The deregulated energy market and different incentives through the state and IRA offer Texans lots of opportunity to save.
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Beyond The Inflation Reduction Act: A Texas Guide

Kimberly Hutchings
October 24, 2023

Understanding The Inflation Reduction Act

Last year, President Biden signed into law the Inflation Reduction Act, signifying a landmark moment in America’s fight against climate change.

Expanding on the administration’s Bipartisan Infrastructure Law (also referred to as the Infrastructure Investment and Jobs Act of 2021), the legislation aims to lower energy costs for consumers and businesses alike while cultivating new, good-paying jobs across America’s growing clean energy sector. 

Drafted at a federal level, the program offers over $400 billion in funding focused on reducing the costs associated with clean energy investments, but its implementation will be state-specific, with many states offering further incentives to help their residents save.

As a consumer, it's a chance to take a closer look at your current energy habits, identify areas where improvement and the adoption of more efficient upgrades may benefit you (and your energy bill), and take advantage of the financial incentives available to you in making those changes a reality.

Tax Credits

Before we get too far ahead of ourselves, though, let’s take a moment to look at what these financial incentives can look like. There are two categories of funding you’ll want to pay attention to.

The first category consists of tax credits, and these work by offsetting the amount you owe on your annual taxes. Applied directly to your tax bill, they’re only really beneficial if you owe money come tax time (as additional funds cannot be issued in the form of a refund), but can be hugely beneficial in the event that you do have to pay.

For instance, if you are eligible for a tax credit of $3,500 and owe $3,000 in taxes, your tax credit will effectively reduce your bill to zero, with the additional $500 remaining unused. In some instances, this remaining money can be carried over and applied to future tax bills, although this is not always the case.

Under the Inflation Reduction Act, there are three major federal tax credit opportunities worth noting, the Residential Clean Energy Credit, the New and Previously-Owned Clean Vehicle Credit, and the Energy-Efficient Home Improvement Credit.

Tax Rebates

Now, unlike tax credits, tax rebates *can* be issued in the form of a refund, providing consumers with money back on the purchase of certain clean energy and high-efficiency upgrades. Think of them sort of like a thank you for making an investment towards a greener future!

Unfortunately, more often than not, consumers will need to be able to pay for these investments upfront, as rarely are rebates applied at the point of purchase, but this may change in the coming years as increasing efforts are made to remove barriers to access for lower-income households.

Under the Inflation Reduction Act, there are two key federally-funded rebate opportunities to remember, the Home Energy Performance-Based, Whole House Rebate Program (HOMES), which supports retrofitting homes with improved HVAC and insulation systems, and the High-Efficiency Electric Home Rebate Act (HEEHRA) which offers funding towards home electrification projects.

Texas-Specific Energy Incentives

Now, as we mentioned earlier, the Inflation Reduction Act is a federal program, but its implementation will vary from state to state, with many states offering added incentives to help consumers take their energy-saving investments even further — and Texas is no exception.

From home weatherization improvements like sealing and insulation to residential solar energy systems and electric vehicles, there are some great opportunities available for Texas residents to go beyond the Inflation Reduction Act with additional savings on their clean energy upgrades.

Below is an overview of the improvements you may want to consider making and their associated statewide funding opportunities.

Want to know more about the Inflation Reduction Act at a federal level? Click here!

Get a Better Understanding of Your Energy Habits

If you’re looking to make some energy improvements to your home and lifestyle but feel lost on where to start, a home energy audit is something to consider! 

During a home energy audit, a licensed auditor will visit your residence to conduct an in-person walk-through, analyzing each room for energy use, asking questions about your everyday habits, and offering suggestions on areas where you may be able to upgrade or improve.

Before your auditor arrives, it’s important to gain a base-level understanding of your current energy habits. The U.S. Department of Energy offers the following prompts to get you thinking:

  • How many people are at home during working hours?
  • Is every room used regularly?
  • How many people live in your home?
  • What temperature do you typically set your thermostat at during the warm and cold weather months?

After your audit is complete, your auditor will provide you with a written report documenting areas for improvement as well as upgrades and changes you can make — a bit like a step-by-step guide to living more efficiently!

