Fifty states and six territories have launched “Cash for Appliances” programs since late last year. Each one had the same amount of money – about a dollar per resident – but the results have been wildly different. Some states ran through their entire rebate budgets in hours; others can’t seem to give away their money. What’s been going on?

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Cash for Appliances, modeled on (or at least nicknamed after) last year’s “Cash for Clunkers” program, was funded as part of the $787 billion stimulus bill. Unlike “Cash for Clunkers,” the appliance rebate program wasn’t designed and administered by the federal government. Instead, the government directed $300 million to the 50 states (plus DC and several American territories), at a ratio of roughly $1 per person in each state. Each state then had the opportunity to design their own program within the general guidelines given by the government.

As you’d imagine with a lot of cooks in the kitchen, no two states designed their rebate program in the exact same way: rebate amounts, categories, eligibility, application processes and marketing plans have all differed. As have the results… Ten states had crushing consumer demand that caused them to run out of rebate funds within 4 days of the respective program start dates, with complaints of flooded call centers and crashing websites. Thirteen other states still have desperate operators standing by and literally can’t give away their money.

Comparing State by State Rebate Programs

It’s not just a matter of some states having better deals than others. Take, for example, refrigerator rebates in Massachusetts, Minnesota and California. The programs in all three states offered $200 rebates on efficient refrigerators. Massachusetts and Minnesota “sold out” in 1 day and 2 days respectively. California? Same rebate amount, but the program has been open since April and still has $19 million in rebates unredeemed.

Across the country, the rebate categories and amounts are all over the board:
So what attributes matter the most when it comes to determining whether a state program sells out quickly or not at all? The answers aren’t as straightforward as you’d think. We did some analysis to compare each of the programs to see what predicted their likelihood to sell out.

What Doesn’t Matter

Average Electricity Rates: One of the biggest surprises in analyzing the state by state rebate data is that the average price of electricity in a state has almost no impact on how popular its Cash for Appliances program is. Consumers don’t seem to be thinking about this program in terms of its ability to save them money over the long-term – otherwise, we’d expect to see that the states with much more expensive electricity selling out their rebate programs much more quickly than those that have relatively cheap power.

Non-Appliance Rebates: There are the “shiny” appliances (refrigerators, washers, freezers and dishwashers), and then there are the “boring” systems (air conditioners, furnaces, heat pumps, water heaters, boilers and solar water heaters). There’s almost no correlation between the number of “boring” categories that a state has rebates for, or the maximum amount of any of those rebates, and the speed at which the state has gone or is going through their Cash for Appliances budget. While we haven’t seen break-downs for many states in terms of the numbers of each type of rebate that have been redeemed, this result indicates that most people aren’t being motivated by the number or dollar figures of non-appliance rebates.

What Matters a Little Bit

Number of “Shiny” Appliance Rebate Categories: There are four basic appliance categories where states can offer rebates (refrigerators, freezers, dishwashers and clothes washers). Generally speaking, the states that offer rebates in 3 or 4 of those categories are more likely to have run through their rebate dollars quickly than those that have offered rebates in fewer appliance categories.

The fact that states that offer smaller rebates on a broader set of appliances have handed out their money faster than states that offer larger rebates on fewer types of appliances may mean that rebates aren’t successfully channeling consumers into buying specific appliances, but rather “catching” buyers who were already planning purchases.

What Really Matters

“Do you have reservations, sir?”: The number one predictor of whether a state rebate program sold out quickly didn’t have anything to do with how generous the rebates were. It actually turned out to hinge on the program’s design. Virtually all the “fast” states required consumers to pre-reserve a rebate application before making a purchase. These states set up websites and call centers that “opened” at a certain date and time, creating an “event” that turned into a feeding frenzy of activity, before closing down within days, or even hours.

