Savvy contractors nationwide know that utility rebates available on the market’s broad range of energy-efficient electrical products—from lighting, motors, drives and generators to electric vehicle chargers, solar panels and more—can help offset project costs by anywhere from 10%–50% (and on average from 20%–25%), reduce project payback periods, increase returns on investment and help sell upgrade projects to customers in general. But where do rebates currently stand among the nation’s roughly 2,000 municipal utilities, 900 rural electric cooperatives and 100 investor-owned utilities as we emerge from the pandemic, and what does the future hold for these powerful financial incentives?

In the following interview, industry experts Steve Rosenstock, senior manager of customer technical solutions at the Edison Electric Institute in Washington, D.C., and Leendert Jan Enthoven, founder and president of BriteSwitch, a Kingston, N.J.-based company that specializes in rebate database software solutions and rebate fulfillment services (primarily in the commercial lighting and EV charging stations arena), shared the current status of utility rebates for several popular energy-efficient technologies, as well as top tips to help contractors capitalize on them in 2023 and beyond.

How did utility rebates fare in 2021–2022? Did the pandemic influence rebate activity in any way?

Rosenstock: According to the American Council for an Energy-­Efficient Economy, overall electric rebate program spending decreased from $6.84 billion in 2019 to $5.96 billion in 2021, a nearly 13% drop in that two-year period. At the same time, the market’s redemption of rebate dollars slowed during the pandemic, especially in the commercial sector, as many companies went into a “survival” mode of operation and supply chain issues caused many projects to be delayed or postponed.

Enthoven: During the pandemic, participation in rebate programs did indeed slow significantly due to shutdowns, material shortages, labor shortages and product price increases. Utility programs were therefore desperate to get projects in their books, so in 2020–2022, we saw more “bonus” programs (offering limited-time enhanced incentives to increase participation) than ever. Coming out of that into 2023, rebate amounts for lighting products still remain higher on average across many categories.

Compared to 5 years ago, how would you describe the climate of the 2023–2025 utility rebate landscape, and what’s your outlook for rebate activity in 2023 in particular?

Rosenstock: The programs are shifting quite dramatically. Due to market share gains by LED lighting in all applications, and with new federal efficiency standards in motion, some programs are shifting their emphasis to other areas, such as grid-interactive technologies. Other utilities are shifting programs away from gas end-use efficiency and toward electrification and maximizing heat pump applications.

In 2023, rebate activity will increase in some areas/technologies and decrease in others. Electrification and heat pumps will likely see the biggest increase, and lighting will likely see the most dramatic decrease due to the years of success utility rebate programs have had and recent updates to federal regulations, which “raise the floor” of minimum efficiency to 45 lumens per watt for all general service lighting.

Enthoven: For 2023, 78% of the United States is covered by a commercial lighting rebate, which is similar to the last few years and just a little shy of the record of 79% that we saw back in 2017. The geographical landscape for rebates has also remained relatively consistent, with the strongest incentive programs located in the Northeast and parts of the Northwest. States like Ohio, Kansas and North Dakota still offer no rebates, while states like California, Florida and Texas offer incentives, but they’re limited in availability and involve very small dollar amounts. However, the overall outlook for commercial lighting rebates remains positive in 2023, with many rebates being just as good, if not better, than 2022 programs. Overall, the dollar value of the average commercial lighting rebate remained pretty consistent, up just 2% over last year.

What, if any, economic, legislative or other external drivers have been or will be influencing rebate activity in 2023, and what other trends are you seeing?

Rosenstock: At the federal level, the Inflation Reduction Act (IRA) supercharged federal incentives and programs for new and existing homes in particular. The updated incentives are in place through 2032, and in most cases are much more lucrative than the old incentives. The incentives for renewable energy systems, energy storage systems, electric vehicle charging stations and electric vehicles will increase the market penetration of these technologies and encourage investments by both residential and commercial/industrial customers. However, federal tariff policies and regulations could have an impact on the ability of suppliers to meet market demand. In addition, supply chain issues haven’t gone away as of early 2023, so there may still be significant delays in starting or completing projects.

