Canary Media thanks Sense for its support of the Home of the Future series.

If you haven’t heard of heat pumps, you will soon. Solar panels, batteries and electric cars have been on the scene for years now; heat pumps are the up-and-comer of the clean energy world. 

They use electricity to both heat and cool buildings with stunning — some would say magical — efficiency. And they won major federal tax incentives in last year’s Inflation Reduction Act that amount to thousands of dollars in savings for each household that installs them. 

But heat pumps require a more complex pitch than EVs or solar, with a more varied and obscure economic payoff. And the contractors who actually sell and install home heating often pooh-pooh heat pumps in favor of the fossil-fueled furnaces they’re accustomed to selling. 

Canary Media has been tracking the technological evolution of heat pumps and the policies that encourage their adoption, and we’ve compiled that knowledge into this user’s guide, geared toward anyone considering the switch to highly efficient electric heating and cooling. 

Canary Media’s Electrified Life column serves up real-world tales, tips and insights that demystify the process of shifting your home to electric power. Canary thanks Lunar Energy for its support of the column.

When President Joe Biden signed the Inflation Reduction Act into law one year ago, he did more than supercharge U.S. manufacturing and the deployment of renewable energy — he also gave households a big pot of money to electrify their own lives.

The climate law delivers a game-changing bonanza of clean energy incentives to consumers. With a historic $8.8 billion in funding for rebates, plus an array of generous tax credits that have no federal spending cap, there’s never been a better time to start plotting out a roadmap for ditching fossil-fuel-burning appliances and electrifying your home, according to Sage Briscoe, director of federal policy at electrification nonprofit Rewiring America. 

After all, the climate law’s benefits don’t last forever. Unless renewed, the tax credits expire or ratchet down after 2032, and the rebates will only be available until their funding runs out.

But figuring out a game plan to take advantage of the IRA’s incentives can be daunting. Some of the benefits aren’t available yet, while others that are finalized have fine print that can be tricky to navigate if you want to make the most of them.

This article aims to make that task a bit easier. Think of it as a cheat sheet for the IRA’s consumer incentives, including who they’re for, how to use them — and when they might be available if they’re not already. 

Getting to know the IRA’s consumer tax credits and rebates

The IRA has two kinds of benefits for consumers: tax credits and rebates. 

The tax credits directly decrease your federal taxes, and they’re available now. You can’t receive more in tax credits than you owe the government, though, so if your tax bill is $0, you won’t qualify for these incentives.

The Residential Clean Energy Property Credit (under tax code 25D) will lower your federal tax bill by up to 30% of the cost of a clean energy installation such as solar panels, battery storage and geothermal heat pumps. The credit is uncapped, so whatever the cost of the project, you can claim the full 30 percent. You can even use the tax credit for multiple projects in the same year, and if your tax bill isn’t big enough, you can carry the savings forward to reduce taxes in future years. 

Two tax credits can help you buy an EV: the Clean Vehicle Credit (30D) will reduce your federal tax bill by up to $7,500 if you buy a qualifying new EV. And the Used Clean Vehicle Credit (25E) will lop 30% of the cost of the vehicle off your tax bill if you buy a qualifying used EV, with a cap of $4,000. Both of the EV credits have specific income thresholds for consumers: for single tax filers, these are $150,000 for the new EV credit and $75,000 for the used EV credit, with amounts doubled for joint filers. 

Also, not every EV is eligible due to some domestic-manufacturing requirements and price limits; DOE maintains an updated list of qualifying cars here.

Finally, the Energy Efficient Home Improvement Credit (25C) can help you make a variety of home energy-efficiency upgrades, from installing insulation to buying air-source heat pumps. These credits shrink your tax bill by up to 30% of costs and are capped annually: up to $2,000 for a heat-pump air conditioner/​heater or a heat-pump water heater, and separately, up to $1,200 on other qualifying improvements. That means you can claim a total of $3,200 in any single year.

Because this credit resets annually, spacing out upgrades makes financial sense. For example, it’s better to get the heat pump and heat-pump water heater in different years to claim the credit twice and potentially reduce your tax bill by $4,000, rather than buy both appliances in the same year and only be able to claim $2,000.

Work with your contractor to figure out eligibility for the home-related tax credits, or if you’re buying appliances yourself, make sure to double-check that they qualify. The Department of Energy has more information on each type of incentivized upgrade, and the IRS has an in-the-weeds fact sheet to help you wrap your head around them. Save your receipts and claim the credits when you file your taxes. 

A closer look at efficiency and electrification rebates

The IRA rebates are a different animal. They provide discounts on home efficiency and electrification upgrades at the point of sale, so you don’t have to wait until you file your taxes. And although higher-income households will be able to access some of the rebates, they’re primarily geared toward helping lower-income families.

While the tax credits disproportionately benefit wealthier homeowners who tend to have bigger tax bills, ​“the rebates are the vehicle for equity in this space,” Rewiring America’s Briscoe said.

Let’s take a closer look at the IRA’s two forthcoming rebate programs.

One program is for home efficiency rebates (Section 50121 of the law), often called the ​“HOMES rebates.” This is a performance-based program whose details will ultimately depend on how states choose to implement it. 