Ten of the 17 “fastest” states required consumers to reserve a rebate before purchasing a qualifying appliance. Six others had hybrid programs where consumers could either reserve ahead of time or get the discount at the point of sale (if available). Of the 15 “slowest” states, 11 have no reservation system, and three others have optional reservation systems. Basically, all the “slow” states use mail-in rebates after purchase.

Conclusions

For rebate program designers in government, utilities or manufacturers, there are a few lessons that can be taken away from the Cash for Appliances results:

1. Create demand through scarcity by requiring pre-reservation for new rebate programs. For rebate programs like Indiana and Pennsylvania (and like many utility rebate programs across the country), that only pay out non-appliance rebates, a potentially effective strategy to kick-start demand would be to re-launch the program with higher rebates for the same back-end measures, but require consumers to pre-reserve their rebate on a specific launch date.

2. Bundle “shiny stuff” (basic appliances) and “boring stuff” (HVAC systems) together to increase the uptake of less exciting, but greater energy saving, systems.

3. Catch the “already upgrading” crowd by offering rebates on a wide set of categories but only on the most efficient models in each category. The program may not be stimulating purchases that wouldn’t have happened already, but it can nudge consumers to the highest efficiency products in each category.

The data from the Cash for Appliances program results fit with academic research on consumer behavior.

“The variable rates of uptake based on seemingly trivial factors such as creating a sense of urgency are further evidence that, when the goal is to encourage consumers to act in their best interest, giving them some reason other than pure rationality can be surprisingly effective,” said Michael I. Norton, Associate Professor of Marketing at Harvard Business School, “Inserting some excitement into behaving well – in some sense, copying the way parents induce their children to eat their vegetables via airplane noises – should always be an important consideration for policymakers interested in encouraging behavior change.”

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“Cash for Caulkers” is nearly here. Last month the House of Representatives passed H.R. 5019 – also known as the Home Star Energy Retrofit Act of 2010 or “Cash for Caulkers” – to kick-start construction, create jobs and cut back carbon emissions. While the bill still needs to clear the Senate, supporters predict it will pass this summer.

This is great news for homeowners and contractors alike. The bill provisions $6 billion for energy-efficient or “green” retrofits. It is expected to fund renovations for 3 million families, create 168,000 new jobs and save consumers $9.2 billion on energy bills over the next 10 years.

But in order to cash in on upcoming rebates, homeowners and contractors will need to do their homework. There are 13 types of retrofits eligible for funding. Each retrofit has unique eligibility requirements and set rebate amounts. You can read the full text here.

Who is Eligible and How to Qualify?

The Home Star bill offers two rebate programs, the “Silver Star” program and “Gold Star” program. Here are details for each:

Silver Star – Unless another amount is specified in the “Rebate Amount” column above, homeowners will receive a $1,000 rebate for each retrofit listed in our table. The maximum amount of rebates paid out will be $3,000 or 50% of the total cost, whichever is lower. For example, if a homeowner spends a total of $4,000 on eligible retrofits, they will get $2,000 or 50% back as a rebate. If they spend $8,000 on eligible retrofits, they would only receive $3,000 in rebates instead of $4,000 (which would be 50% of the cost).

We made it really easy to wade through the legalese. Here is a table that breaks down the 13 retrofits of the bill, along with the requirements and rebate amount for each. In addition to the requirements we listed, each retrofit must comply with Building Performance Institute (BPI) standards or other procedures to be approved by the Secretary of Energy.

Gold Star – To qualify for the Gold Star program, homeowners must reduce their total home energy consumption by 20%. A $3,000 rebate will be rewarded for this reduction. Homeowners can receive an additional $1,000 for each additional 5% reduction, up to a total rebate of $8,000 or 50% of the total retrofit cost. Rebates may be provided for any of the retrofits listed under the Silver Star program, or for any other energy-saving measure, including: home energy management systems, high-efficiency appliances, highly reflective roofing, awnings, canopies, and similar external fenestration (window) attachments, automatic boiler water temperature controllers, energy-efficient wood products, insulated vinyl siding, and mechanical air circulation and heat exchangers in a passive-solar home.