The Energy-Efficiency Home Improvement Credit

The Inflation Reduction Act’s Energy-Efficiency Home Improvement Credit offers existing homeowners and renters the chance to subsidize the cost of a home energy audit. Through this federally-funded credit, households can claim 30 percent of the cost of an audit, up to a value of $150, now through December 2032.

Depending on your utility provider, some Texas residents may also benefit from a free energy assessment as part of their ongoing energy services. Give your provider a call before booking your audit to see what they can do for you!

Update Your Home’s Sealing and Insulation

Weatherization measures like insulation upgrades, enhanced sealing, and the repair or replacement of inefficient doors and windows can improve overall comfort and air quality in your home, increase your property value and lower your energy bills all at once!

These upgrades help your home by preventing the unwanted loss of hot or cold air, allowing your HVAC system to work more efficiently and effectively, saving you energy, and money, along the way.

In fact, investing in home weatherization upgrades can save households, on average, as much as 20-30 percent each month on utility expenses — that's roughly $283 every year!

Ready to make the improvements in your home? Great! If you’re living in Texas, here’s how you might have the opportunity to save.

Weatherization Assistance Program (WAP)

The Weatherization Assistance Program (WAP) is a federally-funded program offered through the U.S. Department of Energy that helps low-income homeowners and renters reduce their energy usage through a variety of no-cost weatherization and energy-efficient home improvements, including the repair or replacement of windows and doors and the installation of window film, awnings, solar screens, insulation and more.

Qualification for the fully-funded improvements depends on your household's average monthly income, with the guidelines for 2023 outlined in the chart below. 

1 $2,430.00
2 $3,286.67
3 $4,143.33
4 $5,000.00
5 $5,856.67
6 $6,713.33
7 $7,570.00
8 $8,426.67
9 $9,283.33
10* $10,140.00
*For households over 10 individuals, add $856.67 per additional person.

You can learn more about the Weatherization Assistance Program (WAP) by clicking here.

Install Energy-Efficient Appliances

Energy-efficient appliances are another great way to reduce your energy footprint, and because they don’t involve making any major, permanent changes to your living space, they’re a great option for renters too!

Some of the most common appliances you may want to consider upgrading are refrigerators, freezers, dishwashers, laundry machines and dryers, as these are some of the biggest contributors to everyday energy consumption in the home.

When shopping for any new energy-efficient appliance, the main thing you’ll want to look for is the Energy Star-certified label. 

Energy Star appliances are more efficient, and often more effective, than their traditional counterparts. For instance, a new Energy Star refrigerator is roughly 15 percent more energy-efficient than a refrigerator that meets the minimum federal efficiency standards.

In order to receive the certification, products must meet a set of stringent guidelines set forward by the U.S. Department of Energy and the U.S. Environmental Protection Agency.

If you’re looking to make the upgrade on one or more of your home appliances, consider using the following tool to maximize your investment.

ENERGY STAR Rebate Finder

The ENERGY STAR Rebate Finder is a tool designed to connect consumers with opportunities to save on Energy Star products and appliances.

To find available rebates, simply input your zip code into the search bar, and the Rebate Finder will provide you with a comprehensive list of rebates and special offers on ENERGY STAR-certified products offered by Energy Star partners in your area!

You can access the tool by visiting the ENERGY STAR website here.

Invest in Solar

Did you know that Texas ranks second in the nation for total installed solar capacity? It's true!

As a matter of fact, Texas currently has enough solar power installed to power 2,114,299 homes, with a projected growth that will have them ranking first in the nation within the next five years.

As a consumer, installing a home solar energy system can offer a ton of benefits. It can save you money (up to $300 a year!), it provides security in the event of an unexpected outage or weather emergency, and it offers the chance to help reduce grid demand — often getting rewarded for it in the process (more on that below!).

While the initial investment in home solar systems can be pricey, incentive opportunities offered through the Inflation Reduction Act and the state of Texas are helping to make things more affordable.

As a Texas resident, here are a few opportunities you’ll want to keep in mind.

Solar Property Tax Exemption

Solar panels and battery storage systems are a helpful way to increase your home’s property value, which is a big win, especially if you’re considering selling in the future. 

