| It has been 18 months since President Biden signed the Infrastructure Investment and Jobs Act (IIJA) into law, and 9 months since he enacted the Inflation Reduction Act (IRA). The two landmark pieces of legislation established a number of funding programs designed to mitigate the impacts of climate change and grow the clean energy economy.
Building decarbonization is an important component of these mitigation efforts, and a total of $94.7 billion across the two bills is dedicated to building electrification and energy efficiency, according to Buildings Hub. Of that funding, $84 billion could be attributed to the single-family housing sector while $33 billion could be allocated to schools. Additionally, the IRA includes $37 billion in new or expanded tax credits currently available to taxpayers. To give you a sense of where the funding will go and how it will be used, here are our high-level summaries and timeline updates for key federal electrification and energy efficiency programs across both major bills. IIJA Programs Weatherization Assistance Program The U.S. Department of Energy’s (DOE) Weatherization Assistance Program (WAP) aims to increase the energy efficiency of dwellings owned or occupied by low-income persons, reduce their total residential energy expenditures, and improve their health and safety. The program especially targets low-income persons who are particularly vulnerable, such as the elderly, those living with disabilities, and children. The IIJA includes a one-time appropriation of $3.5 billion to the WAP, with a grant award period of up to five years. These IIJA funds are intended to supplement existing WAP program funds allocated to states every year through annual appropriations. Funds flow from the federal government to states and Tribes, which are then distributed to local governments and weatherization agencies/partners. All states seeking IIJA WAP funding must have submitted project plans to the DOE by no later than July 2022. The WAP program is critical to supporting low-income communities across all fifty states as they weatherize, insulate, and seal their living spaces. These efforts will ultimately serve to reduce household energy burden, improve health outcomes and equity, and save beneficiaries money. Likewise, each state grantee of IJJA WAP funds will receive a training and technical assistance allocation to attract new hires and establish a robust decarbonization workforce. In providing another vector for electrification, IIJA WAP funds can also be used to conduct cost-effective fuel switching projects. Assisting Federal Facilities with Conservation Technologies (AFFECT) Federal agencies can apply for grant funding through the DOE’s AFFECT program, funding they can then leverage with private capital to facilitate energy and water efficiency upgrades at federal buildings. This program would directly support President Biden’s goals to decarbonize the public building sector 30 percent by 2030. There are more than 350,000 federal buildings in the United States, and energy consumed for onsite space heating, water heating, and cooking “accounts for over 25 percent of Federal emissions,” according to the White House. The DOE intends to award $250 million to federal agencies through the AFFECT program. Applications for the Summer 2023 cycle are due May 31, 2023. Energy Efficiency and Conservation Block Grant (EECBG) Program Administered by the DOE, the EECBG Program is a relatively flexible program with an umbrella objective to assist states, local governments, and Tribes to reduce energy use, reduce fossil fuel emissions, and improve energy efficiency. There is currently a total of $430 million available for formula grants and $8.8 million available for competitive grants through this program across the broad spectrum of building types. State, local, and Tribal governments are eligible for the EECBG formula grant program ($430M) and pre-award documentation for those grants is due July 31, 2023. States can apply for EECBG Program formula funding through July 2023 and local governments and Tribes can apply through January 2024. The EECBG competitive grant program funding ($8.8M) will support small to medium-sized local governments and state-recognized Tribes that do not qualify under EECBG formula grant program. Concept papers are due June 5, 2023. IRA Programs High-Efficiency Electric Home Rebate Program (HEEHRA) Administered by the DOE Office of State and Community Energy Programs, the HEEHRA program serves as one of the IRA’s cornerstone building electrification initiatives. In establishing HEEHRA, the IRA authorizes $4.5 billion for point-of-sale consumer household electric appliance rebates, of which $225 million is set aside for Tribal governments. This program specifically targets low- and moderate-income (LMI) households and LMI-occupied multifamily properties. These rebates will cover 100 percent of the total project costs for qualifying low-income households, up to the upgrade-specific funding cap, with moderate-income households eligible for up to 50 percent cost coverage. A single entity can apply for a maximum of $14,000 in rebates through this program, but cannot stack funds with other federal or state grants/rebates for use on the same electrification project. Funds are to be administered and distributed by state and Tribal governments, which each receive a specific allotment defined by an established formula. Rebate amounts (maximums) are as follows:
In March 2023, the DOE issued an Administrative and Legal Requirements Document (ALRD) allowing states/Tribes to apply for up to 2.5 percent of their total formula allocations for administration, technical assistance, workforce, education/outreach, and planning to begin the process of setting up their HEEHRA programs. This does not serve as official guidance, however, which is expected to be released mid-summer of this year when the full funding allocation will be made available to states and Tribes. Once guidance is issued this summer, applicants will have to submit a plan to the federal government outlining their programs and detailing how they will meet minimum requirements established in the ALRD and the IRA. At $27 billion, the Greenhouse Gas Reduction Fund (GGRF) is the single-largest program we track on Buildings Hub, excluding tax credits. The GGRF, administered by the U.S. Environmental Protection Agency (EPA), will be implemented via three competitive grants. Applications are expected to open in June 2023 and all funds are required to be dispersed by September 2024. Each of the three competitive funding opportunities must align with Justice40. The GGRF includes:
According to the EPA, the GGRF will help reduce GHG emissions, advance environmental justice goals, and bring “economic revitalization to communities, particularly those that have historically been left behind.” Learn more about how the GGRF works in this Atlas Issue Brief. Energy Efficient Home Improvement Credit (25C) and Residential Clean Energy Credit (25D) Starting in January 2023, eligible taxpayers can apply these credits to their deductions. Section 25C of the IRA extends and amplifies the Energy Efficient Home Improvement Credit, increasing the credit amount for energy efficiency improvements from 10 to 30 percent, for a period of 10 years. Eligible taxpayers can receive as much as $600 per project for the installation of improved insulation such as windows, doors, air insulation, and service panel upgrades, up to $1,200 in total per year (amended from a lifetime limit). Additionally, taxpayers are entitled to as much as $2,000 for air source heat pumps, heat pump water heaters, and biomass stoves/ boilers as a special carveout. A $150 credit is provided for households to conduct a home energy audit. Beyond these itemized credits, 25C also updates the energy efficiency standards for all building envelope components: Energy Star for exterior windows and skylights and the most recent International Energy Conservation Code standard for all others, such as doors. Lastly, roofs are no longer treated as building envelope components, but insulating materials. Section 25D of the IRA extends the Residential Clean Energy Credit over 10 years for the following target technologies: solar electric systems, solar hot water, and geothermal heat pumps (covers both purchase and installation costs). The credit values are as follows: 30 percent between 2022 and 2032, 30 percent in 2033, and 22 percent in 2034. Both tax credits are nonrefundable, but there are no regulations against stacking them with state or local tax credits, or other state or federal rebates/incentives. Enhanced Use of Defense Production Act of 1950 (Heat Pumps) The IRA appropriates $500 million to implement the Defense Production Act (funding is available through 2024). These funds will focus on supporting activities related to domestic critical minerals processing and accelerated manufacturing of U.S. electric heat pumps. On April 18, 2023, the DOE announced a $250 million funding opportunity to create or expand domestic production capacity or retrofit existing production capabilities for electric heat pump systems, components, and materials. Concept Papers are due May 19, 2023, and full applications are due August 1, 2023. Across the United States, heat pump penetration as a share of the total HVAC market is relatively small; only 13 percent of US households in 2020 reported using a heat pump for primary heating, according to Atlas analysis of DOE survey data. This $250 million funding opportunity will serve as a major incentive to build domestic heat pump manufacturing capacity and scale overall deployment across the United States. Check out the Buildings Hub Federal Policy and Funding dashboard to see more federal programs and funding opportunities. |
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