But in essence, the program awards rebates to homeowners and multifamily-property owners who undertake whole-home retrofits that save energy. If they cut a home’s energy use by 35% or more, they can qualify for 50% off the cost of the project, capped at $4,000. Low-income homeowners, defined as earning less than 80% of the area median income, can qualify for double the dollars: up to $8,000 or 80% off the cost of the retrofit. A multifamily-building owner could also use this $8,000/80% incentive if at least half of the building’s households have incomes below 80% of the area median income.

Consumers will most likely interact with contractors while doing the retrofit and receive the rebate as a discount off their project bill. 

The other rebate program, called HEEHRA, is for home electrification (Section 50122 of the IRA). These rebates will be like coupons for appliances or other home efficiency and electrification upgrades, including heat pumps, insulation and electric induction stoves.

This article is part of our special series Power by the People: Clean Energy from the Grassroots.

Some of the most powerful gatekeepers of the clean energy transition are almost completely unknown to the public. 

I’m talking about public utility commissioners. In every U.S. state, these individuals regulate for-profit monopoly utilities, also called ​“investor-owned utilities,” on behalf of the public. More than two-thirds of U.S. electricity customers are served by investor-owned utilities, so there’s a good chance that a public utility commission (PUC) is overseeing the energy decisions where you live. But too often, their operations are cloaked in arcane language and procedures, and they remain inaccessible to the very communities they are tasked with serving.

That’s a problem because these utility regulators wield tremendous leverage over how quickly or slowly a state can transition from fossil fuels to clean energy for the power sector, transportation and buildings. They can approve or block the stuff that needs to get built to deliver a clean, electrified future, from renewable plants and batteries to transmission lines to electric-vehicle charging infrastructure. They also get to decide matters crucial to a just transition, such as what a utility owes to coal-plant communities after those facilities shut down.

“It’s these folks that really are holding all the cards,” said Logan Burke, executive director of the Alliance for Affordable Energy and one of the few people advocating for customers at the utility commission in Louisiana. ​“Nobody knows who they are, and that has to change, especially if we’re going to make any real headway in reducing energy burdens and greenhouse gases in our state.”

Numerous obstacles dissuade people from engaging with their PUCs. For one thing, their regulatory proceedings tend to be extremely boring. If you’re hoping to skip the meeting and just look for information online, well, many PUC websites take their design cues from the early-2000s internet — and don’t even ask about mobile optimization.

Welcome to Canary Media’s newest column, Electrified Life.

Homes, and the appliances, tools and cars we keep there, generate a significant chunk of planet-warming CO₂ emissions. Good thing we (generally) know how to fix the problem: by electrifying homes as quickly as possible. 

And thanks to the Inflation Reduction Act, there’s a lot of money — over $10,000 per household, on average — for renters and homeowners to realize the climate, health and financial benefits of kicking fossil fuels out of their residences. But home electrification can be a difficult process to navigate. 

That’s where we come in: With real-world tales, tips and insights, this column will demystify what individuals can do to shift their homes to electric power. 

Canary thanks Lunar Energy for its support of the column.

Your home might be an energy hog. It could be leaking air through cracks and losing thermal energy from almost anywhere, including attics, walls, external doors, basements, windows, chimneys and even electrical outlets. 

All that wasted energy not only hikes up utility bills but can also contribute to unnecessary demand for carbon-spewing fossil fuels, whether burned at home or to produce electricity for the power grid.

A professional home energy audit or assessment can help make a home more efficient. ​“Audits are the ideal way to start an energy-efficiency and decarbonization journey because an audit can help a person understand their home’s energy use and provide a road map for where to start reducing energy [and] emissions and lowering bills,” said Lacey Tan, who conducts research on building decarbonization at climate think tank RMI. (Canary Media is an independent affiliate of RMI.)

What does an energy audit tell you?

An energy assessment is like bringing in a doctor to give your home a physical. At the end of the evaluation, an energy auditor can tell you how efficient your home is and give you a prescription to improve it.

This road map may suggest steps like replacing windows, switching to LEDs, adding insulation and sealing air leaks, which can make a huge difference in how much energy your home uses. For example, John Jones, national technical director at the Building Performance Institute, said he has sealed up and insulated his 4,200-square-foot home in central New York so well that he needs just one window air-conditioning unit to cool the whole thing.

Trimming your home’s energy demand will also help as you electrify your appliances, another common recommendation from auditors. For instance, if you’re considering switching from a fossil-fuel furnace or boiler to a heat pump, which can both heat and cool homes, you can get a smaller, less expensive heat-pump system if your home is properly sealed and insulated. 

On average, American households spend $2,190 annually on electricity alone, according to the EnergySage Marketplace. Implementing the recommendations of a home energy audit can typically slash energy consumption by 15 to 30 percent, according to Jones, whose organization creates national standards to certify energy auditors. And in some cases, the savings can be even higher.

But to be clear, unlocking these savings does require spending money upfront on upgrades like those mentioned above. Jones said many of these activities have payback periods of five to 10 years. 