The downside, though? Increased property value also means increased property taxes.

Fortunately, there’s good news for Texas residents! While Texas property taxes are issued at a local level, section 11.27 of the statewide tax code outlines that any household installing a solar or wind-generated clean energy system is entitled to a 100 percent exemption from any property tax increases related to the value of the newly installed system — win! 

Net Metering

Now, earlier on, we mentioned that installing a solar energy system can help homeowners to reduce grid demand and get rewarded in the process, and you’re probably wondering — how?

Well, it’s a process called net metering (otherwise known as a solar buyback), and for Texas residents with home solar systems, it's an easy way to save on monthly energy expenses! Here’s how it works.

When a home generates surplus solar energy, it gets stored via a battery storage system. Households can choose to save this power in reserve for use during unexpected occurrences like a power outage, but alternatively, consumers can choose to sell this excess power back to the grid — providing utilities with extra power to help counteract elevated demand and providing you with money back in your wallet!

Typically, these buybacks take the form of credit, applied directly to your monthly electricity bill, but in some instances, utility providers may reimburse participating customers with cash directly. 

Eligibility to participate in the program varies between utility providers, but it’s a system that’s becoming more and more common across the state. If you have a home solar energy system, it's worth inquiring whether or not a solar buyback program is available to you! 

Purchase an Electric Vehicle

As of July 2023, there are over 209,000 electric vehicles registered in the state of Texas, a number that has risen by over 15,000 in the last three months alone and a number that is expected to only continue to grow in the coming years.

Switching from a traditional combustion engine vehicle to an all-electric option has a range of benefits for consumers. They typically require less maintenance, they’re more affordable to run on a day-to-day basis, and of course, they’re better for the environment, which benefits us all.

Unfortunately, the biggest roadblock to adoption for most consumers is the upfront investment required in purchasing an electric, fuel cell or plug-in hybrid electric vehicle, with the average cost of a new EV coming in at around $62,000

Luckily, incentives offered through the Inflation Reduction Act and the Texas Commission on Environmental Quality can help make this initial purchase more realistic. Here’s what you need to know. 

Light-Duty Motor Vehicle Purchase or Lease Incentive Program

The Texas Commission on Environmental Quality allocates rebate funding through the Light-Duty Motor Vehicle Purchase or Lease Incentive Program (LDPLIP) to help support the purchase or lease of a qualifying clean vehicle powered by compressed natural gas (CNG), liquefied petroleum gas (LPG), hydrogen fuel cell, plug-in electric or plug-in hybrid electric batteries.

The program accepts 3,000 applicants annually, with 2,000 rebate opportunities allocated to hydrogen fuel cell, electric and hybrid electric options and 1,000 rebates allocated to natural gas (CNG or LPG) vehicles.

If successful, qualifying applicants can receive the following rebates on new light-duty motor vehicles powered by CNG or LPG.

Purchase or Lease (3-Year Term or Longer) $5,000
Lease (2-Year To Less Than 3-Year Term) $3,330
Lease (1-Year To Less Than 2-Year Term) $1,665

For eligible consumers purchasing or leasing a hydrogen fuel cell or other electric drive (plug-in or plug-in hybrid electric) vehicle the rebate values are as follows.

Purchase or Lease (3-Year Term or Longer) $2,500
Lease (2-Year To Less Than 3-Year Term) $1,665
Lease (1-Year To Less Than 2-Year Term) $832.50

To start the process, you can find a list of currently eligible vehicles here.

It’s also important to make note of whether or not allocated rebate funds are still available for this calendar year (for hydrogen fuel cell and electric vehicles, rebate opportunities have already been exhausted for 2023). You can find that information, as well as further details on submitting an application, via the Texas Commission on Environmental Quality’s website here.

Next Steps

Now that you know what opportunities are available to you at a state level, it’s time to make a plan, take action and enjoy those clean energy savings! 

Start by determining what improvements you want to make (this is where that handy auditor report really helps!), assess what state incentives are available to you, and check with your local utility company to see if they offer any additional opportunities to save. 

In Texas, there are hundreds of incentives offered privately through utility companies that can take your investments even further!

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