The IRA: A Boost for Smart Homes

On August 16, 2022, President Joe Biden signed into law the Inflation Reduction Act (IRA) of 2022, designed to help Americans that are struggling with rising costs. However, the law also includes nearly $370 billion in incentives for clean energy and climate-related programs and is considered one of the most significant spending packages in history for climate change mitigation and adaptation. This blog is part of a series whereby Guidehouse Insights’ subject matter experts cut through the 755 pages of legislation to identify the IRA’s most significant elements and synthesize what they really mean for the future of clean energy technologies.

Although the IRA does not specifically refer to smart homes, its provisions support greater adoption of smart home technologies associated with increasing residential energy efficiency in several fundamental ways. 

Funding for Technologies Associated with Smart Homes 

Some new appliances incorporate technology to operate more efficiently than their older counterparts. The next level of improvement is to integrate the operations of these independently operating appliances and equipment into a coordinated system. For example, a properly designed smart home with new appliances can operate them at times when the solar panels are generating the most electricity. Although the home can sell power back to the grid, it is most economical and efficient for the homeowner to use their own power to have the heat pump cool the house, run the clothes dryer, and charge the EV, as the following figure shows.

Figure: Smart Home Elements that the IRA Supports 

(Source: Guidehouse Insights)

As described in the building decarbonization blog, the IRA offers significant rebates and incentives to help cover the costs of the solar panels, a heat pump for space heating, heat pump clothes dryers, electric stoves, and heat pump water heaters. 

Support for the Technology that Enables Efficient Smart Homes

In addition to appliances and equipment, the IRA supports improvements to wiring and the load center/circuit-breaker box in the home. An unpleasant and often unexpected surprise many homeowners face is the costs associated with upgrading the circuit-breaker box and wiring in the home. These may be necessary to support the additional loads associated with EV chargers, solar panels, and heat pumps, and can cost many thousands of dollars. Unfortunately, they offer little aesthetic payback and involve a series of complicated decisions. 

To address this, the IRA offers up to $4,000 to upgrade circuit-breaker boxes along with $2,500 for improvements to the wiring. What may seem to be a minor item in the bill addresses what often causes homeowners to hesitate to move forward. 

Significantly, this makes the latest generation of circuit-breaker boxes, called smart load centers, much more affordable. A replacement of a typical circuit-breaker box to support more circuits may cost in the range of $2,000. Smart load center hardware, which simplify the installation of smart home elements such as residential battery storage and EV chargers, cost closer to $4,000. SPAN, Leviton, and Square D all have offerings in this space.  

Training for the Next Generation of Installers

Many contractors face delays in getting all the components and equipment needed to complete jobs. A more intractable problem, however, involves hiring skilled staff. A less heralded element of the IRA, but very significant, involves training programs to address this shortage of adequately trained personnel. 

The IRA includes $200 million for the training of contractors specifically associated with energy efficiency. On-the-job training is inadequate for the skills associated with energy efficiency work. These tasks require a combination of classroom work along with field experience. This level of funding contributes to addressing this shortage.

Close Ties Between Energy Efficiency and Smart Homes

New appliances are typically more efficient that older appliances, but the integration as a smart home increases the overall efficiency of the residence. More residences will recognize these benefits based on the financial incentives offered as a part of the IRA installed by skilled installation professionals trained by the IRA.

For more information on how Guidehouse Insights can help you navigate the impacts of the IRA, please reach out to richelle.elberg@guidehouse.com.