The Home Star bill also includes rebates for do-it-yourself (DIY) homeowners that are confident in taking on the renovations themselves. DIY’ers can get up to $250 in rebates for products purchased without installation service. This rebate is limited to attic insulation, crawl space insulation and/or air-sealing retrofits.

Seal Your House Envelope and Improve Insulation

Before carrying out any serious retrofit, homeowners need to weatherize and seal their house “envelope.” The envelope includes outer walls, windows, doors, floors and the ceiling. If the house is not properly sealed and insulated, then subsequent HVAC retrofits won’t be as effective.

So how much does it cost to seal all the air leaks in a home? Prices will obviously vary based on where you live, how big your property is and the scope of the retrofit. But it will likely cost a few thousand dollars to hire a contractor for this type of renovation. In this example from the New York Times, the author spent $3,760 for insulating and sealing the envelope of his 1,200 square foot home.

How much can homeowners expect to save? The Environmental Protection Agency (EPA) estimates that homeowners can save 20% on heating and cooling costs by sealing leaks and adding insulation. In New York – one of the most expensive places to heat a home with an average annual cost of $1,513 – this would be a yearly savings of $300 just for heating.

Continuing with the example from the New York Times, the Silver Star program would provide $1,880 (50%) in rebates for their retrofit. At an annual savings rate of $300, the renovation would pay for itself in six years (or less if you include cost savings from reduced air conditioning bills).

Repair and Replace Leaky Ducts

Duct replacement and sealing is eligible for funding under the Home Star bill. Many homeowners will want to outsource this project to a qualified HVAC contractor. Contractors have equipment to detect leaks that otherwise may not be immediately visible. They also have methods to seal ducts that are inaccessible. For example, by spraying an adhesive or sealant through the duct work.

Replacing and sealing ducts can also be a DIY project, especially when ducts can be easily accessed in an attic or basement. Leaks should be sealed with mastic sealant or metal tape (not duct tape), then insulated to reduce heat loss and to further improve efficiency. The Lawrence Berkeley National Laboratory has an excellent guide on how to seal and insulate ducts.

Upgrade Your Furnace and Water Heater

Heating is the largest energy expense in homes, according to the American Council for an Energy-Efficient Economy (ACEEE). In colder parts of the country, it makes up 30 to 50% of annual energy bills. So improving the heating efficiency of your home will have the biggest impact on lowering your energy costs. Sealing air leaks is a good start, but replacing your heating system could provide real leverage towards cost savings.

If your furnace or boiler was purchased before 1990, then it is time to consider an upgrade. Modern furnaces are much more efficient than those that are older than 20 years. You can use rebates from the Home Star bill to replace your furnace, but you will need to meet their guidelines:

Water heaters are typically the second largest energy users after home heating and cooling systems. Replacing convention oil-fired water heaters with high-efficiency gas or electric heaters can save homeowners thousands of dollars over a 10 to 15 year period. The Home Star bill includes a variety of replacement options eligible for rebates.

Additional Financing Resources

With other legislation in the queue, it might take weeks or months to hear the Senate’s final decision on the Home Star bill. In the meantime, homeowners can receive funding from other sources to pay for green renovations. The federal government, state governments, local municipalities and even utility companies offer several options.

For example, homeowners can still receive a federal tax credit for 30% of the cost of energy-efficient products (up to a total credit of $1,500). This includes the purchase of central air conditioning systems (both the product and installation), electric heat pumps, furnaces and boilers, and whole-house ventilation fans. Visit the US Department of Energy Energy Savers website for more information.

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According to both versions of the legislation, the Silver Star Program will offer rebates, in varying amounts up to $3,000 per home, awarded to participating contractors and vendors, who perform qualifying energy saving improvements. That means if a homeowner hires a contractor, the contractor will float the value of the rebate as a discount to you. They will then be paid by the rebate aggregator.

