Creating a Greener Future: Incentive Programs for Energy-Efficient Homes in California

California is leading the charge in decarbonizing the housing sector through a range of incentive programs that cater to all market segments. These programs are designed to encourage homeowners, developers, and investors to adopt energy-efficient and low-emission technologies, promoting sustainability while offering economic benefits. From single-family homes to multifamily buildings, California provides a variety of incentives to support the transition toward a greener future.

California Energy-Smart Homes Program

The California Energy-Smart Homes Program is a valuable initiative aimed at promoting energy efficiency and all-electric construction in residential new construction and alterations. The program offers incentives to project owners who adopt advanced energy measures and transition to all-electric building practices and is available to utility customers of Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), and Southern California Edison Company (SCE).

By participating in the Energy-Smart Homes Program, project owners can receive incentives for various types of residential construction, including:

  • Single-family homes
  • Duplexes
  • Townhomes
  • Multifamily low-rise buildings
  • Alterations
  • Accessory dwelling units (ADUs) 

To be eligible for incentives, projects must be all-electric and comply with relevant federal, state, and local laws and codes. The Energy-Smart Homes Program also provides de-escalating incentives based on the year of completion, as shown below:

All-Electric New Construction Incentives

YearSingle-family/duplex/townhome (per unit)Multifamily/ADUs (per unit)
2023$3,500$1,750
2024$2,100$1,350
2025$1,850$1,100
2026$1,600$1,000

California Energy Design Assistance Program (CEDA)

The California Energy Design Assistance (CEDA) Program is a valuable resource for encouraging electrification and decarbonization in new building construction and major renovations. This program provides complimentary energy design assistance to commercial, public, industrial, agricultural, and high-rise multifamily (four stories or taller) projects.

By participating in the program, project owners can receive customized energy modeling, project documentation for California Public Utility Commission (CPUC) savings claims, and technical assistance to implement energy-saving strategies. CEDA offers two different project paths to cater to customer needs:

  • CEDA mixed fuel path: This path optimizes gas and process heating systems to reduce carbon emissions and encourages the integration of renewable generation, electric vehicle charging, and battery storage.
  • CEDA all-electric path: This path provides higher cash incentives to promote all-electric design and also emphasizes the integration of renewable generation, electric vehicle charging, and battery storage.

To be eligible for the CEDA Program, projects must be:

  • In the early design phase
  • Located in a Pacific Gas & Electric (PG&E), Southern California Edison (SCE), SoCalGas (SCG), or San Diego Gas & Electric (SDG&E) service territory with an eligible rate structure
  • New construction or a major alteration
  • Managed by a project team with interest and commitment to evaluating energy efficiency options

Additionally, major alterations must meet specific criteria, including:

  • Changes in space function
  • Substantial changes in design occupancy
  • Increase in conditioned floor area, or the addition of substantial process or conditioning load to an existing facility

Design teams have the option of choosing their own energy consultant for technical assistance, modeling, and program paperwork while participating in the CEDA Lite program. This option allows them to be eligible for owner incentives and a technical assistance stipend based on their savings.

Federal Tax Credits 

The New Energy Efficient Home Tax Credit, found in section 45L of the Internal Revenue Code, provides taxpayers with a tax credit for eligible new or substantially reconstructed homes that meet applicable ENERGY STAR home program or DOE Zero Energy Ready Home (ZERH) program requirements. 

The recent amendments under the Inflation Reduction Act of 2022 (IRA) have introduced two tiers of credits, with higher credits for homes and dwelling units certified to applicable ZERH program requirements:

  • Single-family homes and manufactured homes that meet the applicable ENERGY STAR requirements can receive a tax credit of $2,500. For single-family homes, different program requirements apply depending on the acquisition date. Single-family homes and manufactured homes certified as zero-energy ready homes under the DOE Zero Energy Ready Home Program can receive a tax credit of $5,000.
  • Multifamily homes that meet the applicable ENERGY STAR Multifamily New Construction Program requirements can receive a tax credit of $500 per unit. Higher credits of $2,500 per unit are available for multifamily homes that also pay prevailing wages to laborers and mechanics. Multifamily homes that are certified as zero energy-ready homes under the DOE Zero Energy Ready Home Program can receive a tax credit of $1,000 per unit. Higher credits of $5,000 per unit are available for multifamily homes that also pay prevailing wages to laborers and mechanics.

These tax credits are available for qualified energy-efficient homes acquired after December 31, 2022, and before January 1, 2033, for residential use during the taxable year. 

It’s important to note that the information provided here is not professional tax advice, and it’s recommended to consult with a tax professional or refer to official IRS guidance for accurate and up-to-date information regarding the tax implications of new home construction and the eligibility criteria for the 45L tax credit.

Take the Next Step—Contact GEM for Comprehensive Energy Efficiency Consulting

When it comes to energy efficiency and incentive programs for your residential construction projects in California, Gilleran Energy Management is here to support you every step of the way. Our extensive knowledge and experience in navigating programs like the California Energy-Smart Homes Program and the California Energy Design Assistance Program (CEDA) make us the ideal partner for your project.

By collaborating with GEM, you can tap into a wealth of resources, including customized energy modeling, technical assistance, and project documentation. We’ll help you implement energy-saving strategies, explore all-electric options, and ensure compliance with federal, state, and local regulations. Additionally, our expertise extends to navigating federal tax credits like the New Energy Efficient Home Tax Credit. Contact Gilleran Energy Management today at (707) 528-7318 to schedule a consultation.