Exploring needs and opportunities on anniversary of Inflation Reduction Act

This week marks the one year birthday of the Inflation Reduction Act (IRA) — federal legislation that includes billions of dollars of investments intended to lower energy costs, promote widespread investment in clean energy and make clean energy technologies more accessible to Americans. In this article we hope to make those incentives more accessible and understandable to Southeast Alaskans.

First, let’s start with the big picture.

This summer continues to register Earth’s hottest days on record. The harsh weather is putting an unprecedented strain on the North American electrical grid infrastructure — leaving two-thirds of the continent at risk of losing power during extreme heat events.

“Alaska and a Changing Climate,” a recent report from the USDA, documents rising temperatures, extreme precipitation patterns and melting glaciers across the state. Here in Southeast Alaska our hearts are with all of the people impacted by this month’s glacial flooding event along the Mendenhall River.

The impacts of climate change are complex and, while there is much diversity in how communities and individuals are experiencing the effects, it can be overwhelming to grapple with the scale of the challenge.

But we are also living in a period of opportunity, where even relatively small actions can shift our climate trajectory. William Ripple, a renowned professor of ecology at Oregon State University recently told The Atlantic, “Scientifically, everything we do to avoid even a tenth of a degree of temperature increase makes a huge difference.” And we have actionable tools and strategies at our disposal, some of the best being to improve energy efficiency and to adopt clean energy sources.

On Aug. 16, 2022, President Biden signed the IRA into law. This federal legislation is a step to accelerate implementation of renewable energy technology and energy-efficient practices that reduce fossil fuel consumption, which is critical to building a resilient Southeast where people and place can thrive for generations to come.

When fossil fuels are burned to power furnaces, cars and jet engines the result is carbon dioxide and toxic chemicals are released, and these chemicals then trap heat in our atmosphere. To fight the effects of climate change and lower air pollution levels, we must find ways to fuel our lives more sustainably. These include reducing overall energy use and using renewable sources of energy instead of fossil fuels. Many places in Southeast Alaska have existing hydroelectric projects — meaning that our electricity can be used with a low environmental impact. Switching to technology that runs on electricity will utilize our communities’ abundant water resources while reducing reliance on fossil fuels.

Electrification can help us build a more just and sustainable world while benefiting multiple areas of society — the health of the environment will improve when we burn fewer fossil fuels, consumers will gain access to more reliable energy systems with less risk of pollutant exposure and electrical utilities may receive more demand for their product. The upfront costs of installing new technologies are sometimes high, but after the investment is paid off consumers can see lower monthly energy costs.

The Inflation Reduction Act for households

The household programs offered in the IRA come in the form of tax credits and rebates that allow households to get money back when they invest in home energy upgrades. Before this legislation passed last summer, clean energy technology existed, but it remained out of financial reach for many Americans because it required large upfront investments or substantial financing. The IRA’s tax credits and rebates for households lower the financial barrier to entry into the world of clean energy — making it possible for more Southeast Alaskans to make home energy upgrades.

IRA tax credits are available now by filling out the corresponding IRS form when filing taxes. The tax credits reduce your overall tax burden and IRA credits have no lifetime limit, meaning they can be claimed every year that the IRA funding keeps the program running. However, they are nonrefundable — meaning that you can’t get cash back if the credit is more money than what you owe in taxes.

Rebates, which are payments for part or all of the cost of energy upgrade products, are still being organized by the State of Alaska and will likely be available in early 2024. Rebates will be paid to a customer at the moment of transaction, when they are making the qualifying purchase, not when they file taxes. Most rebates available are for households under 150% of the area median income (AMI). For a family of four that means a household income of approximately under $183,300 in Juneau, under $162,300 in Sitka, under $158,550 in Ketchikan, under $146,850 in Skagway, and under $141,000 in Hoonah-Angoon and Prince of Wales-Hyder.

In addition, some funding through the HOMES program is open to households of any income. HOMES offers $2,000 to $8,000 rebates for whole-house, energy-saving retrofits that reduce household energy use by 15% or more. The number of rebates available (of all types) is expected to be limited and claiming them could be competitive. Alaska Housing Finance Corporation and Alaska Heat Smart will have information about how to claim the rebates as they become available.