Besides lowering utility bills, weatherizing a home against the elements makes it more resilient. Imagine a dangerous heat wave straining the grid to the point that operators are forced to impose rolling blackouts. A home that’s well sealed and insulated could keep residents cooler and safer for hours longer than one that’s not, according to Jones.

Energy auditing 101

Energy audits can vary significantly in their thoroughness. 

With a simpler ​“clipboard-style” audit, an auditor might take just a few minutes in person or over the phone to collect basic information from you about your home and energy usage and run it through modeling software, which makes some assumptions about the home based on the climate zone it’s in, its size and other factors, to predict the energy upgrades you need. In its most basic format, this level of audit might just consist of a free online form that you fill out.

Comprehensive in-person audits — the kind conducted by energy auditors certified by the Building Performance Institute — are much more customized (and costlier). Over the course of two to three hours, an energy auditor will talk with you about your specific energy and comfort issues, conduct an inventory of all your appliances, look at your utility bills, and use specialized equipment to investigate where energy is escaping in your home. 

For example, they may use an infrared camera to detect where temperatures from outside are seeping in. To look for air leaks, they’ll also perform what’s called a blower door test. This involves mounting a special high-powered fan in one external door, shutting the other external doors and windows, and turning on the fan to create negative pressure inside the home. That partial vacuum causes air to rush in through cracks in the building’s envelope.

When Earth Day rolls around, we at Canary Media get swamped with all kinds of suggestions for stories to write for the special day. Many of them tout supposedly green products or seasonal corporate marketing copy. We don’t heed these pitches.

But we do spend the whole year reporting on solutions to the climate crisis, so we have a few Earth Day insights for you. 

A lot of climate action needs to happen at the systemic level: fostering a clean energy manufacturing base, decarbonizing the electricity sector, electrifying transportation systems and buildings. Telling consumers to change their buying habits can only get us so far, and indeed is a tactic oil companies have used to defer responsibility for their role in carbon emissions.

Yet while broad-scale reforms push the economy in a lower-carbon direction, individuals still have some agency in supporting the transition to clean energy. Here’s a selection of guides from Canary Media on how to take action in your own life to lower carbon emissions and promote a cleaner world.

Engage with the clean-energy gatekeepers

Look out, this is an individual action that influences systemic change! Every state has a handful of people who decide what kinds of power plants get built. These regulators, often called public utility commissions, wield tremendous influence but generally attract little public scrutiny. Follow this guide to figure out who these power players are in your state and how you can get involved to push for outcomes you care about — like, for instance, a cleaner and more just energy system.

Heat and cool your home cleanly

Switch to an all-electric heat pump for your heating and cooling needs. Decarbonizing space and water heating is one of the biggest steps you can make to directly reduce your emissions, and Canary has advice to guide you through the heat-pump buying process. Oh, and a big law you might have heard of — the Inflation Reduction Act — makes it more affordable than ever to do this. Granted, switching your home energy system is something generally only possible for homeowners, but there are some options in our guide for the non-homeowners among us.

Get clean power for your home

Your house will consume some sort of electricity, so why not make it clean? If you own your own roof, Canary Media has compiled 10 key questions to ask as you explore the rooftop-solar buying process. But for all the renters out there, or anyone who just doesn’t have the right kind of roof, there’s another option: community solar. You subscribe to a portion of a larger solar project near where you live, then get money credited to your electric bill for the power it produces. State policy is needed to allow access to community solar, so availability will depend on where you live. Learn all about it from our community solar guide.

Invest sustainably

If you put your money in the stock market, you can screen for investments that don’t support ongoing fossil-fuel extraction and combustion. This guide walks you through how to convert your retirement portfolio into lower-carbon investments, with helpful screenshots to facilitate the changeover. And this article from Carbon Collective helps people advocate for more sustainable 401(k) options from their employers.

Adjust your eating

Nobody likes being told how they should eat — but if you’re looking for planet-friendly options, our correspondent Michael Grunwald chronicles the frontiers of low-carbon food. The global food system generates one-third of our greenhouse emissions, plus most of our biodiversity and deforestation problems. Here’s a recent dispatch on the growing slate of high-tech alternative meats, which deliver nutrients without a side of environmental detriment.

Transition to a career in climatetech 

One way to work for a more stable climate is to, well, work for a more stable climate. The climatetech industry is in full-on growth mode, despite uneasy outlooks in the broader economy. The Inflation Reduction Act kicked off billions of dollars in new factory investments to build batteries, electric cars and solar panels in the U.S. But the industry needs all sorts of skill sets. Here’s some advice on how to get started.

Hat tip to Canary’s social-media maven Barbara Lantz for pulling these ideas together. She wants to know: How are you celebrating Earth Day? Tell us on Twitter: @CanaryMediaInc.

Welcome to Canary Media’s newest column, Electrified Life. With real-world tales, tips and insights, we’ll demystify what individuals can do to shift their homes to electric power. Canary thanks Lunar Energy for its support of the column.

