In a recent post, we showed how Solaflect Trackers – when used to charge electric vehicles – can usually pay back their installed cost in seven years or less. Fuel savings add up fast when you’re replacing gasoline with sunshine at the equivalent of 75 cents per gallon!
However, it’s not just the price of gasoline that’s rising these days, so is your electric bill! In this post, we turn our attention to other home energy devices that can run off our backyard solar Trackers — and take advantage of new federal tax incentives that start up in January. Here again, the savings are huge – with payback times typically five years or less!
Utility bills are soaring – making these even more attractive investments
Before we dive into the details, let’s remember that payback times are themselves a moving target – and still falling as utility rates go higher. In New Hampshire, Eversource and Liberty customers both got hit with 50% rate increases this summer. Rhode Island Energy customers saw a 47% increase in their rates this October. Massachusetts customers of National Grid are bracing for a 64% rate increase this winter, and there is a specter of rolling blackouts across New England if it gets hit with a deep freeze.
And there’s more still to come. Vermont’s Green Mountain Power will file its next request in December for rate increases that go into effect next fall. And throughout our region, this inflationary spiral will continue for years to come as the fossil generating fleet is decarbonized and the aging transmission grid gets a long-overdue overhaul.
This will only add to the long-term advantage of those who step up now to take advantage of new solar and energy-efficiency financing incentives in the just-passed Inflation Reduction Act. By some estimates, homeowners can realize up to $1,800 per year in energy savings by electrifying their homes and using solar power to charge their electric vehicles, home heating systems and other major home appliances.
$14,000 in new tax credits available for energy-efficient home improvements
Besides extending the solar and battery tax credits through 2032 – and boosting the rate from 26% to 30% — the Inflation Reduction Act (lRA) makes new tax rebates available for home heat pumps, heat pump water heaters, high-efficiency induction stoves and heat pump clothes dryers. Altogether, the IRA earmarks $4.275 billion for taxpayers who qualify for these high-efficiency electric home rebates. Taxpayers earning up to 150% of the area median income can deduct 30% of the total purchase price of these qualifying devices against future tax bills, up to a limit of $1,200 per year over 10 years, or $12,000 through 2032.
This does not include a one-time, $2,000 tax credit that’s available to all consumers, regardless of their income, bringing the total pool of financing incentives to $14,000 over 10 years for most households. The $2,000 tax credit is available each year that a new qualifying investment is purchased. There is no income limit or purchasing cap on solar or battery investments.
|Inflation Reduction Act
|30% investment tax credit thru 2032
|30% investment tax credit thru 2032
|New electric vehicle
|Up to $7,500
|Used electric vehicle
|Up to $4,000
|Air-sourced heat pump
|Up to $8,000
|Heat pump water heater
|Up to $1,750
|Induction cooktop stove
|Up to $840
|Electric clothes dryer
|Up to $840
|Electric panel upgrades
|Up to $4,000
|Electric wiring upgrades
|Up to $2,500
|Up to $1,600
Also, in a new twist, the IRA extends these new financing incentives to non-profit organizations and government entities. This change allows non-profits and municipalities to own solar and storage systems outright rather than leasing them or entering into complicated third-party power purchase agreements. With direct cash payments being offered in lieu of tax credits, community solar projects and municipal EV charging stations are expected to get a big boost, among other things.
And it’s important to note that since these incentives are ‘tax credits’, meaning you get the benefit by deducting these expenses from federal taxes you already owe, they can be spread out over years. So if you don’t owe much federal income tax, you can spread out the tax credit over several years, if necessary. For example, if you were eligible for $8,000 in tax credits for energy-efficient home improvements, and you pay $2,000 in federal taxes each year, you can spread the tax credit out over four years to take full advantage.
Air-source heat pumps
Topping the list of new home energy-efficiency rebates is the $8,000 award toward the purchase of heating, ventilation and air conditioning (HVAC) systems using air-source heat pumps. These ASHP systems are three times more efficient than the traditional furnaces and boilers they are meant to replace.
New England has a residential energy profile that does not quite match the national average of 12,000 kWh of annual electricity use and 600 therms of natural gas. That’s because there is less need for air conditioning during the summer, and more use of oil and propane for home heating in the winter. As a result, the average New England home consumes about one-third less electricity and natural gas, and much more oil for home heating, than the national average.
Yet New Englanders still pay just about as much for their monthly electric bills as the national average. That’s because of the region’s outsized dependence on costly natural gas to power half of its generating fleet. This is pushing New England homeowners in a direction where it’s not only economically favorable to back out of oil and gas for home heating, but also to avoid other costly electricity purchases from grid.
That’s where air-source heat pumps come in. First, they are remarkably efficient – able to deliver up to three times more heat energy to a home than the electric energy they consume. Second, ASHPs not only replace home furnaces for winter heating, but also air conditioners for summer use. As the climate warms in New England — and these ASHPs come to play double-duty throughout the year — this trend toward home electrification may increase the region’s residential power demand throughout the year. Even so, New England should remain below the national average, especially when compared to other parts of the country facing even bigger climate and energy problems.
What’s the payback time for heat pumps?
As for payback times, the U.S. Department of Energy says air-source heat pumps save nearly $1,000 a year when replacing electric resistance heaters and about $500 for furnaces and boilers using oil, propane or natural gas. But this begs the question of how ASHPs themselves get their power – from the grid or distributed energy sources?
Using a Solaflect Tracker, we assume that an average New England home of 2,200 square feet requires about 5,000 kWh per year to operate an ASHP for central heating and air conditioning. That’s equal to about half of the annual output of one Solaflect Tracker – at an amortized cost of less than $500 per year, or less than 10¢/kWh.
Can the grid offer a better price? Definitely not – and that includes off-peak hours when rates are lower! With utility rates still climbing while net metering rates are falling, the economics of ASHPs are turning increasingly in favor of our Trackers to power them whenever possible.
So, if we assume that the average utility rate starts are anywhere from 15¢ – 32¢/kWh, depending on where you life, and then escalate the rate at 3% a year (which seems conservative given recent utility trends!), it would take as little as 3 years, but no more than 10 years, to pay back a Tracker’s amortized cost of service for an ASP providing central heating and air conditioning.
Heat pump water heaters
Next on the list of home-efficiency improvements are heat pump water heaters, for which the IRA has awarded a $1,750 federal tax credit. Since these heat pumps operate on the same engineering principles as air-sourced heat pumps, most new homes are moving away from traditional gas or electric water heaters and installing these new heat-pump water heaters instead.
From a visual standpoint, there’s really not much difference. Instead of placing a gas burner or electric coil at the bottom of the water tank, the heat pump does its work on top, blowing evaporated cold air into the room. As for energy use, it replaces about 10 therms of natural gas for water heating with about 75 kWh of monthly electricity use. That’s equal to about 9% of a Tracker’s monthly rated energy production.
The energy savings, however, are far more dramatic. Instead of paying $20 – $40 a month for water heating, the cost with a Tracker-powered heat pump drops to just $7 a month for a typical single-family home.
That means a Solaflect Tracker running a heat pump water heater would produce more than $4,000 in net energy savings over the system’s assumed 13-year lifespan. And with utility and fossil energy price increases pegged at 3% a year, the payback for the Tracker’s use would be a maximum of four years. As with air-source heat pumps, there is also a growing financial advantage to using the Tracker exclusively for this purpose, rather than messing with increasingly unfavorable net-metering rates on the grid.
Induction Cook Stoves
Moving to the kitchen, induction cook stoves are warming up to an $840 federal tax credit. Say what you will about these cooktops, with electric coils under glass (which require steel or iron pans, not aluminum), they cook faster, are easier to clean, and have no pilot lights or cooking fumes.
Assuming these induction cooktops are used for an hour a day and consume 2,000 watts of power, the annual load requirement comes to 730 kWh, equal to about 7% of the annual rated production of a Tracker. In its first 10 years of operation, this stove would save $2,600 in energy costs relative to a gas cooktop, and pay for the Tracker’s use in about three years.
Heat Pump Clothes Dryers
Finally, in the laundry room, heat pump clothes dryers are dialed in for an $840 tax credit as well. Like the other electric devices above, these heat pump dryers offer a number of operational benefits besides saving energy. Not only are they more energy efficient, they also create water as a byproduct instead of exhaust. This eliminates dryer exhaust smell, the need for duct work and ventilation holes that pierce through a house’s exterior. Better still, from an energy efficiency standpoint, a heat pump clothes dryer can cut electricity use in half, to about 250 kWh per year. That’s less than 3% of the annual rated production of a Tracker.
So, for a typical family that runs five loads of laundry per week, the average electric dryer costs about $130 per year to operate, while a gas dryer costs about $85. A Tracker-powered heat pump clothes dryer takes the annual operating cost down to only $25, and the payback time for the Tracker’s use is no more than four years (depending on which type of dryer you’re replacing).
Don’t forget the installation credits!
Finally, don’t forget that the Inflation Reduction Act also provides tax credits for the installation work that these new home electrical devices may require: $4,000 for electric panel upgrades, $2,500 for electric service and wiring upgrades, and $1,600 for other home weatherization work. Many homes – especially ones 50 years or older — aren’t equipped to accommodate the growing electric service requirements of solar arrays, electric vehicles, heat pumps and other major household electrical devices.
Upgrading this service and adding a smart meter with energy management capabilities allows homeowners to take control of their growing power needs – turning solar power, heat pumps, home batteries and bidirectional EV batteries into an integrated, programmable home energy network. App-based software programs can also be used to optimize electricity use and maximize savings.
Taking advantage of this tax-assisted set-up, you can build a hub for future home energy management and drive your energy efficiency and sustainability goals forward. Combined with other price stability and home security benefits, our Tracker-powered devices can rack up thousands of dollars in home energy savings, while paying back its use in just a few short years.
And best of all, you’ll be securing reliable, carbon-free, and practically maintenance-free power generation for the next quarter-century.
Solaflect Energy is your home energy management partner. We help you install clean and affordable solar electricity and home battery systems for a more resilient and climate-friendly future. For more information, please email us , or call (802) 649-3700.