High-impact energy upgrades for Southeast Alaskans

Given the region’s climate, road systems and energy infrastructure, the most valuable incentives for Southeast Alaskans are likely the ones that subsidize heat pumps, weatherization and electric vehicles.

Heat pumps are appliances that run on electricity and collect warmth from the ground, water or air, and concentrate it to heat or cool the home. Heat pumps offer an efficient and sustainable alternative to traditional furnaces and air conditioners by using half as much energy as other heating systems and avoiding fossil fuels. While their upfront costs are high, the resulting monthly cost savings can pay back that investment. Heat pumps are such a popular option for Southeast Alaskan households these days that the demand is surpassing the number of installers in the region, creating six-month wait times for installation.

Weatherization is the process of sealing a building to protect it from the elements and to maximize energy efficiency. It usually starts with a home energy audit or a heating assessment, and involves improving insulation, air sealing and ventilation. For buildings with traditional furnaces and water heaters that run on fossil fuels, weatherization can keep energy costs and usage to a minimum. Weatherization is also important for buildings that are candidates for installing clean energy — it lowers energy use and increases the ability of a building to be effectively heated by technology like heat pumps.

Many Southeast Alaskans already use electric vehicles (EVs), and more are likely to adopt them in the coming years due to the expanding market and new cost-reducing incentives. Furthermore, many communities in this region have small road systems — meaning that EV owners will always have a charger close by. By utilizing electricity rather than combusting fossil fuels to power the engine, EV consumers can drive without creating the same level of carbon emissions and no longer need to pay for gasoline.

Taking advantage of federal and local incentives

There are a few incentives that can help Southeast Alaskans afford heat pumps, weatherization measures and electric vehicles. One of these incentives is the IRA’s Energy Efficient Home Improvement Credit, which covers 30% of qualified expenses up to $1,200 for energy property costs and certain energy-efficient home improvements. It also provides $2,000 per year for qualified heat pumps, biomass stoves, or biomass boilers. The IRA’s Clean Vehicle Credit provides $7,500 for the purchase of a new electric vehicle (EV), a 30% credit up to $4,000 for the purchase of a used EV, and a 30% credit up to $1,000 for the purchase of an EV charger. Eligibility for EV credits depends on modified adjusted gross income (AGI), filing status, and the type of vehicle. The Residential Clean Energy Credit covers 30% of new clean energy purchases including solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells and battery storage technology.

The IRA’s rebates that will become available in 2024 provide further assistance for households under 150% AMI seeking to weatherize their home or install a heat pump. In the meantime, local programs are working hard to fill in the gaps left in federal legislation.

Ariane Goudeau of Sitka owns a duplex and lives on the second floor while renting out the first floor. “We bought a heat pump last fall for downstairs and would like to purchase one for upstairs, but at the moment we want to use up the oil first,” she said. Goudeau was motivated by environmental concerns and knew that her heat pump could utilize hydropower from Sitka’s Blue Lake Dam while providing a credit off of her taxes. “The cost of oil is much higher than when we first moved here, so there is a cost savings, especially with the tax incentives,” she said.

Godeau noticed firsthand the long road that many Southeast Alaskans face after deciding they want to pursue a heat pump. “The wait time was longer than expected,” she said. “It took 2-3 months from start to finish.”

Another Sitka resident, Shauna Thornton, has found that a heat pump makes sense financially and environmentally in her home. “It’s super economical, I run it a lot in the summer,” she said. “I’m in a trailer and it gets hot inside, so I use it to keep it cool.

In the past, Thornton had often paid $500 to $1000 per month to heat her home in the winter, but her bills have dropped since installing her heat pump. “Overall, I don’t pay more than $100 for (heating) a month,” she said. “I’m coming out ahead financially for sure.”

After upgrading her energy use with a heat pump, Thornton has turned her attention to other ways she and her neighbors could improve their energy use. “Looking around in the trailer park I live in, there are a couple of people that could really use some weatherization,” she said. “My place could use some, too!”

Alaska Heat Smart, a Juneau-based nonprofit focused on helping Alaskan households change their energy use at low costs, administers a few relevant programs. First, they offer free home heating assessments, which analyze homes and their energy use to create a report about potential heat pump installation options, including contractors and financing. Second, they administer the Clean Heat Incentives Program (CHIP) in Southeast Alaska, which provides $1,500 to $3,000 sums to help households install heat pumps.