However, you can do some installations yourself. The press release for the Senate version says consumers can get “between $250 and $1500 in ‘point-of-sale’ rebates” for insulation, air sealing, and — of course — caulk.

The Gold Star Program offers retrofits that rebate up to $8,000 to contractors and vendors for retrofits that achieve home energy savings determined by a comparison of the simulated energy consumption of the home before and after the retrofit. Gold Star rebates to only be offered by contractors accredited by the Building Performance Institute. And it also includes similar language to the House version that defines a “certified workforce” as one where all employees performing installation work are certified by NATE, BPI, LIUNA, or HBI.

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In another two weeks, it’s going to be easier, and a fair bit cheaper, to save electricity and take a little off your utility bill.

On April 19, the Governor’s Energy Office is launching a new set of rebates on energy-efficient appliances and energy-saving home improvements. It will also launch a new Web site with energy efficiency and rebate information.

“It’s a one-stop shop where people can get all of the information they need,” said Tom Plant, executive directorof the Governor’s Energy Office, who was in Colorado Springs on Monday promoting the new program.

The $18 million program, dubbed Recharge Colorado, is being paid for from the American Recovery and Reinvestment Act. Earlier ARRA funds were aimed at immediate needs, Plant said, whereas the rebates are designed to give the economy a boost as things begin to turn around.

The rebates include energy-efficient appliances such as clothes washers ($75 rebate), dishwashers ($50) and tankless water heaters ($300), plus services like home energy audits (up to $100) and home solar and wind power systems (up to 30 percent of the system cost). The GEO plans to award about 75,000 rebates in all.

The rebate on washing machines is likely to be the hot item, said Colorado Springs Utilities spokesman Gabriel Romero, because the Recharge Colorado $75 rebate can be matched with another $75 from Utilities.

On April 19, the Governor’s Energy Office will begin offering rebates on energy-efficient appliances and energy-efficiency improvements. Here’s a sample of the rebates that will be available:

Clothes washer — $75
Dishwasher — $50
Refrigerators — Up to $100
Furnaces — $500
Hot water heaters — $200-$300
Insulation and air sealing — Up to $400
Duct sealing — Up to $75
Whole house energy audit — Up to $100

For more information, go to colorado.gov/energy. A new Web site and a call center will be available on April 19. Once the program launches, consumers need to reserve a rebate before they buy the product or service. The rebates are not retroactive.

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The White House and business leaders team up to craft a program to encourage energy efficient home improvements.

Josh Hewey blows in bio-based, closed-cell foam insulation in the upper floor of a Jamaica, Vt., home originally built in the 1700's. Workers with Thermal House retrofit a home to make it more energy efficient, thus reducing its carbon footprint. The Obama administration hopes to spur interest in similar work through a proposed Home Star, or 'Cash for Caulkers,' program. Melanie Stetson Freeman/Staff

The Obama administration has teamed up with green-sector entrepreneurs to craft a vision for a program that Congress could enact later this year. Officially, the plan is called Home Star, but it’s also quickly becoming known as “cash for caulkers.”

Despite its simple appeal, the plan faces a number of practical hurdles.

During a late December lunch with business leaders to discuss the proposal, President Obama asked that the end document be “simple, quick, but effective,” said Steve Cowell, CEO of Conservation Services Group in Westborough, Mass. For Mr. Cowell and other energy-saving proponents, that means grappling with two tough challenges: how to get homeowners to buy into the program and how to build a nationwide industry, complete with training and accreditation, from a disparate collection of state and local programs.
Two kinds of subsidies

To attract homeowners, Home Star will offer two tracks of incentives. The first, “Silver Star,” track subsidizes the purchase of services, like roof installation, as well as products, like efficient windows and furnaces. The incentives will be designed to get homeowners and businesses to try the program.

