energy overview » federal funding
With passage of the American Recovery and Reinvestment Act of 2009 (ARRA), federal resources available for residential energy-efficiency improvements increased dramatically. A large share of funds were allocated to programs that specifically target single-family and multifamily homes; other programs allow funds to be used more flexibly for an array of activities that support energy efficiency, including home retrofits. This page describes some of the key federal programs that support home energy-efficiency.

Also, be sure to visit the energy-efficiency section on the Forum to keep up-to-date on recent developments in federal programs!

Click on the links below to learn more about federal funding sources for residential energy efficiency.

Federal funding programs targeting residential energy efficiency ONLY:

Other funding sources that may be used flexibly to support residential energy efficiency:

Tax credits for energy efficiency

Starting in 2011 and continuing through 2013, homeowners can claim a federal income tax credit worth 10 percent of the cost of energy improvements, up to $500 (i.e., for a $5,000 investment), for energy efficient building envelope updates, or a flat credit of $50 to $300 for energy efficient heating, cooling, and water-heating equipment. The level of the current tax credit is significantly reduced from previous years. The Residential Energy Efficiency Tax Credit, for example, was established by the Energy Policy Act of 2005 and expanded under the American Recovery and Reinvestment Act to allow homeowners to claim a credit worth 30 percent of the cost of the equipment plus some installation costs, up to $1,500 (i.e., for a $5,000 investment). Click here for more information on consumer tax credits for energy efficiency, or click here [PDF] to read an evaluation of energy efficiency tax incentives by the ACEEE.

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Weatherization Assistance Program

Created by Congress in 1976 and administered by the Department of Energy (DOE), the Weatherization Assistance Program (WAP) is the primary source of assistance available to low-income households for weatherization of single-family and multifamily homes. Following an energy audit, participants receive the recommended improvements--usually services like adding insulation and sealing leaks around windows and doors--at no cost. While modest, evaluations of WAP have shown that these improvements can significantly improve residential energy-efficiency and save families an average of about $437 annually on energy bills, depending on fuel costs. [1] A post-weatherization inspection ensures that the upgrades have been satisfactorily completed. The process also includes an all-around inspection of major energy systems to ensure occupant safety.

The DOE administers WAP through the Office of Energy Efficiency and Renewable Energy, which distributes funds according to a formula that accounts for local weather conditions and demographics. However, state agencies manage the program on the ground, contracting with local agencies to provide audits and weatherization services.

With passage of ARRA in 2009, the reach of the Weatherization Assistance Program expanded dramatically. ARRA significantly increased overall WAP funding, with a one-time $5 billion allocation (administered over three years) approximately 20 times greater than program funding in the previous year. Per household assistance levels also increased from $2,500 to a maximum of $6,500. With this large increase in funding, ARRA also widened the income eligibility parameters for participating households. Although individual states have some discretion in establishing rules and standards for program eligibility, there are a few standard guidelines. Following ARRA, eligible beneficiaries include any household at or below 200 percent of the poverty level (from 150 percent). People who receive Supplemental Security Income or Aid to Families with Dependent Children are automatically eligible, and people age 60 and older, disabled people, families with children, and very low-income families must be given priority when allocating funds. Click here for more information about program eligibility.

Following this large infusion of funds, in June 2010 the Department of Energy awarded $29 million to develop and expand 34 Weatherization Training Centers. (Learn more about building contractor capacity.) Additionally, in August 2010 DOE announced nearly $120 million in additional funding which will be used to support successful administration of agencies' expansion, as well as 16 new pilot programs to encourage innovation.

Weatherization Assistance Program and rental housing

While eligibility for this program has always included rental units, apartment buildings, and other types of multifamily units, states have typically focused weatherization activities on owner-occupied single family homes. In fact, in recent years, no more than 21 percent of homes reached through the program have been multifamily units. [2] In December 2010, DOE issued new guidance on WAP implementation aimed specifically at providing weatherization assistance to multifamily dwellings. DOE now requires states to consider this segment of the housing stock when allocating WAP funds. (See all related program guidance here.)

This emphasis on weatherizing a variety of housing types has been strengthened by a partnership formed between HUD and DOE in 2009. The agreement streamlines the use of WAP funds for all HUD-subsidized properties as well as those that receive assistance through the Low-Income Housing Tax Credit, primarily by simplifying the income verification process. HUD Secretary Donovan and DOE Secretary Chu signed a Memorandum of Understanding [PDF] formalizing their efforts to coordinate energy retrofit programs in ARRA.

Even with the weatherization program operating at full capacity, however, the energy-efficiency needs of many households in this segment of the market will likely remain unmet. States and localities may wish to consider adopting complementary programs to create a comprehensive package of resources that can help families at all income levels improve the energy efficiency of their homes. For example, in 2010 the state of Wyoming used a portion of its State Energy Program award to provide rebates to homeowners who increased the energy-efficiency of their homes by replacing old appliances with energy efficient appliances.

Click here to learn about a pilot program to use WAP funds in combination with funding for homeownership rehab assistance programs.

