted by heat from the attic. The heat we pay for is leaking into our attics and heating our roofs instead of heating us. The obvious solution is more insulation - four or five times more than was the fashion in the 60’s. But, it is just as important to seal the attic from the living space. Air can leak between the living space and the attic through the penetrations for lights or vents that we can see from the living space. But, there are other leaks you can only see from the attic. For example, the small gaps between the drywall and the top plates of every wall. Or, the larger gaps around penetrations for wires and pipes. And, way too often, you can find chases around chimneys and ducts that were never closed off - leaving openings large enough to drop a hammer from the attic all the way to the basement. You can see the symptoms of a leaky attic from the street during the winter, but leaky attics are a problem year round. We don’t want our homes exchanging air with the attic whether it’s below freezing or over 120º.
The good news is that all this gives us substantial room for improvement. The bad news is that addressing these problems can cost several thousand dollars. That’s a pretty big expense, but it’s not a very big investment. An investment that will pay dividends in the form of lower energy bills and a more comfortable home for as long as the home is standing.
IRA Overview
The IRA helps us enlist modern technology to improve the efficiency of our homes. But, the technology can be complicated and the IRA is worse. Most IRA rebates are limited to homeowners making less than 150% of the Area Median Income, AMI. Those below 80% are reimbursed for 100% of the eligible costs up to the rebate maximum. Above that threshold, the reimbursement is 50%, but the rebate maximum remains the same for both groups. Tax credits are available to homeowners of all income levels. This guide from Rewiring America tries to simplify the eligibility question for those of us who have no idea what the local AMI is. It shows homeowners the rebates and tax credits available to them for specific projects based on their income and location. However, until we see Maryland’s rebate plan, we have to take everything about rebates with a grain of salt.
Tax Credits
We have more certainty on the tax credit side, since they are already in place. Here is an IRS description of the credits. The credits are divided into two programs: the Energy Efficient Home Improvement Credit, focusing on improving the home’s energy efficiency, and the Residential Clean Energy Credit, focusing on residential energy generation - mostly.
The Energy Efficient Home Improvement Credit provides a 30% tax credit for envelope improvements like doors, windows and insulation (which can be used in conjunction with Empower Maryland benefits) but they’re capped at $1,200 per year and only apply to the cost of the materials - not installation. Air conditioners, heat pumps, furnaces, heat pump water heaters are also covered. Heat pumps for home heating or water heating are eligible for $2,000 tax credit per year - combined. This is a non-refundable tax credit, so it can only be used to reduce your tax liability to zero. Any excess credit is lost.
The Residential Clean Energy Credit is a 30% tax credit on the full cost of purchasing and installing energy generation from solar, wind and fuel cells as well as backup batteries to store that energy. Geothermal heat pumps and solar water heaters are also included. This is a non-refundable tax credit, but excess credits can be rolled forward to future years.
Rebates
Since the IRA rebates are still a work in progress, we won’t know who qualifies, when they start or exactly how they work until Maryland finalizes their plan. We do know that there will be two rebate programs, one that provides rebates for installing specified systems and another that homeowners can qualify for by demonstrating actual or modeled energy savings.
According to IRA guidelines, the first program, High Efficiency-Electric Home Rebate (HEEHR), specifies rebates of $840 for induction stoves, $8,000 for air source heat pumps, $1,750 for heat pump water heaters and $840 for heat pump clothes dryers. There is also a $2,500 rebate for the required wiring and $4,000 for a new electrical panel.
The second program, the Home Owner Managing Energy Savings (HOMES) rebate, is open to homeowners of all incomes and ranges between $2,000 and $8,000 depending on income and energy savings, with low income and high savings getting the largest rebates.
The IRA in Tamarack Triangle
The IRA gives homeowners a number of great opportunities to improve residential efficiency. But, in a country with over 300 million people, living in different climates and circumstances, one size does not fit all.
