Contractors need to assess business practices in preparation for new IRA incentives

States will be announcing rebate programs in the next few months

By Cynthia Adams

Part Four: In this six-part series, contractors will learn about the “what, when, and where” on the billions of dollars in federal funding meant to drive home energy efficiency and electrification.

In my last article, I provided contractors with an overview of how to think about preparing your business for the two energy efficiency rebate programs authorized by the Inflation Reduction Act: The $4.5 billion electrification rebate program and the $4.3 billion whole house energy efficiency rebate program, respectively now known as HEAR (Home Electrification Appliance Rebate) and HER (Home Energy Rebate). Previous iterations of the acronyms were HEERA and HOMES.

Now it’s time to dig deeper into the program requirements we know about today that contractors will have to incorporate into their business practices in order to participate at all. While I will describe these requirements at a high level, it will be up to the states and their program implementers to provide the details.

First, it’s important to understand that states will be submitting multiple plans (Community Engagement Plan, Market Transformation Plan, and so on) to the US Department of Energy (DOE) as a part of their grant application for the rebate funding.

Another such plan, the Consumer Protection Plan, requires states to identify the installation standards that contractors must meet. At a minimum, the installation standards should ensure work complies with local and state laws, permits, codes, and industry best practices. Installation guidelines should also promote the use of standardized and sequenced procedures for developing a detailed scope of work.

 

Assessment and Verication

States will be tasked with defining quality-assurance processes to verify and document whether installation standards have been met and ensuring that a company’s sales language and contract language are the same. Note that proof of combustion safety testing on fossil fuel equipment in all homes where fossil fuel systems have been affected by the install will be required, as will proof of commissioning testing on HVAC equipment when HVAC systems are installed.

Contractors will of course have to up their game when it comes to data collection beyond what might be typical, for example dwelling type, square footage, year built, utility company, existing energy equipment/systems to be replaced, and so on. Note that pictures of installation must also be taken and uploaded into the program’s software for quality-assurance purposes. There are particular requirements regarding invoices as well, a copy of which must be retained by the program. Invoices must show the specific work performed, home address, name and contact information for the contractor, the dates when the work was performed, the total project cost prior to the rebate, and the rebate amount.

 

What Will be Required

For the HEAR or electrification program, heat pump assessments will be required. To that end, contractors must properly size the unit and make an onsite visual inspection of the existing condition of duct leakage. If the upgrade includes a fuel switch, an estimate of utility bill impacts must be provided to the customer. Relatedly, if the upgrade falls within one of the state’s set of home pre-conditions and/ or scope of work scenarios that will constitute unacceptable risk of raising utility bills, an estimate of utility bill impacts and written acknowledgement by the consumer must be provided. Homeowners are also required to provide written acknowledgement of the amount they will owe which is not covered by the rebates.

Let’s look now at some requirements for the HER rebate program, for which there are two paths to qualify: modeled and measured energy savings. See below for an overview of the allowable rebates based on the modeled approach. Incentives for low-income households (less than 80 percent of Area Median Income) are doubled, or up to 80 percent of project costs.

• Retrofits with modeled energy system savings of 35 percent or more: the lesser of $4,000 or 50 percent of project costs.

• Retrofits with modeled energy system savings of 20 percent to 34 percent: the lesser of $2,000 or 50 percent of project costs.

• Retrofits with measured energy savings of 15 percent or more: the lesser of $100 per percent of energy saved or 50 percent of project cost.

 

States will deploy compliance software

States will approve software to be used for the energy model, as it must be BPI 2400 compliant. Two examples of BPI 2400 compliant modeling tools in use today are Snugg Pro and Optimizer. BPI 2400 is a standard used for utility bill calibration, and, yes, that means contractors will have to collect 12 months of prior bills to use as a baseline for projected savings. If the bills and the contractor’s projections are off from one another, then the contractor will have to identify and correct the inputs causing the discrepancy. The DOE and states are looking into software integrations with companies who can pull that utility usage data into the program approved modeling software with the homeowner’s permission. The goal here is to simplify this step for contractors (and their customers). Alternate paths will be available where utility bills are impossible or impractical to get. Undoubtedly, training on the approved energy modeling tool will be in order for contractors to participate in this rebate program.

For the measured saving approach, there is still some debate on the degree to which contractors must model savings to participate. The whole point of measuring savings post installation is that it provides the most accurate information regarding actual energy savings, and the state doesn’t pay out the rebate until those savings have been measured and documented via utility bills 12 months after installation. That said, presumably the aggregator responsible for reporting on these savings and cash-flowing on the rebate will want some modeled savings to quantify the rebate they will pay forward in the first place.

 

Plan Ahead

In sum, for contractors who intend to participate in one or both of these IRA rebate programs, now is a good time to take stock of what information your company currently collects, how you document your design and sizing, performance commissioning, and energy savings for customers. How well do these activities align today with coming program requirements? Are there processes you could augment, add, or otherwise change to lessen your tech or operations lift when programs are getting ready to launch?

Are there new tasks that members of your install team will have to become proficient in, such as combustion safety testing? For example, if you think it’s likely you will be replacing furnaces with heat pumps, and these customers’ homes often have gas fueled water heaters, then learning how to perform a combustion safety or CAZ test for carbon monoxide spillage will be nonnegotiable to offer the rebate.

You are likely to have opinions on all of the above: the level of effort of the data collection, installation standards, contractor credentials to participate, and more. In my next installment on the IRA, we’ll talk about ways to get involved in your state’s program development and how to provide feedback to administrators who are designing these programs now. We’ll also explore the workforce development aspect of IRA because the good news is that there will be funding available for contractor training as well.

Read the rest of this series on IRA rebates.

Cynthia Adams
Cynthia Adams is CEO and Co-Founder of Pearl Certification, and a frequent presenter on the Inflation Reduction Act’s incentive programs. Adams co-founded Pearl to help quality contractors differentiate to close more and upsell by providing homeowners a certified install. Pearl’s certification helps homes sell and appraise for more. Pearl Certification, has a Rebate Finder app that can assist with staying up to date on these programs. For more information, email info@pearlcertification.com.

 


To learn more about Pearl Certification and read other articles in this series as they become available, visit the Southern PHC Pearl Certification page.

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