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Energy Efficiency and Conservation Block Grant

Modeled after the Community Development Block Grant (CDBG), the Energy Efficiency and Conservation Block Grant (EECBG) funds a broad range of projects that improve energy-efficiency and reduce energy consumption and greenhouse gas emissions. The Department of Energy's Office of Energy Efficiency and Renewable Energy administers the program, which is managed by
states and localities. (As with CDBG, the majority of funds are distributed by
formula to entitlement communities, while state governments distribute the balance to smaller local jurisdictions.)

Originally authorized in 2007, the EECBG first received a total of $3.2 billion in funding under ARRA. $2.7 billion is distributed by formula to states, eligible localities, and Indian tribes. An additional $454 million was allocated through two competitive grant programs: the "Retrofit Ramp-Up" program supported neighborhood-scale building energy retrofits with large awards between $5 million and $75 million, and the "General Innovation Fund" issued smaller awards of $1 million to $5 million that focused on the execution of a broad range of smaller but scalable innovative interventions. More information on the selected Retrofit  Ramp-up projects can be found here.

Program guidance issued by the Department of Energy indicates that states and localities should "look for ways to link their energy efficiency efforts to long-term priorities (especially community economic development, community stabilization and poverty reduction efforts)." Supporting retrofits for low- and moderate-income households would clearly be consistent with this guidance. Nevertheless, a broad range of activities qualify for the EECBG program and competition from other interests may mean that funding may be more difficult for organizations to obtain and use for residential energy-efficient retrofits.
Key Resource

A 2009 report from the American Council for an Energy-Efficient Economy, entitled "Energy Efficiency Program Options for Local Governments under the American Recovery and Reinvestment Act of 2009" and authored by Sarah Black, Shruti Vaidyanathan, and Michael Sciortino, provides an overview of eligible activities for use of EECBG funds under the Department of Energy's guidance.

Where applicable, the authors also provide examples of EECBG applications that include specified activities as well as links to additional resources. Many communities may wish to pursue these activities, which include the development of an energy-efficiency and conservation strategy and adoption of technical assistance programs, with funds from other sources, as well.

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All states and localities that receive funds through the CDBG or HOME program must submit a HUD-mandated Consolidated Plan, or ConPlan, at least once every 5 years. Preparation of the ConPlan is an intensive process that necessitates completion of a housing needs assessment and market analysis, as well as identification of long-term goals and objectives to be prioritized when spending federal funds.

In addition to the ConPlan, jurisdictions submit an annual Action Plan that lays out specific activities and targets for the year ahead. While each document comes with its own set of requirements, both offer state and local officials the opportunity to articulate priority policy goals - including improving the energy efficiency of affordable homes - and describe how federal funds will be used to achieve those goals.

HUD lacks the authority to require HOME and CDBG grantees to build to specific energy efficiency standards, but the Office of Community Planning and Development, which administers the programs, has implemented a requirement that grant recipients report the number of units developed that meet Energy Star specifications. In 2007, for the first time, the HOME program produced reports on the number of HOME-funded Energy Star certified units and found that nearly 4,260 had been produced during the year, comprising roughly 17 percent of all new units that received HOME funds. Click here to access HUD guidance on how to promote Energy Star through the CDBG program; click here for the same information related to the HOME program.
Solutions in Action
Roanoke-Lee Street Homes, profiled in the Gallery, provides a great case study of how Community Development Block Grant funds can be used to develop energy-efficient homes. These 14 duplexes in Blacksburg, Virginia are affordable to first-time homebuyers earning up to 80 percent of area median income. An initial CDBG small cities grant from the state's Department of Housing and Community Development which enabled the town to purchase three infill lots and develop the Energy Star-rated homes.

Visit the Gallery to learn more, or read a case study of the development published in Research Works, a publication of the US Department of Housing and Urban Development.

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State Energy Program

Created by Congress in 1996 and administered by the Office of Energy Efficiency and Renewable Energy at the Department of Energy, the State Energy Program (SEP) provides grants to states for renewable energy and energy-efficiency projects. SEP funds are allocated by formula to state energy offices, which manage the program. Typically, recipients are required to provide a 20 percent match of their SEP award, either with their own funds or through in-kind services. (The state match requirement has been waived for the $3.1 billion in SEP funds appropriated through ARRA.)

While grants may be used to fund eligible activities in all sectors, DOE guidance related to SEP funding under the Recovery Act specifically requires that states enact residential building energy codes and prioritize shovel-ready projects, including residential energy-efficiency programs, and strongly encourages adoption of programs described in this toolkit, including on-bill financing strategies and performance contracting. For example, SEP funds have been used to accelerate comprehensive energy retrofits in small and medium-size multifamily apartment buildings in Maine; and to provide grants for energy-efficient home retrofits for low- and moderate-income families in Maryland.

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[2]Weatherization Assistance Program Briefing Book, Chapter 7. [PDF] 2008. Weatherization Assistance Program. Washington, DC: US Department of Energy.