Homeowners can use rebates, tax credits to cut emissions, but does technology hold up in Minnesota winters?
A new law makes thousands of dollars in incentives available for home energy upgrades.
TWO HARBORS, Minn. — Michael Overend and Lucy Grina admit their home was in rough shape.
Built in 1965, the home was inefficient and drafty. But with retirement on the horizon, the now-retired veterinarians and former owners of Lake County Veterinary Clinic wondered if they should stay and renovate or sell it and move.
“We were feeling extreme guilt about just the fact that all this energy was pouring out of our windows, siding,” Grina said. “We had to do something to prevent that.”
They chose to stay, and in 2019 enlisted the help of Duluth designer and licensed Wisconsin architect Rachel Wagner of Through Design on a deep energy retrofit of their house.
Over the course of 2020, all of their windows were replaced with triple-pane windows; several inches of insulation was added to the exterior; and spray foam and blown-in insulation were added to the attic to prevent air and heat loss. They also renovated their kitchen and added new siding, among other upgrades.
All that work sealing and blanketing the house meant the home could be heated with two air-source heat pumps, highly efficient electric heaters and air conditioners.
And because none of the home’s appliances burn gas, it’s not producing emissions. Overall electricity usage dropped 42% once the project was complete.
With solar panels installed already on the property, the fully electrified home generates more electricity than it uses over the course of a year, meaning they actually get paid for returning power to the grid.
The entire project cost more than $300,000, but the two — both volunteers with the Citizens’ Climate Lobby — are hoping a recently passed federal law will help homeowners afford similar upgrades, even if the upgrades are made at a more gradual pace.
It’s coming in the form of the Inflation Reduction Act , a wide-ranging law that, among other goals, seeks to lessen greenhouse gas emissions and combat climate change.
“Solar, wind, heat pumps — all of these things that have been developed — they’re so cheap now,” Overend said. “We have another way to deal with climate, and that is we can offer major incentives for people to make this change to a new renewable energy future.”
For homeowners, the law means rebates and tax credits for a number of energy-efficiency upgrades:
- 30% tax credits on rooftop solar, geothermal heating and battery storage installation.
- Up to $2,000 tax credit for installation of heat pump heater/air conditioner or water heater.
- $8,000 rebate for achieving a 35% energy reduction and a $4,000 rebate for achieving a 15% energy reduction.
- Upfront discounts (based on income) for electric panels, basic weatherization, heat pumps, electric stoves and other energy-efficient upgrades.
- Tax credits of $7,500 to purchase a new electric vehicle or $4,000 to buy a used electric vehicle.
Information on how to get the rebates is still in the works. But energy nonprofit Rewiring America launched a calculator at rewiringamerica.org/app/ira-calculator to gauge what types of rebates and tax credits you’ll likely qualify for.
A boon for installers
The bill is projected to spur growth in clean energy jobs.
In a study, the Political Economy Research Institute at the University of Massachusetts Amherst found the Inflation Reduction Act could create 9 million jobs over a 10-year period.
More than 900,000 of those jobs will be thanks to energy-efficient building tax credits, home energy rebates and retrofits of affordable housing. The study was commissioned by the Bluegreen Alliance, a coalition of environmental groups and labor unions.
Locally, homeowners taking advantage of the tax credits and rebates could lead to higher demand from installers.
John Hageman, office manager at Wolf Track Energy, a Two Harbors-based installer of backup battery systems, electric vehicle chargers and residential and commercial solar arrays, said the company was already growing — and was expecting to grow into the future.
Then, last month, the bill became law. It could boost that growth even more, he said.
“It’s definitely going to help us,” Hageman said.
Wolf Track is not alone. SolarReviews, an informational website on solar, surveyed almost 3,300 solar installation companies and found 95% of them expected their business to grow because of the IRA.
Additionally, there could be a jump from 230,000 people working in residential solar to 340,400 in the next five years — “a 148% increase in solar jobs from installation companies alone,” SolarReviews said.
Hageman isn’t sure exactly how the bill will affect the company, but said it offers customers certainty that they can take advantage of tax credit solar credits well into the future.
That’s because before the law was signed, the residential solar tax credit sat at 26% and was set to fall to 22% next year before expiring in 2024. But now, the credit is back up to 30% where it will remain for a decade.
“It offers predictability knowing that this tax credit is going to be incentivizing people for the next decade or so,” Hageman said
Heat pumps — so hot right now
There’s one appliance that qualifies for rebates and tax credits in the law getting a lot of attention right now: air-source heat pumps.
