47. Good News for Energy Conscious Households

 

Good News for Energy Conscious Households

The Inflation Reduction Act of 2022 will offer some nice opportunities for households to save on energy costs and reduce their carbon dioxide emissions. 

Electric vehicle tax credits, extension of the residential rooftop solar tax credit, a new 30% tax credit for residential battery storage systems, direct rebates to low and moderate income households, and tax deductions for household energy efficiency upgrades are featured. While a thorough summary of these programs does not seem to exist yet, here is what we’ve been able to piece together from various sources:

1. Electric vehicle tax credit 

•  New vehicles: 

• up to $7500 credit for a new EV. You no longer need to have $7500 in tax liability to receive the full credit. It can be used at the time of purchase rather than waiting until tax filing. It applies to all manufacturers regardless of the number of vehicles already sold (The old credit stopped after a manufacturer had sold 200,000 EVs).

• Used vehicles:

• $4000 credit for used EV, available immediately regardless of tax liability.

• Limitations on models relating to domestic sourcing:

• The credit comes in two pieces of $3750 each. The first piece requires that 40% of the value of critical minerals used in the vehicle come from the US or from free trade partners. For the other $3750, 50% of the value of the battery components must be manufactured or assembled in North America. 

• Limitations based on income and retail price of the vehicle:

• The old credit applied regardless of income and or retail price. In the IRA, there is an adjusted gross income limit of $150,000 if filing single, 300,000 for a joint return.

• Credit only applies to cars priced under $55,000 and vans, SUVs and pickups under $80,000.

• Impact on your energy costs:

• A typical EV goes 3.5 miles per kWh. Even with Maine’s relatively high cost of electricity (20 cents/kWh) that gets you 30 miles for $1.67. A similar gasoline powered sedan gets 30 mpg, costing you about $4.00 (at today’s prices) for the same 30 miles.  In other words, it’s like paying $1.67 per gallon for gas. Over 200,000 miles this translates to a savings of $15,000 in energy cost. The national average price of electricity is 12 cents/kWh, or $1.00 per gallon equivalent.

• Impact on your carbon emissions

• In a life cycle analysis (LCA) the electric car produces a bit less than 50% of the greenhouse gas of a gasoline powered car. Note that the LCA includes all of the embodied energy in the manufacture of the vehicle. This will be even less in the future as the energy used for manufacture becomes less fossil-energy-intensive.

2. Residential solar installation

• Amount of tax credit

• 30% of rooftop solar (or solar farm buy-in if you don’t have an available rooftop)

• 30% tax credit for home battery storage with at least 3kWh capacity. Battery storage can reduce peak demand on the grid as well as provide power during outages.

• Impact on your energy cost

• Typical payback of 3 to 5 years, after which your power is almost free for the life of the panels (25 to 30 years).

• Impact on your carbon emissions

• Depending on where your electricity now comes from, your CO2 output per kWh used will drop from 1-2 pounds to less than 0.2 pounds.  Depending on your total usage this could reduce your annual household CO2 by up to 5 tons.

3. Rebates and Tax Deductions for Energy Efficiency upgrades for Households

• How is it structured?

• Rebates for households earning up to 150% of median area income (around $90,000 here in Maine)

• Higher income households get more limited incentives in the form of tax credits.

• What’s covered, for how much $

• Heat pumps: up to $8000 rebate

• Heat pump water heater: up to $1750 rebate

• Upgrading Electric panel to accommodate heat pumps and EV chargers: up to $4000 rebate

• Up to $850 for a heat pump clothes dryer or an induction cook stove

• Extends tax deductions for home efficiency improvements.

• Up to $14,000 total per household.

• How much can you save if you do these things?

• If you currently heat with oil here in Maine and use 800 gallons of fuel oil you could save as much as $2000 in fuel costs.  If you have a traditional electric water heater the heat pump water heater will use less than half the electricity.

• How much can you reduce your CO2? 

• Depending on where you live and where your electricity comes from you could reduce your annual household CO2 output by as much as 9 tons.

While the average American household would probably save about $1,800/year in energy costs buying an electric vehicle and installing a heat pump, a heat pump water heater, and solar panels, a Maine household stands to save much more. We drive more and heat with fossil fuels more than anywhere in the U.S., so that if the average Maine household were to take advantage of every one of the opportunities above, we would save as much $3000 in annual energy costs. A household that might have been planning to undertake most of the measures covered by the act (and someone intent on reducing their reliance on fossil fuels might well be doing so) could possibly save something like $20,000 in costs for the whole package.

So be sure to get to the front of the line on these upcoming opportunities!

Paul Stancioff, PhD., is professor emeritus of physics at UMF. Cynthia Stancioff re-words everything he writes. Email: pauls@maine.edu or cynthia.hoeh@gmail.com