Utilizing High Performing Products to Earn Extra Rebates
As all of us in this industry know, the HERS rating and residential construction markets are constantly shifting. In spite of this, our industry has continuously raised the bar. Last year, RESNET saw the highest number of HERS ratings ever completed in a single year and more than 280,000 of those ratings were submitted via Ekotrope RATER. In addition, Ekotrope calculated our 1 millionth HERS Rating completed by our users.
However, 2023 brings with it lots of changes to the regulatory landscape. There are many changes and opportunities for raters, builders, product manufacturers, and other industry stakeholders to decipher. The new regulatory requirements are complex and difficult to quickly summarize as they can differ by state or climate zone but, here are a few of the biggest changes:
IECC 2021 in effect for many states, while others are in the process of adopting it
New SEER2, HSPF2, and EER2 standards in effect for HVAC equipment and testing
ENERGY STAR v3.1 in effect for all states and we’re preparing for ENERGY STAR v3.2
Planning for new versions of ENERGY STAR v3.2 and DOE ZERH 2 which will be required for 45L compliance in homes sold in 2024
These regulatory changes are coupled with a challenging housing market. Notedly, the residential construction industry is facing supply chain issues, shortages, higher interest rates, and huge contractor and subcontractor backlogs - all leading to fewer housing starts as a result.
The good news is, however, that there are also some new and updated home performance incentives for builders to take advantage of in 2023 which may buoy the energy rated homes and energy efficient products markets, such as:
45L Tax Credit
$2,500 for ENERGY STAR 3.1
$5,000 for meeting DOE Zero Energy Ready Home (ZERH)
Fannie and Freddie Mac Green-Backed Mortgage Programs
Varying rebates
Better interest rates and loan/value ratios
New Utility Programs in various states
Based on local program requirements, builders can earn incentives ranging anywhere from $100 - $25,000 per home
When you layer these rebates and incentives together, the total value and impact can become significant. Raters, builders, and building product manufacturers can overcome the housing market and regulatory challenges by strategically leveraging data to find low hanging fruit opportunities for these rebates and incentives and continue the growth in HERS Ratings and energy efficient products.
We took a look at some common energy efficient building practices and determined that there are some regions where these practices are underutilized compared to their nearby peer regions. Then we analyzed the impact of using these products and practices in the low usage regions to determine how much additional rebate and incentives they could earn if they built similarly to their peers. The purpose of this was to understand what would happen to homes in these regions with low utilization rates if they adopted the practices of their peer states.
We took a look at 4 product categories that have adoption discrepancies:
Energy Recovery Ventilation
Continuous Insulation
Heat Pump Water Heater
Air Source Heat Pumps
To evaluate the products in the table above, we performed some what-if analyses using our Scenario Modeling tool. In short, we took large datasets of 2022 homes from each of the low-adoption states mentioned above and updated existing energy models to see what impact these equipment types had on rebate and incentive capture.
So, what were the results?
Standard and Premium Continuous Insulation in Florida:
Florida has an average adoption rate of 15% for continuous insulation which is much lower than other hot climates. Our analysis found that, by switching to standard continuous insulation, benefitting homes can earn an average of over $2,700 per home. If they opted for premium continuous insulation, they could earn over $2,800 per home. If we include all homes, including the ones that already had continuous insulation, and report rebates earned per 100 homes, that equates to somewhere between $80,000 and $105,000 in rebates and incentives.
Energy Recovery Ventilation in Cold Climates:
ERVs represent 44% of ventilation systems in Minnesota. If other states with similar climates such as Iowa, Ohio, Wisconsin, Michigan and upstate New York utilized these systems in the same way, benefitting homes could earn significant rebates. The average is over $2,200 per benefitting home which equates to roughly $105,000 per 100 homes.
Heat Pump Water Heater in GA and SC:
Heat pump water heaters have been getting a lot more attention recently because they are heavily incentivized by rebate programs and are extremely efficient. However, they still have relatively low adoption rates across the country. In North Carolina and Florida, they have an adoption rate of 5% and 10%, respectively. However, benefitting homes in Georgia and South Carolina could earn an average of over $2,200 in rebates and incentives for installing premium heat pump water heaters. Per 100 homes, it is again in that $105,000 range.
Air Source Heat Pumps in Texas and Arizona:
Air Source Heat Pumps (ASHPs) are seeing a very slow, but steady increase in market share overall. South Carolina, Georgia, Texas, and Arizona are all large housing markets with at least 30% adoption of ASHPs. But, we wanted to see if there was more room for ASHP market share to grow. In a similar fashion to the previous results, benefitting homes can earn an average of over $2,200 in rebates and incentives for installing premium ASHPs. Per 100 homes, this equates to roughly $80,000 in additional incentive credits.
While the average incentive amounts are not always quite reaching the $2,500 rebate that the 45L Tax Credit offers, they are earning a combination of utility incentives and other rebates. By making these swaps in addition to a few other changes, builders in these regions could earn even more than the projected amounts displayed above.
The products we used above were just a few examples where we found discrepancies in adoption for key regions, but there are plenty of other opportunities for builders to earn these incentives. Finding the right product, for the right home, and in the right region can unlock thousands of dollars in untapped incentives.
For raters and builders, leveraging this type of data-driven analysis can provide precise, impactful savings for large and small builders alike. For product manufacturers, it’s critical to understand where and how your product has an impact so that you can set your sights on regions where your product can provide the most value.
This analysis was performed as part of our recent State of the Industry Update which you can watch here. And if you'd like to learn how one rater is developing precise builder specs using a data driven approach, watch this webinar we recently completed with Performance Point. If you have any questions, please don’t hesitate to contact us today at info@ekotrope.com.