With recent advancements, the electric-powered units can both heat homes in frigid climates and cool homes in hot summers. And they’re far more efficient than other forms of electric heat, namely electric resistance baseboards.
And, because they don’t burn fossil fuels like a traditional natural gas, propane or oil furnace, they are being pushed as a piece in the ongoing effort to reduce dependence on fossil fuels amid worsening climate change.
The new law heavily incentivizes buying and installing heat pumps.
Medium- to low-income households will be able to apply for up to $8,000 in an upfront discount and everyone, regardless of income, can get a 30% tax credit for heat pumps capped at $2,000 per year.
According to homeadvisor.com , a heat pump can cost $4,200-$7,400.
The bill’s incentives have Andrew Ronding considering a heat pump as the next energy upgrade to his Duluth Heights neighborhood home. He’s already added 26 solar panels to the roof of his house and garage. Now he’s thinking that when his natural gas furnace needs to be replaced, he’ll swap it out with a heat pump.
“It costs more to run the furnace, both environmentally and economically, so (I’m) kind of weighing those two to figure out, at what point should it be replaced with something that’s more efficient?” Ronding said.
The tax credit made available through the law, he said, could speed up that replacement.
But do they work in the cold?
Air-source heat pumps aren’t new. They’re basically air conditioners that run in reverse to heat a home, transferring heat from outside air to a home’s inside (they can also just run as an air conditioner to cool a home).
They’re common in warmer climates, but they hadn’t caught on in cold climates where temperatures regularly fall below zero degrees.
Then, about a decade ago, technology improved enough that they could operate in negative temperatures, said Ben Schoenbauer, assistant director of research at the Center for Energy and Environment, a Twin Cities-based clean energy nonprofit.
Because heat pumps move — not make — heat, they can still find heat in the air even in negative temperatures and move it to the inside.
“We have put systems up by Lutsen. … I have documented performance of those systems running at negative 25 degrees out and delivering heat to the space,” Schoenbauer said. “It's not as efficient as it was at warmer temperatures, and it doesn’t deliver as much heat, so there are trade offs.”
At a moderate temperature, heat pumps can reach 500% efficiency, but as temperatures drop they go down to nearly 100% efficiency, Schoenbauer said. That’s why he recommends supplemental and backup heat sources.
Some have additional supplemental heat sources turned on when it drops below a certain temperature outside. Others have systems that can be programmed to switch over to a home’s other heat source, like a natural gas furnace, if conditions mean it would be cheaper to use fuel instead of electricity as a heat source.
And heat pumps can be added to a utility company’s dual-fuel program, which allows the company to shut it down when the electricity demand is high and stresses the system, making the home use its other heating source instead. Doing so usually means a lower electricity rate to power the heat pump.
As part of their renovation, Overend and Grina installed two heat pumps in their home: one through traditional ducts and the other ductless.
To supplement that when temperatures drop, there are small electric resistance heaters mounted on walls throughout the house, but Grina said they were only needed “once or twice in the last winter.”
“They’re just not used hardly at all,” Grina said.
And, though the couple has solar, if there’s absolutely no electricity, they can light their wood-burning stove as a last resort.
In Duluth, the old Northwestern Bell telephone exchange building, recently converted into apartments, will also use heat pumps. But each apartment unit also has a small radiator on the wall connected to a boiler in the basement for backup heat if temperatures get really low.
Addressing climate change
According to the U.S. Environmental Protection Agency, 13% of the country’s 2020 greenhouse gas emissions come from the commercial and residential, primarily by burning fossil fuels for heat.
While electrifying a home’s heating source and other appliances means emissions aren’t produced at the home, it does mean more demand for electricity from the grid. And in 2021, almost 61% of U.S. electricity generation came from fossil fuels, the U.S. Energy Information Administration said.
But that’s changing. Laws, regulations and customer demand are causing companies to retire their coal-fired power plants and replace them with renewable energy.
Minnesota Power, for example, plans to be carbon-free by 2050.
“It’s kind of like a win-win,” Schoenbauer said of electrification. “You can reduce the total energy you need to use as well as get it from a cleaner source.”
Overend believes electrifying the entire home and grid is key to reducing emissions, propelled now with a law to help homeowners afford replacing gas appliances with electric ones.
“(The Inflation Reduction Act) will save lots of money. It creates jobs in America and it also saves the climate,” Overend said. “It’s just a win in every single aspect.”