New York State Begins Roll Out of IRA Funding

New York state is now the first state to be awarded Inflation Reduction Act (IRA) funding from the Department of Energy (DOE) for the Home Electrification and Appliance Rebates (HEAR) program. The HEAR rebates are accessible at the point of sale for eligible “qualified electrification projects,” which include the purchase and installation of:

• Heat pumps: up to $8,000 available.

• Heat pump water heaters: up to $1,750 available.

• Electric stoves/cooktops: up to $840 available.

• Heat pump clothes dryer: up to $840 available.

• Breaker box: up to $4,000 available.

• Electric wiring: up to $2,500 available.

• Weatherization, which includes insulation, ventilation, and air sealing: up to $1,600 available.

New York will be directing funds from the HEAR program to its existing EmPower+ program, which emphasizes energy efficiency and building envelope upgrades for existing dwellings. While the HEAR program is unlikely to immediately boost demand, there is potential for improvement over time. The reason for this longer time scale is in part due to implementation as well as the fundamentals of HVAC demand. Homeowners are not likely to replace a functional unit simply because these incentives are available. Instead, what is likely to happen is a trend more towards heat pumps and other electric units over time as the replacement cycle takes effect. Prior to the IRA, large-scale statewide rebate programs were hard to find. However, the New York State Clean Heat program offered through the New York State Energy Research & Development Authority (NYSERDA) provides us with a natural experiment to determine the potential future impact of the IRA non-tax incentives.

The chart above represents the fraction of distribution unitary sales comprised of air-source heat pumps for New York and Pennsylvania. Prior to the NYS Clean Heat rebate, both states had approximately 25-30 percent of sales accounted for by heat pumps and were below the long-term US average of 35 percent. After the January 2016 start date, the fraction of heat pump sales gradually rose in New York over time. Pennsylvania, a nearby state with identical demographics, weather, and geography acts as the control group. There are no identical, large-scale rebate programs in PA that compare to Clean Heat and as a result the fraction of heat pump sales has remained constant overtime. It is worth noting that some of this effect could potentially be confounded by actions taken by New York political leadership beginning in 2017 limiting the supply of natural gas. In 2019, this resulted in a moratorium of new gas hookups in the state, which could have put pressure on the gas furnace installed base. However, the fact that this trend towards a larger percentage of heat pump sales began before this moratorium and tapered a short time after indicates that the rebate program did have some lasting effect on heat pump demand. With HEAR rebates now starting to come online in NYS, we would expect the effects of the previous Clean Heat program to continue as well as the potential for similar trends in the eleven other states that have submitted applications for funding.

Unlock the Benefits of the Inflation Reduction Act with HARDI Member Resources!

The Inflation Reduction Act (IRA) has created significant opportunities for consumers to lower the cost of installing energy-efficient HVAC equipment through tax credits and rebate programs. HARDI's updated IRA Toolkit and Online Course are designed to help distributors navigate these programs and maximize benefits for their customers.

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HARDI’s State of the Channel report goes into greater depth regarding the IRA programs and their impacts on HVAC demand. Get your copy of the report to understand more about the impact of IRA programs and other industry-specific topics.