According to Executive Director of Alaska Heat Smart Andy Romanoff, the IRA incentives have redone the heat pump calculation for many households, especially when stacked with the existing Alaska Heat Smart programs. “There has never been a better time to invest in the money-saving and emissions-reduction of a heat pump,” Romanoff said. “Demand has reached an all-time high.”

Alaska Heat Smart has facilitated over 700 home assessments, and Romanoff estimates that 70% to 80% of the households that received assessments have already installed or plan to install a heat pump. “The IRA simply supercharges the economy, making an upgrade a slam dunk,” he said. “With that kind of discount it’s rare to find a home where a heat pump doesn’t make financial sense.”

Kimberly Gleason recently installed a heat pump at her home in Sitka, an accomplishment made possible by the programs Romanoff described. There are also carbon offset funds, like the one Gleason used, in Juneau and Sitka that may be able to provide support to residents looking to make energy upgrades.

Using support from Alaska Heat Smart and a local Sitka group, Gleason obtained a heat pump at a low personal cost. Gleason said. “I wanted something more environmentally friendly and something I can afford,” Gleason said. “While exploring a heat pump as my option, I came across The Sitka Carbon Offset Fund. The fund was able to provide me with assistance, and directed me to the Alaska Heat Smart’s Clean Heat Incentive Program.”

Sitka Electric handled the installation, replacing her home’s 15-year-old Toyo heating system. “The heat pump that Sitka Electric and I choose for my home is a cold weather heat pump, and will be efficient enough to heat my whole home,” she said.

Some programs provide heat pump assistance to particular groups of Southeast Alaskans — these include the Tlingit and Haida Regional Housing Authority’s heat pump program for enrolled Craig Tribal Association members.

Sealaska and Alaska Power & Telephone (AP&T) collaborate on a heat pump incentive program for customers on Prince of Wales Island, and in Haines, Skagway and Gustavus, with added benefits available for Sealaska shareholders. According to Jason Custer, vice president of regulatory and government affairs at AP&T, the heat pump incentives came out of a rising interest in electrification among its customers. We are eager to see how our customers leverage clean energy technology to support their socio-economic objectives” Custer said. “AP&T is looking forward to broadening support for clean energy technology in its hydropower-rich communities.”

What Comes Next

The incentives from the IRA are an important step in changing regional and national energy use. However, there is still far more work to be done to systemically transition away from fossil fuels and to make sure that all people are empowered through this transition — not just those who already hold the resources and privilege to make big investments in clean energy, further compounding economic, racial and social disparities. We need collective action at all levels — global, federal, state and down to the smallest local communities. Weatherizing, electrifying, and ultimately decarbonizing in Southeast Alaska is necessary and urgent. Doing so will keep our communities healthier, create new jobs and help us live sustainably in this region for generations to come.

Taking action toward this goal is different for everyone — for some it means upgrading to a heat pump before winter comes. For others it’s sharing EV incentive resources with a friend who is looking to buy a car or donating to a local carbon offset fund. We can engage in local climate movements, contact our representatives and promote decarbonization within our own communities. Building local resilience and independence will require buy-in and collaboration from all parts of the community, so take stock of your skills and resources — then use them to help accelerate the energy transition.

• The Sustainable Southeast Partnership is a dynamic collective uniting diverse skills and perspectives to strengthen cultural, ecological and economic resilience across Southeast Alaska. It envisions self-determined and connected communities where Southeast Indigenous values continue to inspire society, shape our relationships, and ensure that each generation thrives on healthy lands and waters. SSP shares stories that inspire and better connect our unique, isolated communities. SSP can be found online at sustainablesoutheast.net. Resilient Peoples & Place appears monthly in the Capital City Weekly.

Kitt Urdang is the Sitka Conservation Society’s Beneficial Electrification Fellow through the Alaska Conservation Foundation’s Ted Smith Internship program. In Sitka, she is working to spread information about how Southeast Alaskans can contribute to the clean energy transition and live sustainably in the region. She previously served as editor-in-chief of the Williams College student-run newspaper, The Williams Record, and her work has been published by newspapers in Connecticut, Vermont and Alaska.