Complete guide to utility rebates for homeowners

You can get cash back from most utility companies for replacing your old inefficient appliances. This guide explains how they work.

Image of a piggy bank, the type in which you can put the money that you save from utility rebates.

Got some old appliances around your house? Perhaps a refrigerator that’s a couple decades old, or a rattling air conditioner that came with the house? Or maybe it’s winter and your just furnace died and you need a replacement NOW or you’ll freeze to death right in your home.

These are big ticket items that make a big hit to your pocketbook, often at unexpected times when they suddenly stop working on you. Any savings you can find can be a major relief. Thankfully, most utility companies provide rebates for heating and cooling equipment, including hot water tanks, furnaces, air conditioners, and heat pumps.

Rebate programs have qualifying requirements for appliances in terms of their rated energy efficiency. Sometimes it’s as simple as looking for an Energy Star label, but often the appliances must meet specific efficiency requirements to qualify. The types of energy efficiency measurements differ between types of appliances, and this can get confusing pretty quick.

So, we wrote this guide to help make sense of all this. You might wonder why a website about solar energy is writing about energy rebates. It’s because the very first step a homeowner should do before going solar is to make their house more efficient. It’s the cheapest and easiest thing you can do to save money on your energy bills.

Alright, let’s dive in.

Why do utility companies offer energy rebates?

First of all, you might be asking why utility companies do this. After all, their business model is to sell you electricity or gas. The more they sell, the more money they make. Right?

Well, there’s two major reasons. One, state governments may require that utility companies make energy efficiency a priority. Energy efficiency has broad public support, so it’s politically popular to support these programs. They’re low cost, and the savings find their way back to the public in terms of direct rebates and long term savings on energy bills. It’s also popular among manufacturers because these programs encourage the purchase of new appliances to replace old, inefficient ones.

The second reason is that in certain circumstances it can actually be less costly to a utiltity company if people use less energy in times of peak demand. If energy demand is so high that a utility company has reached the limit of its infrastructure, it can be very expensive for the utility to continue to provide uninterrupted service. For example, an electric utility may spend hundreds of times the normal wholesale rate of electricity to obtain more electricity from peaking power plants or neighboring regions. Energy efficiency programs can help reduce this peak demand, and in the process help utility companies defer expensive infrastructure upgrades.

Understanding efficiency ratings: SEER, EER, HSPF, AFUE and more

When you start looking at the energy efficiency ratings of heating and cooling appliances you’ll encounter a lot of acronyms, which can get confusing really quick. One thing to be aware of is that there are different energy efficiency ratings depending on the type of appliance.

BTU (British Thermal Unit)

A BTU, or British Thermal Unit, is a kind of a throwback unit that is still in widespread use. It’s not an energy efficiency rating, but instead a measure of heat energy. You’ll see it used to describe the heat output of everything from furnaces to propane grills. But, perhaps confusingly, its also used to describe the cooling power of air conditioners.

This makes sense when you think about it: a furnace adds heat to your home, while an air conditioner subtracts heat. In either case, a BTU is how we measure this.

The BTU ratings you see for household appliances are in the thousands. But how much heat does a BTU add up to, exactly?

Think of a small electric space heater - the kind you might stick on your desk if you work in an office where they keep the thermostat a little too low. Those space heaters typically draw around 1,500 watts, which translates to an output 5,118 BTUs if you run the heater for one hour.

That might be enough to keep a small room warm, but not enough for a home. That’s why furnaces range in size from as small as 30,000 BTU to as big as 120,000 BTU or more.

EER (Energy Efficiency Ratio)

EER is used to measure the energy efficiency of air conditioners and ground source heat pumps. A higher number means better energy efficiency. It’s most commonly used to measure the energy efficiency of window air conditioners. Central air conditioners usually use SEER (see below).

EER is calculated simply by dividing BTUs by watts. For example, if an air conditioner is rated for 10,000 BTUs and 1,000 watts, it will have an EER of 10. If its rated for 11,000 BTUs and 1,000 watts, its EER will be 11.

SEER (Seasonal Energy Efficiency Ratio)

SEER is similar to EER, but it takes into account the performance of an air conditioner under the real world temperatures over the course of a summer season. A higher SEER number means better energy efficiency.