The second, “Gold Star,” track offers incentives tied to overall reductions in a home’s energy usage. A 20 percent reduction in energy output would be eligible for $3,500 in rebates, with each 5 percent of additional energy savings adding $1,500 in incentives. The government would fund no more than 50 percent of any project’s total cost.

Gold Star’s bigger financial incentives are aimed at getting larger energy savings, treating a home as a system rather than as disparate parts, says Matt Golden, president of a San Francisco-based home-retrofitting firm and a leading player in creating the program. “We need to make sure the investments that we’re making right now will be sustainable and will have a long-term impact.”

Organizers, while optimistic, admit they have a long way to go. For example: Even environmentally minded Vermont is struggling to increase the number of home retrofits done.

With the cost of making the average home 20 percent more efficient running between $5,000 and $10,000, only a few hundred Vermonters are retrofitting their homes in any given year. It’s “a drop in the bucket,” says Blair Hamilton, the policy director of Efficiency Vermont, a group that coordinates retrofitting activity in the state. “We haven’t broken a thousand [retrofits] a year. And we need to.”

But the small numbers speak more to the small dollars behind the project than consumers’ lagging interest in the project, advocates say. Where there are homes, says Rep. Peter Welch (D) of Vermont, there is potential demand for retrofitting and, thus, the potential for new jobs, even in remote rural areas.

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Utah receives $30 million for weatherizing homes from the federal stimulus act.

By Thomas Burr
The Salt Lake Tribune
Updated: 12/16/2009 05:19:38 PM MST

When Congress put $5 billion into the federal stimulus act early this year to help boost home energy efficiency, it might have had Sandra Kahn in mind.

Kahn fell last year in her Sugar House home, breaking her neck and spending three months and four days in the hospital recovering.

Coming home, she found electric and gas bills that were just too much to handle on a monthly disability allotment.

But after a call to the Salt Lake Community Action Program in Salt Lake City and a little paperwork, Kahn found her home transformed. Leaky doors and windows were plugged, her attic and crawl space insulated, and incandescent bulbs were replaced with spiral fluorescent bulbs.

“What it means to us is that usually in the past if we did 300 homes it was a good year. Now we’re hoping to get to about 1,000 homes,” says Dale Canning, deputy director of the program.

The program includes an energy audit of a home — checking to see where hot air might be leaking out, for example — and potential fixes such as new windows, insulation and perhaps even new water heaters or furnaces through partnerships with Rocky Mountain Power and Questar, Canning says.

Kahn says she’s already seeing the difference. Her heating bills alone last year were more than $300, she says, but now are significantly less. Her previous electric bill was $12.

“The house is so much warmer now,” she says. “It’s like God sent an angel down to watch over me.”

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NEW YORK (CNNMoney.com) — President Obama’s Cash for Caulkers proposal has almost every homeowner wondering how they’ll be able to cash in.

The plan calls for greater incentives, perhaps amounting to thousands of dollars, for homeowners to get new energy-efficient appliances, windows and other such items.

But no one knows exactly how the federal program – part of a broader plan to stimulate the economy – might work. That’s because it’s still being written.

It may be modeled, at least in part, on New York State’s home energy efficiency program, said Steve Nadel, director at the American Council for an Energy-Efficient Economy, who’s advising on the federal proposal.

So how exactly does New York’s program work?

Homeowners interested in participating find a contractor licensed to do an energy audit by New York State – available on the state’s web page or by calling a toll-free number.

Then someone like David Scharf, a contractor based just north of New York City, shows up.

For about $500, Scharf will figure out how much energy the home wastes. He’ll put a giant fan in the door that will suck in air from outside the home, highlighting leaks in windows, doors or walls. He’ll test each appliance to see how much energy it draws. He’ll check the thickness of your insulation and windows.

Then, all this is fed into a computer model that generates a checklist with everything that could be replaced, how much it will cost, and how much in energy savings can be expected out of it. The homeowner decides how much work to do, and negotiates a price.