Without electricity, it’s almost impossible to run our households. Yet most of us probably don’t think much about exactly how it reaches our appliances, fixtures and devices. Here’s the basic rundown: Electric power flows from the grid to our homes. From there, the electrical panel takes over.

Also called a circuit breaker box or a fuse box, the panel is the electrical heart of any home. It’s what routes power safely to keep lights on, perishable food cold and our cellphones charged.

The electrical panel can also be an unexpected hurdle to ditching fossil fuels. 

That’s because many homes lack the electrical infrastructure to support electric versions of fossil-fueled appliances and other equipment. Pecan Street, an Austin, Texas–based nonprofit research organization, estimated that as many as 48 million homes have panels that will need some degree of updating in order to decarbonize. Upgrades vary widely in scope and cost but can often run thousands of dollars. (Fortunately, Inflation Reduction Act incentives help offset this cost a bit. More on that below.) 

So will you need an electrical panel upgrade before you start your home-electrification journey? Here are some key questions to help you decide. 

How big of an electrical panel will I need?

If you want an electric vehicle charger, a heat pump, solar panels or an induction stove but haven’t checked your electrical panel, stop reading this article, go find your breaker box, and see what you’re working with. 

The main circuit breaker — often located at the top of the panel — will show you the total amps.

This article is part of our special series Power by the People: Clean Energy from the Grassroots.

You don’t have to be a senator negotiating a revolutionary climate bill in secret to boost clean energy. Engaged community members also have the power to encourage wind, solar and battery deployment, as Canary Media’s Power by the People series has set out to document. One underappreciated approach is engaging with electric utilities. 

But for all the importance of utilities in our daily lives, they can be as opaque as an egg. This article cracks them open — and breaks down what they are, how they’re governed and how regular people can influence them. 

Let’s start by defining an electric utility in general, and then we’ll get into definitions of the different types of utilities and related entities.

💡Electric utility

Not all electric utilities are the same, but at their core, they’re all organizations that deliver electricity to customers. This service has three components:

1) Utilities secure power from generation resources such as coal- and gas-fired power plants, hydroelectric dams, nuclear power plants, wind farms and large solar arrays. In some cases, the utilities own the plants. In areas where the electricity sector has been restructured (or, as it’s sometimes misleadingly called, ​“deregulated”), utilities buy power from independent power producers that compete in the wholesale electricity market. 

2) Utilities distribute electric power. They generally own and operate the long-distance transmission lines, local distribution lines, transformers and utility poles that make up the grid.

3) Utilities sell that power to customers. Under the traditional utility model, customers had no choice about whom they could buy electricity from — if you lived in a utility’s service territory, that utility was your supplier. But in many states today, this ​“retail” part of the utility business has been opened up to competition from other companies.

In the U.S., there are three kinds of utilities: investor-owned utilities, publicly owned utilities, and member-owned or cooperative utilities. Data from the U.S. Energy Information Administration shows that as of 2017, investor-owned utilities served 72 percent of all utility customers.

What is a just transition?

To address the climate crisis, the world must rapidly shift from fossil fuels to clean energy. For this transition to be a just one, we need to repair the harms of the fossil-fuel economy and equitably distribute the benefits of the clean energy economy, so that no one is left behind. 

A brief history of a just transition

U.S. labor organizer Tony Mazzocchi is thought to have pioneered the concept of a just transition in response to the unfair treatment of workers as stronger environmental regulations throughout the 1970s and ​’80s led to job losses in toxic U.S. industries. 

For example, in 1987 the Environmental Protection Agency brokered an agreement with the Velsicol Chemical Corporation under which the company stopped selling chlordane and heptachlor, two pesticides linked to cancer, liver damage and seizures. Not long after, Velsicol closed one of its manufacturing plants, located in Marshall, Illinois, and laid off all of its hourly workers. The EPA designated the facility a Superfund site and dedicated more than $10 million to its cleanup. But the plant’s employees, Mazzocchi wrote in a rousing 1993 article, were ​“tossed onto the economic scrap heap.” 

The new climate law is chock-full of incentives to electrify your home and car, but the specifics are a maze to navigate. To help you find your way through, pro-electrification nonprofit Rewiring America has released an online calculator that tells you which of the incentives you’ll likely qualify for. And over 200,000 people have already tried it. 

“I’m so excited that we put this out because it does seem like it’s being legitimately useful to people trying to figure out what the [law] means for them,“ said Sam Calisch, head of special projects at Rewiring America.

Consumer choice is a big deal for the climate. According to Calisch, more than 40% of U.S. energy emissions stem directly or indirectly ​“from the decisions households make at their kitchen tables” — things like ​“where they get their electricity from, what they use to heat and cool their homes, and what they drive.” 

The calculator can inform those decisions, pointing Americans to the home and vehicle electrification discounts, rebates and tax credits that are, or will soon be, available to them thanks to the Inflation Reduction Act. 

Still, when Canary staff tried the calculator, some furrowed their brows; the results that it delivers can be a little confusing. So think of this article as your unofficial guide to how it works and what you can do with your results. 

Getting to know you

To determine which incentives you qualify for, the calculator asks you for several pieces of information: your ZIP code, homeowner status, household gross income, household size and whether you file taxes as an individual, jointly or as head of household. 