Enthoven: Due to the Energy Independence and Security Act, many rebate programs have announced that they’ll be discontinuing rebates for general service lamps, which includes popular products like A19 and PAR lamps. Phase 2 of this legislation will go into effect this July 1 and will increase the minimum efficacy of these types of lamps to 45 lumens per watt. The law itself doesn’t stop programs from offering rebates or incentives for these products, but because customers purchasing these types of lighting will only have efficient options to choose from after July 1, the need for these incentives is being debated by various program administrators across the country. 

Based on 2023 data, however, it’s clear that this future phase-out has yet to affect the rebates for these products, as the average rebate for LED replacement lamps like A19s and PARs went up 71% this year; those programs probably hope to capture the energy-saving potential before the phase-out goes into effect. It’s important to note that this change mostly affects consumer or residential lighting; linear tubes, high bays, pole lights and other commercial-type lighting categories aren’t impacted.

In another trend, utility program implementers have increasingly shifted away from traditional PDF forms toward online portals to reduce their costs and streamline their process, but unfortunately many of the tools they’ve placed online as replacements are poorly designed, increasing the average time it currently takes to file for commercial lighting rebates considerably. Combined with the labor shortages that electrical contractors and distributors experienced during the pandemic, requests for our company’s rebate database software and fulfillment services have increased significantly.

What’s the status of rebates for EV charging stations in the United States?

Rosenstock: There are many opportunities for contractors who install EV charging stations. The combination of incentives and tax credits in the 2021 Infrastructure Investment and Jobs Act and the 2022 IRA will increase the use and construction of EV charging stations at homes, businesses and along highways. As a result, there will be growing opportunities for the installation of Level 2 chargers (208–240V) and DC fast chargers across the United States.

Enthoven: Over the past year, we’ve seen the demand for rebates on EV charging stations skyrocket as many electrical contractors and distributors have moved into this new, rapidly growing market segment. With other energy-efficient product rebates, incentives are usually offered by the electric utility, but for EV chargers, a mix of electric utilities and local, regional, state and federal entities are providing the rebate funding. This makes it much more challenging to identify all the EV charging station rebates available, even though there are a lot of them out there—currently, 69% of the nation has access to a rebate for the installation of commercial electric vehicle supply equipment, while 54% of the nation has access to a residential rebate. 

The rebates for EV charging stations can be extremely lucrative as well, with the average rebate for a commercial Level 2 EV charger currently standing at $3,150 and a Level 3/DCFC charger offering an average rebate of $27,751 across the United States.

Unfortunately, applying for these incentives is much more complex than for commercial lighting. Lighting rebates have been out there since the mid-1980s, and over the years, programs have standardized and streamlined the process. EV charger rebates, on the other hand, are fairly new and many of the rebate entities appear to be turning to different organizations to establish how they’ll work, which has resulted in many inconsistencies in the rebate process between standard energy-efficient products and EV chargers. Also, due to the enormous interest in and demand for these funds, programs are often overwhelmed, and it can take weeks to get a response to even a simple question.

Overall, do you believe that utility rebates represent a great opportunity for electrical contractors in 2023? How can they capitalize on them in 2023 and beyond?

Rosenstock: Rebates absolutely represent an opportunity for contractors, especially those with good supply chains. There are many states where customers will be able to combine federal tax incentives (or rebates) with state/utility programs to maximize the economic and energy savings benefits. However, some of the federal tax incentives come with “strings,” such as a maximum adjusted gross income to qualify for certain incentives, and contractors need to be aware of all the conditions and terms to ensure that customers know their qualification status.

Enthoven: Rebates continue to be a great sales tool for electrical contractors in 2023. Every contractor should include the estimated rebate on every quote, even if they won’t be processing the rebates themselves. While rebates can be a hassle to estimate and ultimately file for, being able to show the customer significant savings off the initial cost is a great motivator. 

For contractors who don’t have the time or manpower, they can partner with a rebate company like ours to greatly reduce their “rebate hassle.” Many contractors use our RebatePro for Lighting and EV Chargers software tools to look up and estimate all the possible incentives for their customers, while also asking us to process the rebate on their behalf so that they can provide a turnkey solution to their customer. 

On a cautionary note, however, contractors should be aware that rebate programs change frequently. Over the course of 2022, we saw some programs change suddenly midyear, making projects that were eligible for rebates ineligible overnight. Contractors need to stay on top of rebate programs and verify that they’re working with the most current information.

shutterstock / Lightspring