“If there’s going to be something that’s transformative for 2023 for heat pumps, it’s really the 25C tax credits,” Fischer said. “The other components are going to take a while to get started. And they’re going to be pretty limited in scope.”

The IRA directs a total of $369 billion toward energy security and fighting climate change — including by incentivizing energy efficiency, electrification, and renewable sources of electricity.

Fischer appeared with Dustin Ketchem, national dealer program manager for Mitsubishi Electric Trane U.S., or METUS, during the March ACHR NEWS webinar, which drew about 900 attendees and was sponsored by METUS.

The IRA extended the 25C credits through 2032 and increased their value from 10% to 30% of the cost of a qualified project.

Certain HVAC equipment that meets specific Consortium for Energy Efficiency (CEE) standards, plus energy-saving doors, windows, and insulation, are eligible for a 25C credit of up to $600 per item ($500 for an exterior door), with an annual cap of $1,200. Under another 25C provision, the installation of a qualified heat pump, heat-pump water heater, biomass stove or biomass boiler can bring a credit of up to $2,000 yearly. Those two types of 25C credits can be combined and are available annually, Fischer said, meaning a homeowner could be eligible for a credit of up to $3,200 for several years in a row for ongoing improvements.

“This gives us new methods, new tools, and brings new people into the market for these heat pumps where they may have not been able to afford them before,” said Ketchem.

Ketchem described the 45L tax credits, which the IRA also extended through 2032.

The 45L credits can be claimed by the builders of new single- and multifamily dwellings; townhomes and duplexes are treated as single-family homes. The credit is $2,500 for each single-family home that meets the EnergyStar standards set by the Department of Energy (DOE), and $5,000 for each single-family home that meets the DOE’s Zero-Energy Ready standards. In multifamily projects, the credit is $500 for each unit that meets the minimum standard, and $1,000 for each unit deemed Zero-Energy Ready.

“Some builders have already utilized this program, and we’re hoping that more builders catch on and begin using this now that the program has been extended,” Ketchem said.

Builders of multifamily projects who adhere to prevailing-wage and apprenticeship requirements can claim credits of up to $2,500 per unit for those that meet the EnergyStar standards, and up to $5,000 per unit for Zero-Energy Ready units.

The 45L credit can also be claimed by homeowners whose homes have undergone a major reconstruction if the completed project passes an energy audit and is certified as energy efficient.

Rebates Months Away

Fischer said the DOE has yet to offer detailed guidance on the IRA’s rebates to the states, each of which will be tasked with managing a separate rebate program. In addition, he said, many state energy offices are not equipped to quickly launch a program.

Fischer said he expects no rebate programs to open until this fall at the earliest, and that many states are not likely to have a program up and running until next year.

“At this point in time, it’s a little bit early to really be talking about these programs with consumers,” he said.

The IRA’s rebate money, in two separate programs, the High-Efficiency Electric Home Rebate Program (HEEHRP) and Home Owner Managing Energy Savings (HOMES), totals nearly $9 billion. But, Fischer said, given that it will be divided between states, that some will go toward program administration (for which the IRA allows up to 20%), and that individual rebates could be large (a maximum of $8,000 for a heat pump, for example, under HEEHRP), the money is not likely to go that far.

Fischer estimated that perhaps 500,000 homes nationwide could be outfitted through HEEHRP.

“So it is going to stimulate the heat pump marketplace from a rebate perspective,” he said. “But it isn’t the same kind of game-changer that we’ll find in the 25C tax credits.”

HEEHRP will be for low- and moderate-income households, while the HOMES rebates will be available for households of any income level, although low- and moderate-income households could be eligible for enhanced rebates, as could the owners of multifamily buildings in which at least 50% of households have low or moderate incomes.

The HOMEs program applies to the installation of certain high-efficiency HVAC equipment, but also to other energy-saving improvements such as better-insulated windows.

Mitsubishi Electric has details on the IRA’s HVAC-related incentives, including a list of 25C-qualified products from Mitsubishi and METUS, at www.mitsubishicomfort.com/inflation-reduction-act.