Why your utility will pay you to upgrade your home
The economics behind utility rebates for water heaters, insulation, and heat pumps.
You’ve probably received a flyer from your utility outlining programs to pay you to upgrade your water heater, add insulation, or switch their central heating to a heat pump.
These programs are universal, run by both public and private utilities, and aren’t a result of legislation like the IRA.
What’s in it for the utility?
Electrical utilities are worried about their infrastructure. They know that 60% of their transformers and power lines are 25 years or older, meaning they are likely to break down.
They worry that millions of EVs and the electrification of home heating and cooking will drive up demand for electricity, causing their aging infrastructure to overload and break.
It costs millions of dollars to upgrade a single transformer. Building new transmission lines is incredibly challenging when environmental reviews take many years. But the utilities have realized they have another option – they can pay people to use less electricity.
How can they get you to use less electricity?
Say your home has a 10 year old electric water heater. It uses electrical resistance heating and runs on about $500/year of electricity. Newer heat pump water heaters are far more efficient, only requiring about $100/year of electricity. This one appliance can use up to 40% of the electrical needs of a given house, and takes a single technician about 2 hours to upgrade.
Your utility knows that that an 80% reduction in electricity used for water heating means less strain on their transmission lines. If they can get 100s of households in a given area to all reduce their electrical needs, they can extend the life of the transformers and power lines in that neighborhood for years, saving them millions.
What do these programs look like?
Utilities typically have two types of programs - one targeting businesses that use large amounts of electricity, and the other for individual homeowners.
The business incentives can be quite complicated, but homeowner incentives are designed to be simple and “one size fits all”. They are frequently available in the form of coupons available on the utilities website or “preferred providers” that receive an incentive directly from the utility for performing an upgrade, and thus are able to charge a lower price.
All of these programs are focused on the highest ROI changes – as an example, Seattle City Light offers a $500 point-of-sale coupon for heat pump water heaters, but only $35 towards an energy star washing machine.
How can I take advantage?
Google the name of your electrical utility and incentives (eg: “Pacific Gas and Electric Incentives”). You’ll find a page like the one below outlining the different programs they’re running and how you can take advantage.
