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By Dan Bradley, Raquel Malmberg, Vinod Ramachandran, Jeffrey Meyers
The U.S. Department of Energy (DOE) recently updated its guidance for the Home Energy Performance-Based Whole House (HOMES) rebate and the High-Efficiency Electric Home (HEEHR) rebate programs. As part of the Inflation Reduction Act (IRA), Congress appropriated, and the DOE will soon allocate to state energy offices, some $8.8 billion for home energy efficiency and clean energy appliance upgrades in order to achieve more affordable, energy efficient homes. The revised guidance, which was issued on October 13, 2023, responds to stakeholder feedback on DOE’s initial program guidance issued in July 2023 and introduces important new clarifications and flexibilities that will aid states in planning, designing, and implementing the HOMES and HEEHR rebate programs.
The DOE updates were made to the Home Energy Rebate Program Requirements & Application Instructions, the Administrative and Legal Requirements Document, the Programs Approved for Categorical Eligibility List, and several of the technical support documents.1 Some changes are merely clerical, but there are others that that will surely impact how state administrators decide to operationalize these two complex energy rebate programs. Here are the most significant changes and why they matter:
In order to protect consumers and to provide quality assurance over energy-efficiency upgrades and appliance installation, the DOE initially required independent onsite post-installation inspections for upgrades under both HOMES and HEEHR programs for the first five projects of a contractor and for 5% of all projects thereafter. The revised program requirements in Section 3.2.5 now allow for virtual home inspections, provided that the homeowner or property owner consents to a virtual recording of their home and the state’s Consumer Protection Plan contains the following elements:
Key Takeaway: The flexibility of virtual home inspections to satisfy quality assurance compliance requirements may reduce the time, labor, and cost of full onsite home inspections. However, the impact of this flexibility is dependent on homeowner consent and involves additional requirements to assure the integrity of the inspection and homeowner privacy.
The DOE’s initial program requirements in Section 3.1.2 limited the issuance of rebates for projects initiated only after the state had received its HOMES grant award. The revised program requirements now specifically allow rebates to be given to energy-efficiency projects under HOMES initiated on or after August 16, 2022 (the enactment date of IRA), provided that these projects meet all applicable DOE and state requirements. Retroactive rebates may not be given for home appliance upgrades under HEEHR.
Key Takeaway: While retroactive rebates for energy-efficiency home upgrades may be used equitably to capture prior projects back to August 2022, states and their contractors must still ensure that all income thresholds, rebate limits, and other requirements are met. The volume of retroactive rebates a state may have to issue will be influenced by the program design. For example, a state that limits participation to low-income residents may have fewer retroactive rebates to give than a state that opens participation to broader participation.
A major focus of the HOMES and HEEHR rebate programs is to ensure that low and moderate-income households, including those in disadvantaged communities, participate fully in these programs. States must allocate a percentage of their rebate funding for each of the two programs in line with their percentage of low-income households. States are given several tools to achieve this result. Under the IRA, those low-income households that demonstrate their eligibility for a federal program with income restrictions at or below 150% of area median income are deemed “categorically eligible” to receive the higher level of rebates available to households with incomes less than 80% Area Median Income. States may also incorporate their own categorial eligibility standards, provided they satisfy DOE requirements.
The revised DOE guidance expanded the list of federal programs to include the Women, Infant, and Children’s benefits program (WIC), as well as reorganizing the eligibility tables and the list of federal programs in Appendix A for easier identification of the income levels associated with categorical eligibility.
Key Takeaway: DOE has significantly clarified the qualifying federal programs that will enable eligibility of low-income households for higher levels of HOMES and HEEHR rebates.
Under the IRA statute, any state that receives a HOMES or HEEHR, or both, grant may not use more than 20% of those funds during the duration of the program for planning, administration, and technical assistance. The DOE’s initial guidance noted that administering such a complex, high-touch project may well incur overhead costs exceeding 20%, including home assessments, energy audits, and the myriad of quality assurance tasks such as monitoring and reporting, among others. To cover these costs, the DOE indicated that states could request rebate program funds to cover these administrative functions once alternative funding sources were exhausted. The revised program requirements still allow states to seek DOE approval for the use of rebate funds for uncovered project administrative costs, but also reaffirm that the DOE cannot approve the use of administrative funds in excess of the 20% statutory cap.
Key Takeaway: States must carefully estimate the costs associated with planning for and implementing the project over the entire program cycle and utilize flexibilities such as virtual home assessments to hold administrative costs under the 20% cap. This will also likely encourage states to identify potential alternative funding from utilities, non-profits, and other state agencies for expenses such as energy audits.
States will not only need to ensure close tracking of program updates but have in place a strategy and work plan designed to quickly and accurately incorporate DOE program adjustments to continue to ensure an uninterrupted customer experience while maintaining compliance with all program requirements. This result will flow from a carefully planned, designed, and implemented rebate program.
The foundation for HOMES and HEEHR program’s success starts with developing a vision that will bring clear direction to stakeholders and creating a well-defined strategy grounded by the DOE’s requirements to drive the long-term plan. State goals for the rebate programs may vary from efficient and equitable goals, such as reducing energy burden, to additive goals, like braiding and stacking existing programs to deliver deep energy retrofits. Some states may wish to streamline offerings to accelerate program launch and operations. Others may seek to take additional time to design a program that addresses a particular market transformation goal or a gap that is not addressed by existing programs.
Consumers across the country are seeking information and awaiting the launch of these IRA rebate programs to save money on energy bills, upgrade to clean energy equipment, and improve energy efficiency. Residents with current needs to install improvements, including opportunities to convert from a gas or oil heat pump to electric, must decide whether to hold off on those improvements or replace them now without a rebate. Over time, pressure may continue to build as residents and contractors push for the program’s launch.
We understand energy rebate program evaluation —Guidehouse provides over 30 years of rebate program experience from program strategy, analytics, and potential studies to design, execute, and evaluate innovative and effective programs throughout the U.S., Canada, the UK, and the Middle East. This expertise provides Guidehouse with an understanding of successful residential programs in markets across the U.S. We have a 360-degree view of what is required to make these programs successful and will bring that experience to bear for our clients.
We understand and track federal regulations and guidance — Through its Community Building and Investment Center of Excellence©, Guidehouse tracks all federal regulatory developments that impact its clients’ programs and services and socializes this information to keep clients up to date with information on how the latest regulations and guidance may impact their project goals. Our understanding of the federal regulatory environment allows our team to recommend best practices in program administration and compliance.
We design, implement, and operate grants management programs — Our team has extensive experience with grants management, from the design of technology-based portals to the review of all grant requirements by the Federal Uniform Guidance, 2 CFR Part 200, as well as all program requirements and guidance issued by federal agencies. The HOMES and HEEHR Energy Rebate programs similarly involve allocating funds based on eligibility and include extensive reporting, monitoring, and compliance requirements. We fully understand and support monitoring, reporting, and compliance requirements having performed these services for more than 65 state and local governments relative to numerous federal funding sources, including all COVID-19-related response, recovery, and rebuilding legislation.
We engage with clients locally and with key stakeholders and communities — The successful pursuit and implementation of large federal grants are tied to community understanding and support. Many of the funding opportunities offered by the IRA involve impactful investments in our nation to address long-standing and urgent climate, energy, and local infrastructure needs, including for disadvantaged communities. Guidehouse works locally with our clients to create a winning strategy and engages with the local community to ensure successful grant pursuits and post-award implementation.
1.“Home Energy Rebates Programs Guidance.” n.d. Energy.gov. Accessed December 6, 2023. https://www.energy.gov/scep/home-energy-rebates-programs-guidance.
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