CHARLESTON — With electricity costs escalating more in West Virginia than most of the rest of the country, help from the Inflation Reduction Act is on the way.
The federal Department of Energy has allocated West Virginia $88.2 million for home energy rebates designed to make homes more energy efficient.
The funding is West Virginia's share of a nearly $9 billion pot provided by the Inflation Reduction Act for states and tribes focused on low-income consumers and aimed at electrifying home appliances and energy-efficient retrofits of homes.
Slated to be made available to states next year, the money could go a long way in West Virginia given the state's historically limited energy efficiency options.
West Virginia's $88.2 million will be split almost evenly between two home rebate programs.
The state will get $44.2 million for home energy performance-based, whole-house rebates. That funding will cover rebates for energy efficiency retrofits ranging from $2,000 to $4,000 for individual households and up to $400,000 for multifamily buildings. The $44.2 million also will cover grants to provide rebates for home retrofits of up to $2,000 for retrofits cutting energy use by 20% or more and up to $4,000 for retrofits for saving 35% or more.
Maximum rebates are to be double for retrofits of low- and moderate-income homes.
West Virginia will get another $44 million to develop a high-efficiency home rebate program that includes a $14,000 cap per household. Caps under that program will be $8,000 for heat pump costs, $1,750 for a heat pump water heater, and $4,000 for panel and service upgrades. Other eligible rebates will cover electric stoves and clothes dryers, as well as insulation and air-sealing measures.
The high-efficiency home rebate program includes means testing and will provide half the cost for incomes 80% to 150% of area median income and the entire cost for incomes 80% of area medium income and below and similar tiers for multifamily buildings.
The Department of Energy estimates that the new rebate program funding could support up to 1.6 million households nationwide in upgrading homes and apartments to lower energy bills, including installation of up to 500,000 heat pumps and deep building retrofits via insulation and electrical wiring.
But it'll be up to the West Virginia Office of Energy to submit plans to the Department of Energy to implement the two consumer rebate programs to obtain the $88.2 million allotted to the state.
Signed into law by President Joe Biden in August after critical support from Sen. Joe Manchin, D-W.Va., the Inflation Reduction Act requires state energy offices to submit plans for the funding. The Department of Energy may choose to reallocate funds from states that don't have an approved program two years from its enactment.
The Department of Energy expects that funding will be available by the spring of 2023 and that rebates will be available to the public later in the year. The agency will issue a request for information for public input early next year.
The West Virginia Office of Energy hasn't yet received federal guidance regarding the funds, and an office spokesman declined comment.
The Department of Energy said it will release formal guidance and applications to states late in the second quarter of 2023. It will be up to states to determine program implementation timelines once they're issued the funds.
The Inflation Reduction Act, which allotted an unprecedented $369 billion in clean energy and climate funding, passed Congress without any Republican support.
Heat pumps are quickly becoming a more popular energy option — and one that more states are embracing as keys to electrification that slashes energy bills and slows climate change.
California has set a target of 6 million heat pumps to be deployed in the state by 2030. Maine has set a target of installing 100,000 heat pumps by 2025.
A recent report by the sustainable living research group Carbon Switch citing data from the federal government's National Renewable Energy Laboratory found that if every home in the United States replaced its heating and cooling systems with heat pumps, the average homeowner would save $557 per year on their utility bill.
In West Virginia, the average homeowner would save $887 per year and 52,000 jobs would be created, the report projected.
Heat pumps can cut electricity use by roughly 50% compared to electric resistance heating such as furnaces and baseboard heaters, according to the Department of Energy.
The agency argued that heat pump use by the United States and its allies could cut down reliance on Russian oil and gas upon Biden's Defense Production Act invocation earlier this year.
Heat pumps move heat from the outdoors into buildings during the heating season and move heat from buildings into the outdoors during the cooling season.
West Virginia electric bills have ballooned as the state has clung to coal for the vast majority of its electricity, even as other states increasingly embrace alternatives.
State ratepayers faced a 90% climb in average residential electricity retail price from 2005 to 2020, per Energy Information Administration data. Only Michigan had a greater increase by percentage.
In 2020, coal-fired electric power plants accounted for 88% of West Virginia's electricity net generation, according to the Energy Information Administration. That clip is roughly quadruple the national percentage.
But although West Virginians would benefit disproportionately from more energy-efficient homes, the state has lagged behind in energy efficiency options.
The nonprofit American Council for an Energy-Efficient Economy ranked West Virginia 48th in its 2020 State Energy Efficiency Scorecard. The group said that electric utilities in the state deliver some of the lowest levels of savings of any state in the country.
Nearly 56,000 West Virginia households with incomes of less than 50% of the federal poverty level spend 31% of their annual income on home energy bills, according to an analysis last year by the Massachusetts-based economic consulting group Fisher, Sheehan & Colton.
The study concluded that existing sources of energy assistance in West Virginia don't sufficiently address what the group calls the home energy affordability gap.
The West Virginia Public Service Commission rejected a request in December from consumer and energy efficiency groups to direct Mon Power and Potomac Edison to evaluate potential for adding energy efficiency programs that serve the companies' low-income ratepayers and provide customers prompt access to multi-year energy usage data.
That rejection came in a case in which the commission approved a $19.5 million annual increase in fuel cost recovery for the two FirstEnergy subsidiaries, representing a 1.5% hike in total rates. The commission ruled that the request for adding energy efficiency programs was out of place in the case.
FirstEnergy customers in West Virginia don't have access to incentive programs available to the company's ratepayers in other states. Low-income Pennsylvania customers can access appliance rebates, and ratepayers also have options for a residential energy audit program; heating, ventilation and air-conditioning rebates; and a financial incentive program for more energy-efficient single-family and multifamily homes.
The Public Service Commission staff has discouraged electric utility energy efficiency investments, recommending in 2017 and 2019 that the commission deny approval of Appalachian Power and Wheeling Power requests to continue their energy efficiency and demand response programs.
Demand response programs allow customers to lower or shift their electricity use during high-demand periods to capitalize on time-based rates or other financial incentives. Such programs reduce stress on electricity grids.
Commission staff argued in 2017 that the energy efficiency and demand response offerings would cost customers more than if they weren't in place. In 2019, the staff contended that the programs were increasing bills for non-participating customers.
Energy efficiency proponents said the programs were key tools for utility customers to limit the effect of West Virginia's rising electricity costs.
In both cases, the commission approved agreements between the companies and consumer advocate groups. The 2017 agreement scuttled four new energy efficiency and demand response programs that Appalachian Power and Wheeling Power had proposed. The 2019 agreement slashed the companies' projected annual revenue from energy efficiency and demand response offerings by $3.1 million to $8.6 million in 2020 and 2021.