It’s useful because EER measures efficiency specifically at an outdoor temperature of 95°F and an indoor temperature of 80°F, but air conditioners have different efficiencies at different temperatures.

SEER ratings are an attempt to measure realistic performance over a typical cooling season using representative temperatures. While it’s imperfect because your actual temperatures will be different, it does help give an apples-to-apples way to compare air conditioner performance.

Air conditioners today are required to have a 14 SEER rating, and can go as high as 24 SEER or more.

HSPF (Heating Seasonal Performance Factor)

HSPF is used to measure the heating efficiency of air-source heat pumps. Higher numbers are more efficient.

It’s calculated similiarly to EER. For example, a heat pump that outputs 10,000 BTUs in one hour while consuming 1,000 watts will have a HSPF of 10. But, similar to SEER, this is calculated for the temperatures of a typical heating season.

COP (Coefficient of Performance)

COP is often used to describe the energy efficiency of ground source heat pumps. A higher number means better efficiency. COP is a simple ratio of the amount of energy generated divided by the amount of energy used. For example, a heat pump that outputs 4 kw of energy while consuming 1 kw would have a COP of 4.

AFUE (Annual Fuel Utilization Efficiency)

AFUE is used to measure gas and oil furnace efficiency. It’s a simple percentage of how much of the fuel is efficiently converted into heat. For example, a 90 AFUE gas furnace converts 90% of the natural gas input into heat, while a 95 AFUE unit is more efficient, converting 95% into heat.

Gas furnaces these days can be very efficient, reaching as high as 98 AFUE.

UEF (Uniform Energy Factor)

Uniform Energy Factor (UEF) is a new measure of water heater overall efficiency, replacing the older EF standard. Higher UEF numbers mean higher efficiency.

Applying for rebates

Every utility offers different rebates. It depends on the type of energy the utility is in the business of (for example, electricity or gas). It also depends on the climate. For example, in a warm climate, utilities may offer rebates for pool covers, which reduce evaporation and water usage. But you won’t find those rebates in colder climates where that’s less of an issue.

Shopping around

Now that you understand what all those acronyms mean, you’re ready to go shopping for your appliance. The first thing you should do is find out what rebates your utility company provides. Check with your utility website to find out they currently offer.

Energy Star logo

If a rebate is offered for your appliance, great! Be sure to read the qualifications for the rebate, because there will be a minimum energy efficiency requirement. Sometimes it’s as simple as having an Energy Star rating, but often there are specific rating requirements using one of the measurements described above.

Types of rebates available

Smart thermostats

This is such a popular rebate that we dedicated an entire article to it. Many utilities offer cash back on programmable or smart thermostats, often giving a higher rebate on the latter. Some even offer them for free. This is such a low cost device relative to the large energy savings you can get that there really isn’t a reason why you shouldn’t upgrade.

Also, a few utilities offer an additional program called demand management. This allows the utility to access your smart thermostat over the internet and raise or lower your temperature setting by one or two degrees during times of very high demand. In exchange, you can usually earn between $25-100 per year for participating.

While some people may find it a little creepy to let the utility access your thermostat, we think the security risks are minimal. Read our article to learn more.

Window air conditioners

When offered, rebates for window air conditioners are typically in the $25-50 range. Most programs simply require that the unit is ENERGY STAR rated, so look for the blue logo. Some programs may also have an EER minimum rating, in which case you need to look for the yellow EnergyGuide label.

Here’s what the label for a window AC will look like. The red arrow shows where you find the EER rating:

Example EnergyGuide label for a window air conditioner.
EnergyStar label for a window AC. The red arrow shows the EER rating.

Central air conditioners

Utility rebates for central air conditioners are quite common. Units for the home are sometimes called split systems, because the compressor is typically located outdoors while the air handler is a separate unit inside.

Unlike window air conditioners, there is always a minimum energy efficiency requirement, expressed as SEER. The minimum currently allowed today is 14 SEER. Higher numbers are more efficient, but more efficient units cost more, and there’s a point at which you might never recoup the added cost of higher efficiency.