It uses different pieces of that information to determine your eligibility for different incentives. For example, your household income will qualify you for some incentives if it’s less than a certain absolute amount, and for others if it’s below a certain percentage threshold of the median income in your area. The calculator looks that up based on your ZIP code and household size using data from the U.S. Department of Housing and Urban Development. (According to the department, the national median household income in 2021 was $79,900.)

Your homeowner status comes into play because some incentives require you to be a homeowner — or really only make financial sense for property owners. Renters probably don’t want to foot the bill for an updated electric panel or geothermal heating system, for instance, so the calculator dismisses incentives for these types of items.

Before diving in, remember to take the results of the calculator with a grain of salt. It’s gathering just a few pieces of information about your particular income and tax situation, so it can only provide you with a broad-brush picture of your eligibility for incentives and how much they could save you. The incentive programs also have yet to be actually set up by the government agencies that will implement them. But the calculator results are still a great place to start. 

Calculating the savings — from low-income to high-income, from homeowners to renters

Ready to see the calculator in action? Imagine a married couple with two children are contemplating some serious climate-friendly home upgrades: solar on their roof, an electric car in their garage and new electric appliances to replace their aging fossil fuel-powered versions. They live in the Minneapolis ZIP code 55412. Let’s run through a few scenarios varying their household income and whether they own or rent their home. 

Lower-income homeowner: All incentives available! 

First, we’ll give the family a household income of $63,900. They’re considered a low-income household, as are other four-person households in their ZIP code earning up to $89,400, or 80 percent of the area median income. The couple owns their home. Feeding their details into the calculator, we find the family qualifies for all of the incentives the calculator assesses.

Eager though you may be to power your home or business with local, clean solar energy, you might not be able to install solar panels on your roof. Perhaps you rent your property or reside in a shady spot. Or maybe you can’t afford to invest in solar panels; the average cost of installing a home solar array in 2022 so far is a whopping $20,498. But never fear, a democratized alternative is here: community solar.

According to a recent report by Wood Mackenzie, community solar had a record-setting year in the U.S. in 2021. Here’s what it is — and how to get it. 

What is community solar?

Community solar refers to moderately large solar projects — usually up to 5 megawatts — that a number of customers, which can include individuals, organizations and companies, subscribe to or jointly own. 

Instead of putting panels on their own roof or property, a community solar participant taps into the value of a solar system located elsewhere, like on a community center or in a field. The projects, also called community solar gardens or farms, generate energy that’s fed into the grid.

Ready to immerse yourself in grid lingo? Let’s dive in!

⚡ the grid

How does electric power reach our homes and workplaces? Via the grid — a vast network of electrical lines, transmission towers, transformers, and control and sensing equipment that carries electricity from power plants to where it’s used. The U.S. grid has been called the biggest machine ever built. And it has a pulse: an electric alternating current of 60 hertz (cycles per second) in the U.S.

The grid moves power around at different scales: Transmission networks carry large amounts of power over longer distances, while distribution networks carry power the final miles to our electrical outlets. Almost all electric power starts its journey from a large-scale generator like a solar array, wind farm, hydroelectric dam, nuclear reactor or coal- or gas-fired power plant.

The power then goes to substations where devices called transformers increase or ​“step up” the voltage — the force pushing electric current through the system. That boost enables the power to travel over long distances more efficiently.

Closer to where the electricity will be used, transformers then reduce or ​“step down” the voltage so power can more safely flow into the local distribution network, which includes underground cables as well as the power lines you see along neighborhood streets, bedecked in pigeons.

The changing energy mix is presenting major challenges to today’s grid. For example, the distribution system was designed to push electricity out to customers. But as more people install rooftop solar and batteries, an increasing amount of electricity is flowing in the other direction: from customers to the distribution network. This two-way system is more complicated for utilities to manage. 

Customer electricity demand is also changing. As people shift to electric vehicles and switch from fossil fuels to electricity for home heating and appliances, the amount of power they can draw from the grid at any one moment increases dramatically. To keep up, the aging grid will need some serious upgrades. 

More on the grid:

• Infographic: Understanding the grid, from the U.S. Department of Energy

• A closer look at how the grid works, from the Council on Foreign Relations

More on the grid from Canary Media:

• The grid can’t handle all the clean energy projects planned in the U.S.
• How to connect clean energy projects to the grid more quickly
• Digitizing the transmission grid can enable the energy mix of the future
• Chart: U.S. utilities are spending less to produce power and more to deliver it

🏡 behind the meter

Utilities use electricity meters to measure power going into customers’ homes and businesses. Devices that produce or store power inside those customer buildings are on the customer’s side of the meter, or from the utility’s perspective, behind the meter.

The term is most commonly used to describe things like rooftop solar arrays and home batteries. It’s also applied to smart appliances and smart thermostats, which can alter how much power a customer is using and when. 

Conversely, front of the meter is used to describe technologies that are connected to the grid on the utility side of the meter, such as large-scale batteries.