So what does and doesn’t work for Tamarack Triangle?
Electrification is the wave of the future and a major theme of the IRA. Unfortunately, today electricity is not intrinsically cleaner or cheaper than natural gas. In fact in our area, Btu for Btu, the carbon footprint of electricity from the grid is 80% higher that that of natural gas. And, the price is almost four times as high. This gives natural gas a serious advantage over electricity, but only when we’re talking about simple, electric resistance heating devices - like ovens, dryers and baseboard heaters. Electricity’s advantage is based on the efficiency of the devices it powers, like electric water heaters and heat pumps.
Water Heaters
Heat pump water heaters are a great example of the efficiency of electric appliances. But, they’re also an example of the fact that one size does not fit all.
Heat pumps don’t create heat. They just move it from one place to another. The defining feature of a heat pump is that it can move heat from a cooler place to a warmer place. And, it can do that using far less energy than it would take to create the same amount of heat through combustion. A modern heat pump water heater can put three times as much energy in the tank as it consumes. In heat pump parlance we would say that it has a coefficient of performance (COP) of 3.
A by product and potential benefit is that as the heat pump water heater heats the water, it cools the surrounding air - providing free air conditioning.
On the other hand, with traditional gas water heaters much of their energy literally goes up in smoke, as their exhaust escapes up the chimney, so only a fraction of the energy consumed goes into the tank.
Unfortunately for gas water heaters - and their owners, the bleeding doesn’t stop when the fire goes out. A steady stream of warm air, heated by water in the tank, continues to waft up the chimney 24/7 - resulting in substantial standby losses. An electric water heater of any type avoids that problem by being completely sealed and insulated.
Reducing standby losses is not the heat pump water heater’s claim to fame, but it is a substantial advantage that it shares with all electric water heaters. And, in some circumstances, it can outweigh the heat pump advantage.
Heat pump water heaters are most useful in warm climates where air conditioning is a good thing year round. In other climates, during the cooler months, a heat pump water heater will either be working against the furnace or it will be switched to electric resistance mode, which is much less efficient than heat pump mode, but still more efficient than a standard gas water heater.
Heat pump water heaters are also most advantageous to households that use the most hot water. The energy and cost savings is the same for everyone per gallon, but more gallons means more total savings.
I discovered where I am on that heat pump advantage spectrum when I replaced my gas water heater with an early generation heat pump water heater 10 years ago. The good news is that, when running in heat pump mode, my water heating energy use dropped to one sixth of what it had been. But, my heat pump with a COP of 2 couldn’t do that all by itself. In my situation, eliminating standby losses was a bigger factor than the heat pump. I only ran the water heater in heat pump mode four or five months a year, but the advantage from the reduction in standby losses was 24/7, whether the heat pump was running or not.
I also learned that we need to look at these choices from a lifecycle perspective. My heat pump still runs, but when the tank sprung a leak, as they are wont to do, the whole thing became useless. The good news is that there are now a number of efficient options for low use and/or cold climate households like mine. An electric tankless water heater (my current choice) is probably the most efficient. For those who want to ensure that the shower won’t run cold the minute the power goes out, most standard electric resistance water heaters are greener than gas models. But, to maximize environmental and economic impact, there are two electric tank options that offer lifetime warranties (with fine print). First, there are stainless steel tanks, which are fairly new to the market. Another option, Marathon, a brand that has been around for many years, produces a distinctive, dome shaped plastic tank. If either of these water heaters only last twice the life of a standard water heater, they will probably save the cost of buying and installing a new water heater in the next ten years.
However, there is no IRA money earmarked for these. Despite my tepid endorsement, heat pump water heaters are still the darling of the IRA. They get a tax credit of up to $2,000, a rebate up to $1,750 and yet another rebate up to $2,500 for associated electrical upgrades.
Although the IRA does not earmark subsidies for non-heat pump electric water heaters, it is possible that they could be part of a package that qualifies for the HOMES rebate.
