The Inflation Reduction Act comes to Minnesota homes

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Matt Doll, Minnesota Environmental Partnership

Minnesota is a cold state. And, almost as often, a hot state. Sometimes, we’re both in the same month, even the same week. Suffice to say that heating, cooling, and powering our homes and businesses is a big deal. It costs a lot of energy and generates a lot of climate emissions, which sets us up for even more extreme weather down the line. 

That’s one of the biggest reasons that the Inflation Reduction Act’s energy provisions are a shot in the arm for Minnesotans. The IRA is, as many have said, about “carrots” for the energy sector. It doesn’t introduce many new restrictions on industries, but it provides tremendous incentives for businesses and individuals to switch to clean energy.

A couple weeks ago, MEP had the opportunity to sit down with Pete Wyckoff and Paula Sunde, lead staffers for U.S. Senator Tina Smith, to learn about how the IRA will affect Minnesota. They explained how the climate provisions will specifically help Minnesotans easily access energy savings and weatherization – the figures in this column largely come from their informational documents.

Heating and cooling

In 2018, Minnesota’s residential and commercial buildings emitted the equivalent of 14 million tons of carbon-dioxide in climate pollution from natural gas alone. That’s part of what has contributed to a troubling trend. While electricity and transportation emissions in Minnesota decreased from 2005-2018, building emissions actually went up, contributing to our lackluster progress on cutting emissions economy-wide.

Part of the challenge is that Minnesota homes are old – with a median age of 43 years – and not terribly efficient, making heating and cooling in our varying weather an expensive proposition. The vast majority of homes in our state also rely on gas heating. As we wrote recently, U.S. natural gas prices hit a 14-year high on August 14th. Relying on gas is costly for our wallets and harmful to the planet in the long run, but it can be prohibitively expensive for residents to invest in insulation and heat pumps to make the switch to cleaner electricity.

Fortunately, the Inflation Reduction Act includes Residential Clean Energy Tax Credits. For the next ten years, individuals will be able to access these credits to help reimburse up to 30% of their costs for energy efficiency improvements starting January 1, 2023.

  • Water Heaters: $600 for electric or gas heat pump water heater or heat pump, central air, gas or propane water heater or hot water boiler, or biomass boiler
  • HVAC: $2,000 towards a heat pump
  • Windows and Doors: windows ($600), doors ($250 per door, up to $500 total)
  • Insulation/Weatherization: $1200
  • Home Energy Audits: $150

And that’s just the tip of the iceberg. The IRA also provides $4.3 billion in funding to state governments to implement a HOMES rebate program, which would reimburse homeowners for whole-home retrofits to save energy. These rebates (and those in the following section) can’t be combined with the tax credits listed above, but will help to reach a broader set of households.

For single family homes:

  • 15-20% energy systems savings: a payment rate per kilowatt-hour saved equal to $2,000 for a 20% reduction or 50% of the project cost.
  • 20-35% energy systems savings: the lesser of $2,000 or 50% of the project cost.
  • Over 35% energy system savings: the lesser of $4,000 or 50% of the project cost.

For multi-family homes:

  • 15-20% energy systems savings: a payment rate per kilowatt-hour saved equal to $2,000 for a
  • 20% reduction or 50% of the project cost.
  • 20-35% energy systems savings: $2,000 per dwelling unit with a maximum of $200,000 per
  • multifamily building.
  • Over 35% energy system savings: $4,000

For low- and moderate-income households:

  •  The federal government recommends that the state program rebates be doubled or upped to 80% of project cost. 
  • These households have traditionally had the greatest difficulty accessing efficiency upgrades and, consequently, had disproportionately high energy bills. 
  • These targeted and higher rebates would go a long way toward saving these families money and making their homes more livable.

And on top of that, the IRA includes another $4.3 billion in funding – $4.28 billion for state governments and $225 million for tribal governments – to set up rebate programs to reimburse electrification investments. This includes upgrades like:

  • Heat pump water heaters ($1,750)
  • Heat pump heating/cooling ($8,000)
  • Electric stove/cooktop/range/oven or clothes dryer ($840)
  • Electric load service center upgrade ($4,000),
  • Insulation or air sealing for better ventilation ($1,600)
  • Electrical wiring ($2,500).

Speaking from personal experience, these rebates would be a major boon for residents. I recently removed my gas oven and range and replaced it with an induction unit. While the energy savings and performance are well worth the price, the cost to upgrade my electrical panel alone was nothing to sneeze at. These rebates will help reward consumers for making choices healthy for them, their bank accounts, and our planet.

The next steps

The tricky part with these energy-saving rebates is the same issue that faces many federally-funded state programs: the state has to establish and run the program. As we’ve seen with issues like Medicaid expansion, or with Minnesota trying to access federal matching dollars for transportation, state governments can be resistant to setting up programs for ideological or other reasons.

We must also recognize that during the negotiation process, fossil fuel concessions were made in this bill that will have a greater effect on already overburdened communities. It will be up to the state to ensure that money included in the IRA to support environmental justice will find its way to BIPOC and overburdened communities. It’ll be up to Minnesotans and organizations like MEP to help ensure the law reaches its full potential for cutting emissions and reducing energy costs. This includes working with government leaders and agencies and partners to ensure these funds reach the communities in our state that need it the most. 

Fortunately, we have the facts on our side: the cleanest, cheapest type of energy is the energy you never use. Efficiency is a win-win for our planet, economy, and health, and we’re willing to bet that Minnesotans will enjoy making their homes cozier in the winter and cooler in the summer.

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