More on behind-the-meter technologies from Canary Media:

• Behind-the-meter resources could flatten winter demand peaks
• Behind-the-meter batteries can help regulate the grid’s frequency
• Can a new way to pay for behind-the-meter flexibility help prevent rolling blackouts in California?
  

🔋 distributed energy resource (DER)

The grid currently gets most of its power from central power plants. But electric power sources that are sprinkled throughout communities — such as solar panels, batteries, backup generators and, increasingly, electric vehicles — can also feed power to the grid. These distributed energy resources, or DERs, are found everywhere from households to commercial sites.

You may also hear the term DER applied to devices that don’t generate power but instead can be controlled so their electricity consumption ramps down when needed, such as water heaters and appliances. That’s because when they’re turned down or off, they free up energy on the grid. So — if you squint — they could be seen as energy resources.

Utilities and grid operators are usually unaware of exactly how much energy DERs are generating. But in some cases, they can control DERs through a combination of technologies that come together in what are called DER management systems, or DERMS. 

More on DERs from Canary Media:

• How to harness DERs: What the power grid can learn from the internet
• Meet the task force fighting for distributed energy resources

🏭 virtual power plant (VPP)

Like a real power plant, a virtual power plant, or VPP, provides electricity to the grid. But instead of being sited in one place, a VPP harnesses distributed energy resources, or DERs (see above!) that are spread across an entire community. Private companies or utilities ​“operate” VPPs using software and digital communication networks to conduct a symphony of DERs.

By coordinating tens to thousands of these devices, VPPs can inject power into the grid or curtail demand, potentially as quickly as central power plants — or sometimes even faster. Depending on where you live, your household might be able to sign up to participate in a VPP and maybe even get compensated in return. Because VPPs take advantage of privately owned resources (such as homeowners’ solar panels and batteries), they can save a utility money, and the utility in turn could pass those savings on to customers in the form of reduced rates. 

Bonus activity: Play this game to see how long you can manage power sources on a grid to prevent a blackout. Then switch the game into VPP mode and watch it crush your record.

More on VPPs from Canary Media:

• Can virtual power plants keep California’s grid up and running?
• Hawaii contracts an 80-megawatt ​“virtual power plant in a box”

📞 demand response

Say there’s a spike in electricity demand on a sweltering summer afternoon as people blast their air conditioners. Utilities could ramp up power generation to meet demand. But utilities could also pay customers to respond to the spike by voluntarily cutting back their electricity use. That’s the activity and business of demand response.

For decades, utilities have made demand-response agreements with big industrial customers to pay them to dial down their power consumption during grid emergencies. For example, a utility would call a manufacturer and ask it to temporarily shut down a factory line.

The next phase in the evolution of demand response came in the residential sector, with programs that paid customers who agreed to let the utility remotely turn off their air conditioners, electric water heaters, pool pumps or other energy hogs during demand spikes. 

In the last 15 years or so, demand response has become more automated. Utilities and independent companies called demand-response providers use two-way wireless communications to link devices, like smart thermostats, to demand-response management systems (DRMS), which can more actively monitor and change the ​“shape” of a device’s electricity demand.

More on demand response:

• Financial incentives for demand response, from the U.S. Department of Energy

More on demand response from Canary Media:

• Summer heat in the Pacific Northwest gives demand response new appeal
• The role of demand response in preventing California summer blackouts
• OhmConnect bets $100M that free smart thermostats can prevent summer blackouts in California

⚖️ balancing the grid

On the grid, the supply of electric power must perfectly match demand. Think of the grid as a massive, interconnected web of energy, constantly humming at a perfectly tuned frequency. For power to flow from any node in the web to any other node, that frequency must be maintained at all times — an activity known as balancing the grid. Any imbalance between the power energizing that web and the energy being consumed at the web’s millions of endpoints can cause that frequency to go out of whack — and if it goes too far, dangerous things can happen.

When demand outstrips supply, utilities and grid operators can either allow the imbalance to overwhelm the grid, which can cause extensive damage to the electromechanical parts of the system, or they can start to force customers off the grid with rolling blackouts. If the grid goes out of balance faster than grid operators can react, the safety equipment on the grid takes over, shutting off major swaths of the network and causing massive blackouts that can take days, weeks or longer to recover from. 

To balance supply and demand, utilities have traditionally relied on central power stations, and when demand peaks, they have turned to so-called peaker plants that often run on fossil gas. But renewable energy and batteries offer cleaner ways to balance the grid. Also, equipment and appliances that can adjust their energy demand, such as air conditioners and freezers, can help if a number of them are coordinated together (see distributed energy resource and virtual power plant above).

