HEEHRA creates amazing opportunity for HVAC contractors
When spoken, HEEHRA might sound silly – but it’s about to drive billions of serious dollars into the HVAC contracting industry, along with tens of thousands of dollars for individual contractors. The $4.5 billion program is intended to replace lower-efficiency and fossil fuel-burning heating technology with high-efficiency electric systems, particularly air source heat pumps.
In addition, HEEHRA’s benefits are focused on low- and moderate-income households, with benefits of up to $14,000 for many. That creates an opportunity to make your top-line equipment more affordable to your budget customers than your budget package.
HEEHRA’s beneficial electrification
As the nation grapples with the changing climate, reducing carbon emissions is a high priority for the current administration. The rapid expansion of renewable power such as solar generation is one result of that emphasis. And even though many electric power plants continue to burn fossil fuels, they represent a shrinking share of power generation.
To accelerate the trend, the electric power industry has embraced a concept many call “beneficial electrification,” which seeks to replace major sources of carbon emissions with alternatives using electricity. The growth of electric vehicles is a great example. Instead of burning dirty gasoline and diesel fuel, electric vehicles use cleaner electric energy.
By encouraging homeowners to make less use of fuels like gas and oil, and replace lower-efficiency electric equipment with high-SEER heat pumps, the government expects to see a significant reduction in greenhouse gases.
What exactly is HEEHRA?
Its full name is the High-Efficiency Electric Home Rebate Act. Maybe not the most exciting name, but it comes with some exciting news, namely the rebates of up to $14,000 for qualifying homeowners. The program will become available when your state approves its preferred way to distribute the money.
You’ll find a chart of the program’s rebates here. For example, a 16 SEER heat pump qualifies for $8,000 on its own, but the program also throws in another $4,000 for a new breaker box and $2,500 for wiring – covering up to 100 percent of the project costs, up to $14,000. Those rebates apply to homeowners who earn less than 80 percent of your area’s median income (AMI). Smaller rebates covering up to half the cost are available for homeowners making between 80 and 150 percent of AMI.
Will my customers qualify?
The AMI for Cornerstone’s hometown in an Indianapolis suburb is $91,900. That means homeowners earning less than $73,520 annually in our community qualify for the full rebates. Think about folks who are on a fixed income, such as seniors. They probably qualify. And homeowners making up to $137,850 can receive half the rebate amount — $4,000 on a heat pump is an impressive discount.
You can check for your community’s AMI using Fannie Mae’s free lookup tool. You’ll probably be amazed at how many homeowners in your area qualify for these generous federal rebates.
Building incentives into offers
For some contractors, their bread and butter is incentives using lower-cost equipment. For example, they land customers by offering a free or low-price air conditioner with the purchase of the furnace, often packaging the minimum 14 SEER AC with an 80% furnace. We’ll call that an $11,000 sale.
Now, thanks to the combination of HEEHRA and the 25C federal Energy Star tax credit, your customer can afford to buy a 16 SEER heat pump and a 95% furnace … and do it for less out-of-pocket than your current offer. Plus, you may be able to sweeten your offer even more by taking advantage of rebates local utilities offer to encourage efficiency.
As an example …
Suppose instead of recommending your bottom-tier package, you offer the customer a 16 SEER heat pump and a 95% furnace that normally costs around $16,000. Right off the bat, the homeowner qualifies for a $2,000 credit under the 25(C) program, as well as rebates of let’s say $350 from the local gas company and $300 from the electric utility. Let’s also say you’ll build in roughly $1,500 in marketing funds, so the homeowner is saving $4,150.
Now let’s add in the $8,000 heat pump HEEHRA rebate, which brings the total out-of-pocket for the homeowner to just $3,850. Put another way, for far less than they’d normally pay for your budget option, the homeowner is getting the same products their more affluent neighbors choose, as well as significantly lower utility bills. They’re also going to experience a superior level of comfort they’ll come to appreciate.
Sweetening the offer
There are some contractors who discourage sales of heat pumps because of the more complex installation and the electrical requirements. There’s nothing more frustrating than seeing the customer’s breaker box or wiring can’t accommodate a heat pump. But HHHRA also offers up to a total of $6,500 for that electrical work.
What’s my next step?
While you wait for your state to implement the HEEHRA rebate program, you can prepare to get a jump on everyone else in your market with some advance planning. Specifically, you need to create the offer you’ll make under HEEHRA. Compare all the available incentives to your product line and choose the right products.
You’ll also need to train your team to familiarize them with heat pumps, since they’ll be seeing and hearing more about them. That includes your sales and office staffs, too. You also need to develop the process through which you’ll promote and sell your offer, and make sure everyone understands the process and documentation needed to ensure customers qualify for the rebates.
If you’d like to know more about Cornerstone, and how we work as your outsourced marketing department to help grow your business, contact kerryf@cornerstonead.com. Or you can call (317) 804-5640 x108.