The climate law had $9B for energy rebates. Where did that cash go?

By Brian Dabbs | 06/13/2024 06:42 AM EDT

A POLITICO’s E&E News analysis found that one of the Inflation Reduction Act’s largest pots of money may not be fully distributed before the November election.

HVAC Worker Performing Heat Pump Maintenance

A worker installing a heat pump on a home. iStock

One of the Biden administration’s signature climate initiatives — $9 billion in home energy rebates — has launched one state program to date, raising concerns about the fate of funds from the Inflation Reduction Act to slash emissions and utility bills.

The rebate funding is one of the few parts of the Inflation Reduction Act that would mainly impact the pocketbooks of low- and moderate-income Americans, rather than corporations. Under the law, DOE distributes funds to states, which then set up programs to release the federal money to individuals for efficiency upgrades.

In recent public appearances, Energy Secretary Jennifer Granholm said a “summer of rebates” would be coming to help install heat pumps and other appliances.


But according to an analysis from POLITICO’s E&E News, much of the funding is unlikely to be distributed before the November election and the potential victory of former President Donald Trump.

Trump veterans say his administration would retool the rebate program, putting the money — and Biden’s plans for it — in jeopardy.

“If the money isn’t disbursed before a Trump administration, the new administration would surely review the criteria for how the money is awarded,” Dan Simmons, former assistant secretary for the Office of Energy Efficiency and Renewable Energy during the Trump administration, said in an email. “For many awards, the Biden administration has included extra-statutory requirements and all of those will be reviewed for alignment with administration policy.”

That could mean a large portion of the funds — which are more than the Biden administration is spending to build a clean hydrogen industry — are used more for Trump priorities, such as boosting fossil fuels. If Trump wins and Republicans take both chambers of Congress in November, it’s also possible that the rebates and other Inflation Reduction Act provisions could be repealed.

The funding also could exacerbate a blue state-red state divide on energy efficiency, as money disbursed before the next presidential inauguration is more likely to head to states with Democratic governors, the E&E News analysis shows. A majority of Democratic-led states have already applied for the funds, while Georgia, Tennessee and Indiana are the only Republican-led states to do so.

The rebate rollout comes as federal agencies are struggling to get hundreds of billions of congressionally approved dollars out the door and into the hands of companies and consumers before the possible end of Biden’s presidency.

DOE says it has been working to make the rebates a reality since the climate law passed 21 months ago, issuing multiple rounds of guidance for states. The department set a deadline of Jan. 31, 2025, for states to apply for the funds, saying the timeline is designed to allow sufficient time to put together applications.

“It’s thrilling to see the work pay off. So many states have already submitted funding applications and several aim to launch programs this summer,” Karen Zelmar, program manager for Home Energy Rebates at the DOE, said in a statement.

But according to David Terry, president of the National Association of State Energy Officials, “the communications coming now that suggests that the rebates are coming this summer in large quantities are setting the wrong expectation.”

The rebate programs “are challenging because they were complex in nature, and then more complex,” he said in an interview.

“There were many requirements added by the department that were optional,” he said, indicating he did not have an opinion on whether those requirements were “a good idea or not.”

One individual close to the federal process who was granted anonymity to speak freely said the administration has “tried to turn the home energy rebate program into something that addresses every single administration priority.”

“We have environmental justice plans and consumer plans and labor plans — none of those were in the law. It’s a lot. They overshot. And it caused delays,” the person said.

Red vs. blue states

Energy Secretary Jennifer Granholm testifies before the House Appropriations Subcommittee on Energy and Water Development and Related Agencies on Capitol Hill March 20, 2024.
Energy Secretary Jennifer Granholm. | Francis Chung/POLITICO

Under the Inflation Reduction Act, the rebates can be used to install electric stoves and heat pumps for clothes dryers or heating and cooling, with low-income Americans slated to get the biggest checks. Wiring, insulation and ventilation to improve efficiency are covered. More efficient natural gas systems could also get money.

Overall, the rebates could reach more than $14,000 for low-income residents and hundreds of thousands of dollars for landlords.

To assess the status of the program, E&E News contacted all 50 state governments. New York currently is the only state to launch a program with the Inflation Reduction Act funds, announcing its plans last month. The money is transferred to states after applications are approved, according to DOE.

Of states led by Democratic governors, all except four responded to E&E New inquiries. With Republican-led states, all but eight responded.

So far, there’s a clear partisan split with the applications.

