Financing Your Energy Efficiency Upgrade

Willem Maas is the Founder and Publisher of GreenHomeGuide.


Boosting energy efficiency is one green project that’s appealing on economic terms alone. The reduced operating costs and increased home value that result from improved energy efficiency offset up-front project costs over the long term. And community, state, and federal incentives can cut costs in the short term. Here’s a roundup of rebates, loans, and other financial programs that can help you make your home more energy efficient.


1. Federal assistance with first costs

Through December 31, 2007, homeowners are eligible for federal tax credits of up to $500 for energy efficiency–related home improvements.

The Energy Policy Act of 2005 provides tax credits for projects ranging from additional insulation (10 percent of the cost, up to a $500 credit) to installation of a high-efficiency water heater ($300 for qualifying units). A separate tax credit for solar hot water systems (up to 30 percent of the cost) is also available. This Energy Star website provides a complete rundown of federal incentives.

2. Utility assistance with first costs

Utilities throughout the United States offer rebates, loans, and other assistance to homeowners who make their homes more energy efficient.

Programs range from cash rebates for energy-efficient lighting, air conditioning, refrigerators, and water heaters to low-interest loans to in-home energy audits. The Edison Electric Institute has published this directory of electric company programs across the country.

3. State assistance with first costs

In response to the energy crisis of the early 1970s, many states established energy offices to research and advise state officials on energy policy. Your state’s energy office is a good starting point to find state-level incentives. The National Association of State Energy Officials publishes this directory of energy departments in all 50 states.

4. Incentives for switching to renewable energy

When you’ve done all you can to make your home energy efficient, consider switching to renewable energy—with the help of state, local, utility, and federal incentives.

The Database of State Incentives for Renewable Energy provides an up-to-date directory of incentive programs searchable by state.

5. Energy Efficient Mortgages

If you’re financing your energy efficiency project with a loan, the Federal Housing Administration’s Energy Efficient Mortgages (EEM) program will make it easier to borrow the money you need. The program helps homeowners finance the cost of adding energy efficiency features by considering the savings on monthly utility bills when determining how large a mortgage the household can afford.