More on balancing the grid from Canary Media:

• Software platform from Virtual Peaker taps home devices to help utilities balance the grid
• How to get millions of thermostats and EVs to help balance the grid
• Heat pumps show promise for balancing Ireland’s grid

🛎️ grid services

Grid services are functions that keep the power grid humming, provided by a wide variety of power sources, equipment and coordinating systems. These services are a wonky, motley crew, but they’re vital, which is why utilities and grid operators are willing to pay for them. Here are a few examples:

• On longer timescales of hours to days, a primary concern for grid operators is the grid service of power capacity: They must ensure power generators, such as gas-fired power plants, wind farms and solar arrays, are providing enough electricity to meet ever-changing demand.
• On the timescale of seconds to minutes, the grid might need ancillary services to balance the grid (see above). When a power plant goes out or a line goes down, grid operators rely on one such service: reserves. A battery, for example, can fill this role by instantly discharging power to the grid.
• On the timescale of seconds, frequency regulation is a critical grid service — helping to maintain the grid’s frequency, which in the U.S. is 60 hertz (cycles per second). When too much electricity is being drawn from the grid, the frequency drops. If it falls too low, the lights go out (and the same thing happens if it rises too high). Power plants have traditionally provided frequency-regulation services, but those can also be provided by batteries, massive electric pumps or thousands of household electric water heaters being operated in concert as a virtual power plant (see above).

More on grid services:

• An introduction to grid services from wind energy, from the National Renewable Energy Laboratory

More on grid services from Canary Media:

• Swell’s virtual power plant in Hawaii will provide grid services
• Internet-controlled Tesla Powerwalls are providing second-by-second frequency regulation
• Nuvve bets vehicle-to-grid charging hubs will provide profitable grid services

***

Stay tuned for more clean energy concepts demystified. And in case you missed it, check out our previous piece in this series: What is net metering? And other solar terms explained.

Solar panels are the symbol of clean energy for many. But actually getting them onto your rooftop requires grappling with all sorts of complexity. 

“As a journalist and researcher, I’m usually pretty good at finding out how things work,” said Katie Fernelius, who found herself trying to decipher a solar sales pitch after buying a house in New Orleans. ​“But the solar marketplace felt very confusing. It was really difficult to know what all of my different options were and how empowered I was as a consumer in navigating those options.” 

When buying, say, a used car, customers generally know to be on guard, but that may not be the case for solar power, which enjoys a virtuous reputation for reducing pollution and fighting climate change. But as with any other product, the companies selling solar installations are incentivized to maximize their profit. And like Fernelius, many customers find it hard to decipher all the different variables that go into the deals those companies are offering. 

Fernelius knew she wanted solar and a battery after living through 10 hot and humid days without grid power in the aftermath of Hurricane Ida. Throwing out a fridge full of rotting food and trying to sleep through sweltering nights hammered home the value of resilience. But first, she had to sift through a roster of unfamiliar solar financing options and discern a fair price for the system she wanted.

“I wish it were more accessible to people so they didn’t have to spend as much time [figuring it out],” Fernelius said. 

If you are thinking about getting solar panels, you are probably in a similar quandary. To help you navigate the process, Canary Media has compiled 10 key questions to ask yourself along the way. Answering them should enable you to strike the deal that works best for your situation.

1. Are rooftop solar panels the right choice for me?

Start by considering the big picture: Are solar panels on your rooftop really the best way for you to access cleaner energy? 

There are many ways to power our lives with clean energy. Some utilities already supply clean electricity to their customers, especially in places with lots of hydropower. For example, if you’re in British Columbia, the grid is almost entirely carbon-free already. Start by checking your utility’s portfolio to see if building your own mini clean power plant would really provide you with a cleaner supply of electricity. 

Alternatively, you might be able to sign up for community solar — an especially good option for those who don’t own their own home. At its best, community solar gives customers immediate, guaranteed savings with almost no strings attached. You subscribe to energy produced at a local solar project and pay a rate that’s lower than what your utility charges. These projects are typically much larger than a rooftop solar installation, so they benefit from their larger scale.

“The roof is sort of an arbitrary location,” noted Richard Caperton, who runs the policy and regulatory team at Arcadia, which connects customers to community solar subscriptions. ​“A community solar project can be put in a place that’s more optimal for the grid.”

You might not enjoy the level of savings that a good rooftop solar purchase delivers, but you can typically pay 5 to 20 percent less than the utility rate, depending on where you are, Caperton said. And you won’t lock up thousands of dollars investing in your own panels or have to wait years to earn your money back.

“Community solar is one of the best options for you as a consumer,” said Vikram Aggarwal, founder and CEO of EnergySage, which runs an online community solar comparison platform.

The catch is that states need to have policies in place that encourage community solar — and not every state does. EnergySage’s marketplace covers around 10 states. Arcadia, which has signed up customers for 500 megawatts’ worth of community solar, is active in nine states plus Washington, D.C.

Clean energy has its own vocabulary. That’s helpful when experts need precision to talk to each other, but it can make key concepts tougher for everyone else to understand. So the Canary Media team is breaking down the jargon. This article kicks off a series that will explain key terms people use when talking about clean energy.

This first installment is a companion to our helpful new guide, ​“Ask these 10 questions if you want to get rooftop solar” by Julian Spector. Here, we offer up definitions of technical terms that will be helpful to know before you take the solar plunge.

📏 net metering

Understanding this wonky term could help you pay off your solar panels more quickly. Net metering is a policy that pays homeowners and business owners to produce energy from solar and send it to the electrical grid. Also known as net energy metering (NEM), the policy has been adopted in several countries and U.S. states, albeit in different flavors.