While three Republican-led states have applied for the funds, 16 Democratic-led states said they have already done so. Several Democratic states said they would apply by July 1, along with the GOP-led Tennessee.

State officials in New York, Hawaii and Maine said they’re hoping to get rebates to residents by late summer. Other Democratic-led states like California and New Mexico are expected to follow suit.

Ohio and Indiana are planning to submit applications this year, but the majority of red states said they plan to file by the January deadline — if all goes according to plan. That could mean that roughly half the country does not have formal rebate programs before the potential return of Trump, although it’s possible states could apply faster than planned for the funds.

No state that responded said it is opposed to the rebate program.

Despite early signals that Republican Florida Gov. Ron DeSantis intended to reject the funds, the state budget includes money to administer the rebate programs.

During a public outreach event in May, Brooks Rumenik, the energy director at the Florida Department of Agriculture and Consumer Services, called for “efficient, smooth, and prompt implementation” of the rebate program, adding that the checks can provide “real savings and improved efficiency for all.”

But some states that support the program say they need more staff to develop applications.

The Missouri energy office said the state has “no concerns with the programs’ application and blueprints” but needs more time to hire a contractor, a position echoed by Kansas officials.

It’s also unclear how quickly money announced by DOE is moving out the door.

DOE says it’s sent roughly $100 million in “early administrative funds” — which are meant to prepare applications and programs — to several dozen states and nearly $160 million in rebate funds to New York.

But several state officials told E&E News that DOE is reimbursing money spent from existing state funds and not providing federal money upfront.

When asked about its process Wednesday, DOE did not respond to request for comment about reports that some states are spending their own money before getting reimbursed. A senior DOE official told reporters last month that rebate money is “actually transferred to the states” after the department approves early administrative funds and program applications.

The New York State Energy Research and Development Authority told E&E News in May that the agency has received only $100,000 from DOE. NYSERDA said that money was a reimbursement for part of two pots of early administrative funds the department authorized.

“NYSERDA will receive the funds as we incur expenses,” the agency said in emailed statement when it announced its launch of the rebate program.

Rebecca Stair, director of New Mexico’s Energy, Minerals and Natural Resources Department, similarly said the state is “receiving reimbursement.” Oregon and Colorado officials also said their states are spending their own money upfront and later getting reimbursed.

But other states like Pennsylvania and Washington have had a different experience. They say DOE sent them the early administrative funds right after the department approved them. Liz Reichert, a senior energy policy specialist at the Washington State Department of Commerce, said DOE gave the state more than $2 million “up front” for administrative funds.

“It is important to note that these [administrative] funds cannot be used for rebates, only for a set number of pre-application activities in order to prepare for rebate programs,” she said in an email.

There have been applications from almost 48 states and tribes for administrative funds — which are capped at $2.5 million for each rebate program — Granholm said this month at POLITICO’s Energy Summit.

‘A great opportunity’

The approximate $8.6 billion for energy rebates is divided into two parts run by DOE.

There’s a $4.3 billion Home Efficiency Rebates program to retrofit both stand-alone houses and multifamily buildings. The Home Electrification and Appliance Rebate Program, funded at $4.28 billion, is geared toward electrification and appliance upgrades.

Rebates are based partly on energy-savings levels, so a heat pump water heater — which uses low amounts of electricity to transfer heat — will yield more funds than an efficient gas heater.

The response by red states to the potential cash doesn’t necessarily mean they are opposed to it, analysts say.

Democratic-led states have programs in place that the rebates can piggyback off of, while many Republican states don’t. That split may be allowing blue states to submit applications faster.

NYSERDA, for example, plans to use the rebate funding to build on an existing state program called EmPower+, which similarly funds home retrofits.

“This federal funding will help expand upon the existing EmPower+ program funding and will allow the program to overcome barriers such as providing necessary electrical upgrades needed to make comprehensive electrification projects more affordable for New York residents,” the agency said in a statement. “It will also allow for additional incentives to be available to low-income homeowners to install heat pumps.”

Nolan Lister, a spokesperson for the Montana Department of Environmental Quality, which is in charge of that state’s program, called the rebates a “great opportunity for Montanans,” saying the state is “working to make them available as soon as possible.”

Capitol Hill pressure

In September of last year, a group of House Democrats pushed Granholm to speed up implementation of the rebate program, pointing to errors in early guidance and a “failure to disburse early administrative funds.”

“These delays are all the more concerning considering that rebates are targeted at low and middle-income families who are less likely to benefit from nonrefundable tax credits,” lawmakers led by California Democratic Rep. Jared Huffman said in a letter at the time.

 Rep. Jared Huffman (D-Calif.) takes part in a House Natural Resources Subcommittee on Energy and Mineral Resources hearing.
Rep. Jared Huffman (D-Calif.) on Capitol Hill. | Francis Chung/POLITICO

DOE said in a statement that it “has been all-hands-on-deck for rebates since the IRA passed and has not let up since.”

“Our goal from the outset has been to help the states make rebates available to consumers as quickly as possible while standing up top-notch programs. That being said, the rebates are a new program under the IRA, and complex government programs like these take time and coordination to set up,” the department said.

Zelmar, who took the helm of the program in May 2023, said the department will be “working with more and more states, territories, and Tribes to get them ready to implement successful rebate programs for their residents.” Her office currently has 23 full-time equivalent staff with more coming soon.

For lobbyists who pushed for years for the rebates, it’s critical to make the program a success.

“All states are thinking seriously about how to craft their applications. These are not simple programs to implement,” said Kara Rinaldi, president of the AnnDyl Policy Group, which lobbied in favor of the rebates. “The state energy offices have had to do a lot of work to curate the appropriate program elements for their state, so states should be taking credit for their work, whether a red, blue or purple state.

“The focus right now is to press these important programs forward as quickly as we can,” she said.

States applying for the funds are required to navigate a multilayered process. The 100-plus pages of program requirements incorporate nonstatutory rules on tenant protections, collective bargaining and other issues that the Biden administration has prioritized.

Some states are looking to contracting firms to devise and implement their plans. One such company is Guidehouse Insights, according to a state energy official who requested anonymity to speak freely. Guidehouse declined to comment to E&E News.

Terry said DOE is doing its “level best.”

“In the Department of Energy’s defense, I think all of this landed when they had far fewer staff than they do now,” said Terry. “I think they have a handle on these things. But some of it is water under the bridge. We can’t go back and fix it.”

Granholm has said the pace of distributions isn’t fully under her control, pointing to issues such as staffing issues at the state level.

“It’s up to the state timelines. Some states have leaned in, and some states have not,” she told the Senate Energy and Natural Resources Committee in April.

At POLITICO’s Energy Summit, she said the department is working to provide as much assistance as possible to expedite the process.

A boost for equity?

Many climate advocates say they are pleased with DOE guidance that has been blamed for causing delays, including equity rules such as a two-year prohibition on rent increases and evictions for landlords that take rebate cash.

“DOE built out the guidance so that there’s wiggle room and flexibility for states to tailor the program to fit their needs and to fit the needs of their community,” said Amneh Minkara, acting director of building electrification at the Sierra Club. “We can call it complicated, but I call those guardrails.”

Lowell Ungar, director of federal policy at the environmental group American Council for an Energy-Efficient Economy, said the rebates will relieve some financial pressure on households.

“Energy burdens are really significant for large parts of the population, certainly for low-income families,” he said. “We certainly need to make new homes much better, but there’s, depending on how you count, 120 million homes out there, and we need to make those more efficient.”

U.S. homes generated 391 million metric tons of carbon dioxide equivalent in 2022, or about six percent of total use greenhouse gas emissions, according to EPA’s most recent full-year data.

Along with opening up rebates more for appliances that use natural gas, a Trump takeover could mean a removal of Biden’s equity rules.

Some observers of the process say the delay in distributing funds is wasting an opportunity for Biden to earn votes in the November election. But others don’t think so.

“Since the rebates will be run through the states, Biden is unlikely to get any political boost out of them,” Scott Hodge, president emeritus at the nonprofit Tax Foundation, said. “The rebates will be seen as a state program and very different from the explicitly federal [George W. Bush] Bush or Trump tax cuts.”

Still, supporters of the program are pushing states to get money out the door before the potential uncertainty of Trump. Joan Entwistle, a Sierra Club member in Utah, said she’s organizing a letter campaign to pressure her state’s energy office to apply for the rebate programs by September. The campaign is prioritizing rebate access for low-income residents.

“I heard about these rebates a year and a half ago, and I’ve been waiting to see when they would come,” she said in an interview. “We’re missing the opportunity for people to get these rebates. People can only delay so long.”

The Utah Office of Energy Development told E&E News the state currently does not have a “set timeline” to submit applications.

Correction: A previous version of this story misstated the number of red states that have applied for funding.