Government Incentives for Energy Efficient & Renewable Energy Upgrades   by James Carlin

If you’ve paid attention to the news surrounding government programs designed to motivate the implementation of energy efficient and renewable energy upgrades, you’re probably more than a little bit fatigued – and possibly a little confused. Let’s clear up this confusion and take a closer look at the available incentives to help homeowners improve their home’s energy performance.

Tax Incentives
As you were doing your holiday shopping and getting ready to ring in the New Year, Congress was hard at work (relatively speaking of course) addressing the expiring federal tax incentives for energy efficient home upgrades.

In short, tax incentives for energy efficient home upgrades were reduced to 10% of eligible upgrade costs with a $500 cap for tax year 2011, down from 30% of eligible upgrade costs with a $1,500 cap for tax years 2009 and 2010. The upgrades covered remain largely unchanged, although certain upgrades now carry new caps, like a maximum of $200 for exterior windows and skylights and caps for certain heating and cooling upgrades. Another point of note is that the $500 limit applies to cumulative claims for energy efficient upgrades dating back to 2006. In other words, if you have applied (or will apply for 2010) for $500 or more in tax credits for upgrades made from 2006 – 2010, you are not eligible for the tax credit in 2011.In the case of renewable energy upgrades, including Geothermal heat pumps, solar Photovoltaic Cells, solar water heaters and fuel cells, these home upgrades still garner a 30% tax credit with no cap and will continue to do so until the end of 2016.

Government Programs
As it relates to energy efficient upgrades, the new federal tax policy is certainly less advantageous to homeowners – but there is a potential silver lining. States, cities and municipalities have been awarded an unprecedented amount of federal funding to spur energy saving home upgrades in their respective jurisdictions. Much of this funding came from the ARRA (aka the “Stimulus Bill”). In the ARRA, the federal government made the determination that all states and cities are different, as are the methods by which they most effectively encourage homeowners to take action – so they put the power in the hands of the states and cities to shape their own programs.

Most of the states and cities that were awarded funding are currently structuring their programs and will introduce them in the upcoming months. In most cases, these programs will include a range of incentives to encourage participation. Utilities also continue to offer more targeted and shorter duration programs that encourage the more efficient use of energy. The net result of these state, local and utility programs could lead to more attractive incentives in your area than previously offered by the federal government.
Unlocking Potential Savings in 2011

The combination of the renewed, albeit reduced, federal tax incentives and state and local incentives should stabilize the market for home energy saving upgrades in 2011, as will increased homeowner awareness and education. However, headwinds persist in the form of continued softness in the housing market and limited financing availability. With that said, there are certain initiatives that could help to allay some of these issues and provide a very positive jolt to the market.

The Department of Energy and the Federal Housing Authority (FHA) recently announced the FHA PowerSaver Loan pilot program, offering a dedicated financing vehicle for energy saving home upgrades. This program was introduced, in part no doubt, as a replacement to PACE financing initiatives. After being touted by the Obama Administration, principally VP Biden and the Middle Class Task Force, PACE was stopped dead in its tracks by the FHA. In short, the FHA was concerned about the “seniority” of the obligations generated under PACE programs, which would have put more payment obligations ahead of the mortgage debt that theFHA holds (stay tuned for a follow-up article dedicated to financing initiatives for more details). The PowerSaver program is a step in the right direction, providing more accessible and dedicated financing, though it lacks some of the benefits of the PACE programs.

And then there is the “cash for caulkers” program touted by the Obama Administration for the first half of last year and passed by the House in May of 2010 before losing its legislative “mojo.”This program, called the Home Star Energy Retrofit Act of 2010 in the House Bill (H.R. 5019), has the potential of adding incentives for homeowners to “go green” at home if the Bill resembles something close to its 2010 form.

And finally, I would be remiss if I didn’t say that there are many companies, like ours, who work hard each day to help homeowners better understand their home savings alternatives and take action to capture them. It should be an interesting 2011!

About the Author

James Carlin is the Co-Founder of Energy Results LLC, headquartered in Chicago, IL. Energy Results empowers homeowners to save energy and money through energy efficient home upgrades. James is a former Executive Director of Investment Banking at JPMorgan. James holds a BA in International Relations from Michigan State University and an MBA from The Booth School of Business at The University of Chicago.For more info, please visit
EnergyResults.com or email info@energyresults.com.

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