When the work is done, the homeowner pays Scharf directly. Scharf then submits paperwork to the state agency that runs the program. The homeowner then gets a reimbursement check from the agency for 10% of the project cost, up to $3,000, usually within 30 days.

If Obama gets his way, homeowners could get much bigger rebates than that in the future. No one knows what the numbers will be yet, but Nadel said other legislation currently in Congress would give homeowners a 50% rebate, with a maximum reimbursement of $12,000.

With so much money potentially on the table with Cash for Caulkers rebates, fraud is another big concern.

“Any program that is going to run through a third party and is going to distribute billions of dollars, needs to have lots of checks and balances to make sure there’s not abuse,” David Kreutzer, an energy analyst at the Heritage Foundation, told CNN earlier this week after Obama proposed the new federal program Tuesday.

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This time of year, many homeowners are thinking about making energy-efficient home improvements to help them save money on their energy bills. But you may not realize that you also can qualify for state and federal tax credits, along with rebates from your utility company, for some of these home improvements.

However, finding out what you need to do to qualify can be time-consuming. That’s why I am going to help you wade through the maze of tax credits and rebates so you can get all the credit you deserve when making home improvements this fall.

“A tax credit is actually better for a taxpayer than a tax reduction because it reduces your tax bill on a dollar-for-dollar basis for the amount of the credit, whereas a deduction only reduces the amount of income taxed,” says Jonathan Goldberg, an attorney and CPA at Bloom Asset Management in Farmington Hills. “But for most energy-efficient home improvement products, homeowners can only get a maximum credit of up to 30 percent of the qualifying expenditures, with an overall $1,500 limit over the two-year period of 2009 and 2010.”

Products that are eligible for a tax credit of up to $1,500 maximum include windows and doors, insulation, roofs, furnaces, boilers, central air conditioners, air-source heat pumps, nonsolar water heaters and biomass stoves. The home must be your principal residence and these credits are not available for new construction.

In addition to the cost of the products, installation costs are also covered for heating, ventilation and air-conditioning systems, biomass stoves, water heaters, solar panels, geothermal heat pumps, wind energy systems and fuel cells. Installation is not covered for windows, doors, insulation or roofs.

But remember, the tax credits are designed to improve energy efficiency, so the products must meet certain energy efficiency guidelines. For example, exterior windows installed before June 1, 2009 must meet Energy Star criteria, but if they are installed after June 1, 2009, they must have a U-factor of equal to or less than 0.30. A natural gas furnace must have an Annual Fuel Utilization Efficiency (AFUE) rating of equal to or more than 95.

Obviously, the cost for most products with a higher energy efficiency rating usually is higher than a less efficient product, so homeowners will have to determine if the added cost is worth it.

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By Kenneth R. Harney
July 26, 2009

Reporting from Washington — You’re probably familiar with some of the federal government’s incentives for home energy efficiency — heftier tax credits for solar panels, solar water heaters, geothermal heat pumps, heavy-duty insulation, windows, air conditioning and the like.

But these are just the beginning of an unprecedented push by the government that’s getting underway for energy conservation in housing.

At the Department of Housing and Urban Development, a new generation of mortgages designed to encourage energy efficiency is being rolled out, starting with Federal Housing Administration loans that offer 5% larger mortgages to people who plan on making energy-efficiency improvements.

For example, if you qualify for a $300,000 FHA mortgage, the FHA might now be able offer you an additional $15,000 if the extra money is used to substantially lower the property’s annual energy consumption.

Among the key housing-related provisions in the bill:

* The FHA is directed to insure a minimum of 50,000 new energy-efficient mortgages during the coming three years. An energy-efficient house is defined as one in which energy consumption is reduced by 20% following renovations.

* Fannie Mae and Freddie Mac are directed to develop mortgage products and more flexible underwriting guidelines to reward energy-conscious borrowers and builders.

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