DOE revises IRA Home Energy Rebates, ending incentives for heating system fuel switching

Image courtesy of the DOE

The U.S. Department of Energy (DOE) has issued new guidance that changes how federal home energy rebate dollars can be used under several programs established by the Inflation Reduction Act (IRA).

According to the updated guidance, states can no longer use IRA-funded rebates to incentivize homeowners to replace liquid- or gas-fired heating systems with electric heat pumps. The change affects three federal rebate programs created under the IRA: the Home Owner Managing Energy Savings (HOMES) program, the High-Efficiency Electric Home Rebate (HEEHR) program administered by state energy offices and a separate HEEHR program administered directly by federally recognized Indian Tribes.

"ASA has long supported consumer choice in the products available to homeowners nationwide," said Steve Rossi, ASA vice president of advocacy. "After partnering with our industry allies to call for a review of existing incentives, we are encouraged that the Department of Energy's recent action better enables consumers to choose the product that best fits their needs."

The HOMES program provides rebates of up to $8,000 for whole-home energy efficiency improvements, while the HEEHR program provides rebates of up to $14,000 for specific appliances and equipment.

Under previous rules established during the Biden administration, the nearly $9 billion allocated to these programs was designed to encourage homeowners to remove existing heating oil, propane and natural gas heating systems and replace them with electric heat pumps. The new DOE guidance eliminates that incentive structure.

Going forward, rebates under the programs are limited to upgrading existing electric equipment to more efficient electric equipment and to new construction projects. Homes heated by heating oil, propane and natural gas are no longer eligible for rebates intended to encourage conversion to electric heat pumps.

The guidance also introduces new requirements related to weatherization. States must now prioritize weatherization measures, including insulation and air sealing upgrades, before homeowners can access rebates for heating and cooling equipment.

In addition, homeowners may retain existing fossil-fuel heating systems when installing a heat pump. Previously, program designs focused on replacing existing systems with electric alternatives. Under the revised guidance, households can install heat pumps while maintaining their existing heating equipment.

The policy change follows advocacy efforts from a coalition of industry organizations, including the American Supply Association (ASA), which previously requested that the DOE and Environmental Protection Agency review building electrification programs and related guidance.

In a February 2025 letter to DOE Secretary Chris Wright and EPA Administrator Lee Zeldin, ASA joined the American Public Gas Association, National Propane Gas Association, National Energy & Fuels Institute, Plumbing-Heating-Cooling Contractors National Association and other organizations in expressing concerns about federal building electrification policies and programs. The coalition argued that existing electrification initiatives restricted consumer choice and failed to recognize improvements in renewable fuels and high-efficiency liquid- and gas-fired heating systems.

The coalition specifically requested a review of building electrification programs established under the Inflation Reduction Act and Infrastructure Investment and Jobs Act, including state-based home electrification rebate programs, contractor training grants supporting residential electrification, heat pump subsidies and related guidance documents.

The letter also raised concerns about guidance encouraging states to prioritize electrification strategies, including recommendations for so-called "Envelope First, Heat Pump Ready" programs and other policies intended to support building decarbonization efforts.

In the letter, the coalition asked federal agencies to develop balanced policies that protect consumer choice and allow homeowners to select energy solutions based on their individual needs, local climate conditions and budgets.

The DOE's revised guidance represents a significant change in the implementation of federal home energy rebate programs and shifts the focus away from using federal incentives to encourage fuel switching from heating oil, propane and natural gas systems to electric heat pumps.

ASA will continue monitoring federal energy policy developments and their potential impact on distributors, manufacturers, contractors and homeowners.