Heat Pump Space Heating
When it comes to heating homes there are two types of heat pumps: air source and ground source. An air source heat pump is essentially a bidirectional air conditioner. In heating mode, it extracts heat from the outside air and pumps it inside. In cooling mode, it does the opposite.
As the outside air gets colder, extracting heat from it becomes more difficult. A ground source heat pump is one way to get around this problem. Instead of trying to get heat out of cold air, you extract it from the much warmer ground by circulating fluid through underground pipes and extracting heat from the fluid. Air conditioning just reverses the process.
All this is very expensive and probably overkill for this area. With that, you now know everything I know about ground source heat pumps and we’ll return to air source heat pumps.
There are two ways air source heat pumps can be used to heat our homes: there is the standalone heat pump where the heat pump does all the heating and cooling, replacing both the air conditioner and the furnace, or a “dual fuel” system, where the heat pump just replaces the air conditioner and works in conjunction with the furnace to heat the home.
Dual Fuel Heat Pump Systems
Dual fuel systems use simple and relatively inexpensive heat pumps. They are not intended to heat the home in the coldest weather. The heat pump does the heating in milder temperatures and switches over to the furnace in colder temperatures.
Thanks to the IRA, homeowners who need to replace an air conditioner may find that replacing it with a heat pump is less expensive than a straight AC for AC swap. Heat pumps are more expensive than an air conditioner, but the IRA provides an $8,000 rebate for installing a heat pump and rebates for the associated electrical upgrades.
Standalone Heat Pump Systems
Standalone heat pumps are not very popular in the colder parts of the US. Still, they’re a big hit in Norway. That's because Norwegians use modern, cold weather heat pumps, while ours are frequently transplanted warm weather heat pumps. Warm weather heat pumps are typically single speed units, sized to the cooling load. They meet the heating load with supplemental electric resistance heating. That’s fine in warmer climates where the heating and cooling loads are not too different, but our heating loads are much higher than our cooling loads, which would result in high reliance on electric resistance heat which would make the conversion counterproductive from both a cost and environmental perspective.
In contrast, cold weather heat pumps are variable speed systems, sized to the heating load. By ramping up and down incrementally from 100% to 25% of their maximum capacity, they can efficiently accommodate the lower cooling load (or the heating load on mild days). Instead of frequent cycling from full speed to dead stop, cold weather heat pumps run slower and longer. This improves their efficiency, provides quieter operation and more constant temperatures.
All this is well understood in Norway. But, not everyone in the US got the memo. That includes some well respected HVAC professionals, steeped in old school ideas, who can be dangerous. I’ve been shopping for a replacement for my 25 year old dual fuel system. On two occasions, I’ve had salesmen propose gas systems. When I asked for an all electric option, they proposed a warm weather heat pump the same size as my current heat pump and an electric resistance heater that was just as powerful as the heat pump. Essentially, they replaced my relatively efficient gas furnace with electric resistance heat.
If I had accepted, I would have ended up increasing both my heating costs and carbon footprint. And, the contractors would have probably just shrugged and said, with some justification, that this was all my idea. From that I learned not to push sales people out of their comfort zone. If they are not comfortable proposing a heat pump system, I don’t want them trying to build one for me.
One thing that would have saved me from myself in those situations is that those systems would not have met the efficiency requirements to qualify for the $2,000 tax credit. Qualifying for the tax credit is not just about the money. The Northeast Energy Efficiency Partnership (NEEP) maintains a database providing information on cold weather heat pumps, which includes COP and capacity statistics at 47º, 17º and 5º.. Heat pump efficiency goes down as the outside temperature decreases. Capacity, does too - except for heat pumps like the Mitsubishi Hyper Heat line. The NEEP data helps homeowners ensure that a system will not just be efficient at colder temperatures, but that it will also provide the required capacity throughout the expected temperature range, while minimizing or eliminating the need for supplemental electric resistance heat.