Determining the ideal SEER number for you requires a highly technical analysis of the cooling requirements of your home, which is influenced by its air tightness, insulation levels, climate, ductwork, and more. This is called a Manual J calculation, and it is best performed by a qualified mechanical engineer. Many HVAC companies may not get this correct, so it’s sometimes a good idea to find an independent engineer to perform this calculation for you. This service may cost a couple hundred dollars, but pay for itself over time by having a right-sized unit.

This is a sample EnergyGuide label for a central air conditioner.

Example EnergyGuide label for a central air conditioner.

Heat pumps (Ductless Mini-Splits)

Mini-split heat pumps are becoming popular because they are highly energy efficient, and can function as both a heating and cooling unit for your home. Because of this, many utility companies offer rebates on heat pumps. They’re a good pairing with a solar photovoltaic system, because it can allow your home to operate entirely on solar electricity.

Because they both heat and cool, you will see two ratings: the SEER rating describes its cooling efficiency, while HSPF describes the heating efficiency.

Example EnergyGuide label for a ductless mini-split heat pump.

Gas furnaces

Gas furnaces are widely used in the United States, so there’s a good chance that your utility offers a rebate. Efficiency in this case is expressed as AFUE. The minimum you’ll find these days is 80 AFUE. This could be fine for mild climates with a short heating season, but a gas furnace needs to be at least 90 AFUE to be considered highly energy efficient.

Example EnergyGuide label for a ductless mini-split heat pump.

Gas fired water heaters

Unlike the other products we’ve discussed, the EnergyGuide label of gas fired water heaters do not include the UEF rating. This is true whether it is a tank or tankless unit. Utility rebates often specify a minimum UEF rating to qualify. To find the UEF rating for the product, you will need to look up the specifications.

But the EnergyGuide label does tell you how much energy the product is estimated to use, and also what size category the unit falls into. This is important because you should only compare the energy cost of units that are in the same size category.

A large capacity unit will obviously use more energy than a small one, so be sure to select a unit that isn’t too large for your needs. There are four “bins”: very small, low, medium, and high.

Example EnergyGuide label for gas water heater.

Recycling refrigerators, freezers, window air conditioners, and dehumidifiers

These appliances all have something in common: a refrigeration coil that contains compounds called hydrofluorocarbons (HFC). These HFCs are kept under very high pressure inside the coil. Because of that high pressure, these compounds can slowly leak into the atmosphere over time. They will certainly make their way into the atmosphere if the appliance is simply disposed of in a landfill instead of being properly recycled at the end of its life.

While modern HFCs are no longer harmful to the ozone layer due to the international Montreal Protocol treaty, they are a very significant greenhouse gas: about 3,000 to 7,000 times more potent as a greenhouse gas per unit than carbon dioxide. Because of this, it’s illegal to dispose of a refrigerator or freezer without first having the refrigerants safely collected.

To properly dispose of one of these appliances, first check with your utility to see if they have a recycling program. Many will actually pay you a small fee - often about $50 - to come to your home and collect the old appliance. They will ensure that the refrigerants are safely extracted, and the metal properly recycled.

Recycling programs for window air conditioners and dehumidifiers are less common, but also sometimes available.

If your utility doesn’t have a collection program for your appliance, check with your municipality, which may have a bulk waste or appliance collection day. Finally, if neither your utility or town offers anything, call up a local HVAC company. They will be able to tell you what programs are available near you, or be able to take care of the recycling themselves.

Other programs

You can also find rebates for insulation and many small items, such as LED lights, showerheads, faucet aerators, and more. Don’t let the small-ticket price of these things fool you. These little upgrades are often the most cost-effective and easiest environmentally friendly upgrades that you can make to a home.

What next?

To find rebates, you can visit the residential energy efficiency section of this site. Keep your receipts of any product you purchase, and also the invoice from any contractor work that was performed. You’ll need to indicate the make and model of your unit on the rebate form so that the energy efficiency rating can be verified.

And if you’ve made your home energy efficient as possible, that’s a good time to start thinking about making the move to go solar. Check out our complete guide to going solar to learn everything you need to know.

Save 26% or more on home solar with current incentives

When you’re ready, fill out our form to get up to three estimates from qualified solar installers.

Save 26% or more on home solar with current incentives

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Use our calculator to get a financial payback and solar performance estimate customized to your home, including federal, state, and local incentives.

When you’re ready, fill out our form to get up to three estimates from qualified solar installers.