Why is it called net metering? There’s a meter at your home that ticks forward as it measures how much electricity you’re pulling from the grid. The utility reads your meter on a regular basis to figure out how much to bill you. Under a net-metering policy, if you have solar panels producing more energy than you’re using, the surplus gets fed into the grid (the opposite direction of normal electricity flow), and your meter literally runs backward. The utility doesn’t just charge you for the total amount of energy you’ve drawn from the grid; instead, it measures both how much you’ve pulled in from the grid and how much you’ve fed back in order to charge you for the net amount, hence the term ​“net metering.”

Net-metering policies have spurred the growth of rooftop solar in the U.S. because they cut electricity bills for solar-panel owners and help them more quickly recoup the costs of installing their systems. Customers like these policies — and, unsurprisingly, so do rooftop-solar companies, which are better positioned to push their products when net-metering policies are in place. Utilities are less enamored, however. Many have criticized net-metering policies for being too generous in their compensation for solar energy fed from consumers’ systems back into the grid, as well as for leading to solar customers paying less to cover the costs of maintaining the electrical grid and related infrastructure. As a result, heated battles are underway in some U.S. states over reforming or jettisoning net-metering policies. Controversy abounds over what an ideal system would look like.

More on net metering from Canary Media:

• A series on the ongoing fight over net metering in California
• Video: A debate over how to reform net metering in California
• Hawaii is updating its net-metering policy to encourage home batteries
• North Carolina’s net-metering compromise is under threat

💰 Investment Tax Credit

The solar Investment Tax Credit is another financial incentive to sweeten a solar deal. The ITC is a U.S. federal tax break to entice homeowners, businesses and utilities to invest in (that is, buy) solar panels. Enacted in 2006, it has been a major driver for installing solar. As of 2022, it reduces your tax bill by 26 percent of the cost of installing solar. For homeowners, it’s essentially like a 26-percent-off coupon for a rooftop solar project. How does it work? Let’s walk through an example. 

• You install a solar project that costs $26,924.
• The amount of federal tax you owe, based on your income, is $8,000.
• Then, because of the ITC, the federal government gives you a $7,000 break on your tax bill (26 percent of $26,924). So, what do you owe now? $8,000 minus $7,000, or just $1,000 in taxes.

If you have more credit than you can use, it rolls over, for up to five years.

The size of the tax credit has morphed over time, as has the intended expiration date. It started at 30 percent with a two-year duration. But Congress has extended and adjusted it several times since then. Most recently, this happened in the December 2020 budget package. Now, for residential projects, the ITC will shrink to 22 percent in 2023 and fall to nothing in 2024. Big projects (commercial and utility-scale), though, will get to keep a 10 percent tax credit in 2024.

More on the ITC:

• Solar ITC 101, from the Solar Energy Industries Association

I have a confession: I worked on a fossil fuel divestment campaign, but I didn’t know how to divest my own money.

I used to avoid my investments like they had gone rank in the fridge. In 2016, an employer opened my first 401(k) account, and for more than a year, I didn’t actually know which companies my new retirement savings were invested in. Did they manufacture weapons? Operate private prisons? Or profit from fossil fuels? The possibility that my money was funding and I was profiting from fossil fuel production really galled me, because I had, for years, lobbied my university, the Massachusetts Institute of Technology, to divest from fossil fuel companies. But now that I had my own investments, I didn’t know how to divest them. I waited an embarrassingly long time to figure it out. 

But you don’t have to. I’ll guide you through how to divest. 

First, though: The movement to divest from fossil fuels has reached heights of popularity I never expected it to. Two of my alma maters have divested — the University of California system and the University of Oxford. Last year, even Harvard, which had resisted for a decade, moved to divest its $41.9 billion endowment, the largest of any single university. In 2018, Ireland became the first country to pledge to dump its investments in coal, oil, peat and gas. The Institute for Energy Economics and Financial Analysis recommends divesting — and so does the pope. In 2020, a group of researchers picked fossil fuel divestment as one of the concrete ways to help tip society toward rapid carbon-neutral transformation. Even Sir David Attenborough — ​“as close to a secular saint as we’re likely to see,” as one writer put it — advocates that we divest from fossil fuels.

Detangling the process of personal divestment took me a while. But by sharing what I learned, I intend to make it far easier for you.

Three strategies

To divest, I offer you, broadly, three strategies.

The first option is to ask your financial adviser to do it for you — or at least help you evaluate your options. You might not know you have a financial adviser; I certainly didn’t when my then-employer MIT opened my retirement account but didn’t tell me how to use it. But financial advisers come with these accounts. You’re entitled to their time, free of (extra) charge. Your account pays for them; they work for you.

The second option: If you’re lucky, your company already offers a fossil-free fund right out of the gate. Select it as your investment, and bada bing, you’re divested.

The third option, which you might not know exists, is to open a new account but one that’s tethered, like an astronaut to a broken shuttle, to the 401(k) (or its nonprofit equivalent, the 403(b)) that your company originally set up. But this new account? It comes with much more freedom to choose where to invest your money.

Here’s a schematic summarizing the strategies: