What’s the Value of 45L to Utilities?
In our August 4th post, “The New 45L Tax Credit: What is it and How to Prepare”, we outlined the energy provisions of the proposed Inflation Reduction Act of 2022, the specific terms surrounding the 45L Tax Credit extension as well as how the rater, builder, and building product manufacturer communities can begin preparation on leveraging this phenomenal incentive. The Ekotrope ecosystem, however, spans many more stakeholders including the utilities and the implementers that manage residential new construction (“RNC”) programs. It is the utilities, after all, that provide the power that the 45L incentive is intended to preserve. This leads into the ultimate goal of supporting load management, reducing energy consumption and the reduction of greenhouse gas emissions.
While the benefits to the builder community, in the form of tax incentives, and the environment, in the form of reduced greenhouse gas emissions are clear, the value of 45L to utilities and implementers is a little less tangible.
It is through our network of utility and implementer relations that the picture has become clear. 45L provides a wide range of benefits to utilities, both in the short-term and long-term. This can support them in their attainment of energy efficiency and conservation goals. Here we’ll outline the most prominent benefits and encourage you to weigh in with others as we explore this unprecedented opportunity to drive energy efficiency to the forefront of the broader building community.
Increased Program Visibility and Participation. Utility programs are likely to experience increased attention due to the heightened interest in efficient building practices brought on by the 45L incentive. Trade-allies such as raters can often aid in this exposure as they often form the bridge between utilities and builders. In turn, this helps surface all incentives like tax credits, utility programs and building product manufacturer incentives. We can expect that with the 45L incentive now available, many builders will use their resources to support high performance construction.
Collective Incentives. Utility RNC program incentives can vary widely in value. Smaller incentives may be overlooked due to the associated costs necessary to comply and obtain them. Collectively, however, 45L, utility rebates and building product manufacturer incentives can provide a compelling story totalling thousands per project property. When compiled and presented to builders as part of the rater process, programs can experience a lift in exposure, participation and energy savings.
Increased Electrification. Our data already indicates a rise in electrification. This even covers whole home electrification. With the advancements in energy efficient building materials and smart, connected appliances, 45L is poised to be the catalyst for even greater adoption. Besides load management, which will be addressed below, this increase in electrification provides utilities several downstream societal benefits. These benefits include a reduction in GHG emissions and greater energy equity paired with lower operating costs when applied to moderate and lower income households.
Load Management and Ancillary Program Enablement. By nature of the products incentivized by 45L, you should expect to see more intelligent appliances, thermostats and increased whole home connectivity to the internet. With that connectivity comes the ability to manage and control load. Also, many post-occupancy incentives and programs can increasingly leverage the product adoption that 45L and electrification have fostered.
We project that these benefits, driven by the 45L tax incentive, will help foster change in the new home construction industry. Together, EE programs and conservation managers, raters, builders, and product manufacturers can help drive this change that will not only save energy and improve the way new homes are built today, but also prepare the grid and support our environment tomorrow. It is a common set of tools, resources and data, like Ekotrope’s RATER, that brings these stakeholders together, connects the dots and presents the full potential. That could include supporting raters and their ability to advise their building clients, providing unique solutions to help utilities gain exposure for their programs, or assisting with the energy modeling that demonstrates a home's compliance across utility and federal (45L) programs.
Overall, we anticipate that the federal funds available through 45L’s extension will inspire innovation, collaboration and demonstrate a noticeable lift to energy efficient efforts. We trust that you share our optimism and that you will leverage the heightened awareness of energy efficiency brought on by the 45L extension.
How else do you see 45L impacting energy efficiency and conservation efforts within utilities? Share your thoughts below.