RESIDENTIAL ENERGY EFFICIENCY & RENEWBALE ENERGY INCENTIVES
CASE STUDY: FEDERAL LEVEL
February 2013
About the series:
Given the growing interest of homeowners in reducing home energy costs, residential energy efficiency incentive programs, in forms of tax credits, rebates, and low-interest loans/grants, are potential resources for homeowners to offset and finance the costs of home performance projects.
In addition to the series of reports on state and local incentive programs for residential energy efficiency and renewable energy, this paper is a supplement to the series which focuses on current federal-level incentives for residential sector. The purpose of this document and the series at a whole is to aid residential consumers in navigating the incentive and policy landscape when it comes to financing home energy-efficiency improvements. The series is based on a number of case studies on state and local incentive programs in Pennsylvania, Massachusetts,
Wisconsin, Ohio, Maryland, Connecticut, Michigan, Virginia, Colorado, and North Carolina.
These case studies are compilation of state, local/municipal, and utility programs focusing on residential energy efficiency improvements and renewable energy projects. Additional documents in the Residential Energy Efficiency & Renewable Energy Incentive Programs series are available online at http://www.360chestnut.com
About 360Chestnut:
360Chestnut is an online resource dedicated to energy efficiency. Our goal is to be a one-stop information resource tool for the consumers to determine the most cost-effective energy efficiency improvement projects for their homes, discover available rebates and incentives, and connect with a local certified service contractor who will perform the work. Here at
360Chestnut , we help you to Save Energy, Save Money, and Live Better .
Check out blog for most up-to-date information on home energy efficiency at http://www.360chestnut.com/blog . If you have any questions about home energy efficiency, ask one of our experts by emailing info@360chestnut.com
. We love to hear from you.
This report is prepared by Tung Huynh, who is the intern at 360Chestnut. Tung has background in Environmental Science and Policy and recently received his master’s degree from Clark
University.
360Chestnut
Cambridge Innovation Center
One Broadway
Cambridge, MA 02142

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1. Residential Energy Efficiency
The Federal Residential Energy Efficiency Tax Credit is once again available for homeowners who are interested in taking advantage of saving opportunities toward home energy improvement projects. As part of the fiscal package Congress passed in early January 2013, the
American Taxpayer Relief Act extended the tax credit that expired in 2011 to the end of this year, as well as made it retroactive to January 1 st
, 2012. Therefore, it will apply to projects you did last year as well as those taken on this year. The tax credit can count for 10 percent of the cost of energy efficiency measures and up to a cap of $500. Eligible measures include improving building envelope (insulation, roof, windows and doors), upgrading heating and cooling equipment (furnace, boiler, water heater, central air conditioner, etc.).
Insulation
Windows, Doors, &
Skylights
Building Envelope

Credits available up to 10% of costs up to $500

Eligible for only existing home and principal residence

Excludes installation costs
Requirements
Typical bulk insulation products include batts, rolls, blow-in fibers, rigid boards, expanding spray, and pour-in-place.
Products that air seal (reduce air leaks) must be accompanied with Manufacturers
Certification Statement:


Weather stripping
Spray foam in a can, designed to

 air seal
Caulk designed to air seal
House wrap

10% of costs up to $500

Windows are capped at $200

Excludes installation costs
Requirements
Must be an Energy Star product.
More Information
Learn more about insulation .
More Information
New addition and replacement of old windows, doors, and skylights in your home are all qualified. Learn more about window replacement .

Roofs (Metal &
Asphalt)

10% of costs up to $500

Excludes installation costs
Requirements
Meet Energy Star standards and have appropriate pigment coatings (metal roofs) and cooling granules (asphalt roofs) to reflect sun’s rays.
More Information
Energy efficient roofs with appropriate color and materials can reflect sun’s rays, lower surface temperature, reduce the amount of heat transfer, and keep your home cool in the summer.
Water Heating (non-solar)

Tax credit amount of $300
Requirements
Gas, Oil, Propane
Energy Factor ≥ 0.82 OR a thermal efficiency of at least 90%.
Electric Heat Pump
Energy Factor ≥ 2.0
Heating, Ventilation, Air Conditioning (HVAC)

Tax credit amount: $50
Requirements
Must use no more than 2% of the furnace's total energy
More Information
Learn more about water heater
More Information
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Advanced Main Air
Circulating Fan
Air Source Heat Pumps

Tax credit amount: $300
Requirements
Split Systems:
HSPF ≥ 8.5; EER ≥ 12.5; SEER ≥ 15
Package systems:
HSPF ≥ 8; EER ≥ 12; SEER ≥ 14
More Information
Learn more about air source heat pumps

Central Air
Conditioning (CAC)

Tax credit amount: $300
Requirements
Split Systems:
SEER ≥ 16; EER ≥ 13
Package systems:
SEER ≥ 14; EER ≥ 12

Tax credit amount: $150

Includes installation costs
AFUE ≥ 95
Requirements
More Information
Learn more about central air conditioner replacement
More Information
Gas, Oil, Propane Hot
Water Boiler

