How do Energy Rebates and Incentives Work?
Replacing or retrofitting older lighting fixtures or appliances with new energy efficient technologies can save a significant amount of money, especially when you consider that Lighting can represent up to 40% of an average building’s electrical costs. But did you also know that switching to a more energy efficient solution can actually earn you money back on top of your energy savings? This may seem like a bold claim, but it is absolutely possible due to Energy Rebates and Incentives.
After The Energy Policy Act was put in place, the government started offering significant tax incentives for companies that installed new energy efficient lighting or retrofitted existing fixtures to be more efficient. By putting money back into the pockets of companies and households nationwide, these Energy Rebates and Incentives are being implemented by State and localized Utility Companies to jump-start the use of new energy efficient technologies. If you’re in the planning stages of a big project, then now is a great time to start searching for these rebates and incentives before you start securing your products. It might just save you a lot of money!
Surprisingly, less people than you may think are taking advantage of these incentives and money-saving opportunities. This is likely because people don’t fully understand how the Energy Rebate system works or perhaps it’s because they’re having trouble locating one specific rebate that applies to them out of the thousands listed online.
The following offers a brief overview of how the system works and will introduce you to the major types of incentives available and how to find them!
Tax Credits vs. Rebates
Unlike a tax deduction, a Tax Credit is a dollar-for-dollar subtraction from the amount of tax that is owed. The credits are then claimed when you are filing taxes for the previous year, so that if a purchase was made in the current year, it would be claimed on your tax credit when your taxes are filed.
Rebates work a little bit differently than tax credits do. With a rebate you receive the cash directly and much more quickly than with a tax credit. Sometimes rebates are combined with other incentives like tax credits and/or are only available for a limited amount of time. Because of this, it is extremely important to read the fine print.
There are many different types of rebates for energy efficient technology offered by Utility Companies, manufacturers, city and community rebates, and more. There is such a vast majority of different rebate types that we would be unable to cover them all here in this article. However, the most important thing is knowing how to find them and what to do with them.
Utility and Local Rebates
Utility and Local Rebates are numerous and vary drastically from company to company and county to county, making the research a little bit more time consuming. That being said, www.dsireusa.org is a fantastic resource for finding incentives that are applicable to your needs and is based on location and/or utility company provider.
Navigating Through the DSIRE Database
The DSIRE database allows you to search for energy rebates and incentives by state. Once you’ve selected the state that you wish to find an incentive in you can further filter the incentives by the following categories.
- Program Type
- Implementing Sector
- Coverage Area
- Eligible sector
Once you select the particular energy incentive program that you’re interested in you will be brought to the individual page for the incentive. The landing page will provide more details regarding the rebate or tax credit amount as well as applications and stipulations. For instance, some rebates may require a visit by a qualified inspector or an installation by a certified professional in order for it to take effect. Reading carefully through all of the information provided is integral to making smart, incentive-based decisions. Contact information for the incentive provider is also included at the bottom of the listing. This makes it easy to get in touch with the original incentive provider if you have questions that aren’t specifically addressed on the page.
Calculating Energy Usage and Payoff
Here’s a quick example of how you can calculate energy savings using some helpful resources linked in this article.
For purposes of simplicity let’s say that you own a small workshop in Seattle, Washington. Currently you’re operating your business with four 400-Watt HID High Bay fixtures. You are considering replacing the High Bays with LED Fixtures. This is where using an energy and investment calculator comes in handy. By using the Energy Estimator on WCS we can calculate Energy Cost, Investment, Payback, and CO2 Reduction.
Energy Savings HID vs LED
So let’s go ahead and start plugging the information into the Energy Cost Calculator.
Four 400-Watt Metal Halide High Bay fixtures running at 458-Watts for 4,368 hours a year (12 hours per day for 364 days) will run approximately $560 a year based on the current kWh rate of $0.07 as noted on the Seattle City Light website. Four MaxLite LED equivalent Linear High Bays running at the same amount of time will run around $183 a year. As you can see, this is a potential yearly savings of $377!
Looking at the energy savings return, we can plug in the amount that the new fixtures costs along with an estimate of the labor costs involved and get a calculation for when the energy savings will recover the investment. In this case it will take 44 months until the new LED High Bays have paid for themselves based solely on energy savings.
Now let’s look into some incentives on DSIREusa.org to see what sort of rebate applies to this potential upgrade. After looking through the database, we found that the utility company Seattle City Light has a financial incentive that applies to this situation. Following the links from DSIREusa.org to the Seattle City Light incentive page, we can see that for new lighting you can receive 23 cents per annual kWh.
In order to calculate the kWh used we take the total wattages of the fixtures, multiply them by the hours burned per year and divide the number by 1000.
This gives us the following:
- HID – 8,002 kWh per year
- LED – 2,621 kWh per year
After subtracting the LED kWh from the HID kWh we get a savings of 5381 kWh.
So at 23 cents for every kWh saved, this would mean a grand total incentive of $1,237.63. However, the program caps the incentive at 70% of the installation cost, or about $960 based on the current WCS sale price of the fixture plus estimated installation labor costs. When this incentive is applied, the payback period is now reduced to 13 months. That means for the remaining life of the LED fixtures (107,000 hours or about 24 ½ years), the $377 annual energy savings is yours to keep!
So not only would you save on your energy bill throughout the year by using less power, you would also get reimbursed by the utility company for lowering your usage because you switched to an energy efficient technology.
Start Saving Now!
Chances are that if you’re looking into energy efficient solutions, then you’re probably interested in saving money, too. Now that you’re equipped with this knowledge about energy incentives, spending a little extra time doing research might just be able to help you gain that edge over your competition and end up with extra money in your pocket!
-Written by Dane Gustafson