The NEEP database allows you to search for systems that are eligible for the IRA tax credit in your region. There are two regions North and South. Maryland is South. To make things more interesting the eligibility standards may change every calendar year.
Residential Back Up Batteries
The IRA offers a 30% tax credit, which can be carried forward to future years, for the installation of backup batteries. Batteries are a key part of our pivot to cleaner energy. They power EVs. They can make the electricity grid cleaner and more reliable. In this capacity, residential back up batteries perform a useful role in areas where the utilities can pay to draw power from them when needed.
Unfortunately, we don’t live in one of those areas. Because power outages here are rare, it would be greener to install a gas fired generator that would run almost never and let the battery be used for a useful purpose.
Rooftop Solar
Some of our cleanest electricity comes from solar panels. Making your own with roof top solar is a route many of our neighbors have taken. The IRA offers a 30% tax credit (which can be carried forward to future years) for the installation of roof top solar. Electricity rates are going up, so locking in a rate of zero could be a good investment. Homes with unobstructed, southerly exposures are the best candidates. For those who don’t have a good exposure (like me) the decision is more difficult. I went solar despite my poor site. The result was a serious hit to the potential performance of those panels. The PVWatts website tells me my solar array would produce 50% more energy, if it was facing south with an unobstructed view of the sun. I did this 9 years ago. Maybe it was a mistake, maybe not. But, today it definitely would be, because we have another option - community solar.
Maryland’s community solar program allows anyone who pays an electric bill to go solar virtually. Homeowners, renters, apartment or condo dwellers can subscribe to a percentage of the output from a local solar farm. Their share of the farm’s output is credited to their electric bill just as if it came from rooftop solar, but nothing is installed on their roofs. They don’t even need to have a roof. Most plans offer a slight discount to PEPCO rates and there are no additional fees. Community solar customers are money ahead from the first month. This may be the greenest way to go solar. Solar farms have a perfect exposure, so the solar panels are used to their full advantage and economy of scale reduces costs. Search online for “community solar” and you will find a number of companies that do the marketing and customer service for local solar farms.
Induction Stoves
There’s been a lot of debate about gas vs. electric stoves recently. From an environmental perspective, it’s much ado about little. An induction stove is more efficient than a gas burner because it heats pots and pans directly without heating the air or stove top. But, electric ovens are not inductive. So, with the oven, we’re talking about natural gas heat vs electric resistance heat. As we said before, natural gas is cheaper and cleaner than electric resistance heat. In any case, for most people the total impact, one way or the other, is small enough that this shouldn’t be a priority on an environmental basis.
A serious study of the effect on indoor air quality of burning natural gas in the home should have also looked at homes with ventless gas fireplaces. Also, improving indoor air quality requires looking at more than just natural gas exhaust. Cooking, even electrically, and just living, generate pollutants which need to be considered. Very likely, the conclusion of such a study will recommend additional ventilation, rather than replacing the gas stove.
That said, although I still have my gas stove, I also have a $70 plug in induction hot plate which I use instead of the stove and I’m quite happy with it. But, I have to confess that no one who knows me asks for or accepts my advice on cooking.
Getting Started
The IRA rebates being in limbo complicates things for those who qualify. Even so, getting an energy audit is the reasonable first step for any efficiency enhancements. It gives you the information you need to move forward or at least start planning. For most 60 year old homes, attic insulation and air sealing will be the first priority. EmPower Maryland incentives and the IRA tax credits for this are already in place. It’s a good idea to do this first because it will change the amount of heating and cooling your home needs. Knowing what those numbers are should be factored into sizing of a new HVAC system or a solar array.
Those who qualify for the IRA rebates, will probably want to hold off on any upgrades until the rebates take effect - hopefully in the near future.
Those who will not qualify for the rebates, will still qualify for the tax credits anytime they decide to move forward.