Tax credit amount: $150
AFUE ≥ 95
Requirements
Natural Gas, Propane,
Oil Furnace
Biomass Stoves

10% of costs up to $500
Requirements
Thermal efficiency rating of at least 75%
More Information
Keep your home safe by performing a combustion analysis test of your furnace regularly.
More Information
Biomass Stove
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2. Residential Renewable Energy
The Federal Residential Renewable Energy Tax Credit is still available through 2016 for eligible renewable energy systems including geothermal heat pump, solar energy systems
(solar thermal and PV), small residential wind turbines, and fuel cells. A taxpayer may claim a credit of 30% of qualified expenditures, including purchase and installation costs, for a system serving a housing unit that is used as primary residence by the taxpayer. Except for fuel cells system, there is no upper limit for the amount of credits for all eligible technologies installed and placed in service after 2008. Systems installed before 2008 are still subjected to $2,000 credit cap. The tax credit is non-refundable and if it exceeds tax liability, the excess amount may be carried forward to the succeeding taxable years through 2016. The tax credits may also be taken against the Alternative Minimum Tax .
The following below outlines the maximum allowable credits, system requirements for the following eligible technologies.
Geothermal Heat Pump

Credits available up to 30% of costs, with no upper limit

Must be installed and in place of service by 12/31/2016

Eligible for new and existing homes
Requirements
Closed Loop: EER >= 14.1; COP >= 3.3
Open Loop: EER >= 16.2; COP >= 3.6
Direct Expansion: EER >= 15; COP >= 3.5
EER: Energy Efficiency Ratio
COP: Coefficient of Performance
More Information
Learn more about geothermal heat pump
Solar Energy Systems

Credits available up to 30% of costs, with no upper limit

Must be installed and in place of service by 12/31/2016

Eligible for new and existing homes
Requirements
Solar Thermal
At least half of the electricity generated must come from the sun
More Information
Learn more about solar energy
Solar Electric/ PV
Meet minimum fire and electrical code requirement
Must be certified by Solar Rating and
Certification Corporation (SRCC)

Residential Small Wind Turbines

Credits available up to 30% of costs, with no upper limit

Must be installed and in place of service by 12/31/2016

Eligible for new and existing homes
Requirements
Capacity less than 100 kilowatts
More Information
Learn more about residential wind turbines
Residential Fuel Cell System

Credits available up to 30% of costs up to $500 per 0.5 kW of power capacity

Must be installed and in place of service by 12/31/2016

Eligible for new and existing homes
More Information Requirements
Have at least 30% efficiency and 0.5 kW power capacity
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References:
U.S. DOE’s Energy Saver: http://www.energysavers.gov/financial/70010.html
DSIRE: http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US37F&re=1&ee=0
According to Section 136 of the U.S. Code, “energy conservation measures” subsides provided by public utilities either directly (cash) or indirectly (credits or reduced rates) are nontaxable. The term “energy conservation measures” includes installations and modifications of the primary residence to reduce energy consumption and improve management of energy demand.
Eligible dwelling units include houses, apartments, condominiums, mobile homes, and similar properties. The exclusion may not apply to solar-thermal and solar-electric systems as these systems are currently eligible for federal tax credit (see section I).
Reference:
DSIRE: http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US03F&re=1&ee=0

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Energy Efficiency Mortgages (EEM) is a mortgage that credits the costs of home energy efficiency improvements, including renewable energy technologies, to the mortgage itself. It gives homeowners the ability finance cost-effective energy-saving measures and increase the purchasing power of homeowners in qualifying for larger loan amount for better and more energy-efficient homes such as
Energy Star® certified homes
. To get EEM, a borrower typically has to have a home energy rater conduct a home energy rating before financing is approved. This rating verifies for the lender that the home is energy-efficient.
Conventional Energy Efficient Mortgages
The loan is not backed by the federal agency. Homeowners are allowed to borrow mortgages from Fannie Mae and Freddie Mac up to 15% of an existing home’s appraised value for energy improvements.
FHA Energy Efficient Mortgages
The mortgage amount can be increase by the cost energy improvements. The maximum of EEM for energy efficiency improvements is the lesser 5% of:

The value of the property

115% of the median area price of a single family housing unit

150% of the conforming Freddie Mac limit
VA Energy Efficient Mortgages
The mortgages are available to qualified military personnel, reservists, and veterans for energy improvements when purchasing an existing home. The cap of the VA EEM is $3,000 -
$6,000.
References:
DSIRE: http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US36F&re=1&ee=0
FHA’s EEM: http://www.resnet.us/professional/ratings/fha_summary
VA’s EEM: http://www.resnet.us/professional/ratings/va_summary
Freddie Mac Support for Energy Conservation: http://www.resnet.us/professional/ratings/freddiemac
Fannie Mae Energy Improvement Feature: https://www.efanniemae.com/sf/mortgageproducts/pdf/eifeaturefacts.pdf