State financial incentives are an important instrument for increasing the use of energy efficient technologies that provide benefits to both residents and the state overall. The incorporation of a financial incentive can make energy efficiency investments more alluring for private and public entities, particularly by lowering inhibitive upfront costs. Financial incentives also complement other efficiency policies such as appliance standards and energy codes, overcoming market barriers for cost-effective technologies.
Financial incentives can take many forms: rebates, grants, or loans for energy-efficiency improvements, direct income tax deductions for individuals and businesses, and exemptions or reduced sales tax on eligible products. They are commonly run through State Energy Offices and Departments of Revenue, which partner with market actors to ensure consumers, retailers, and energy service providers understand the array of financing opportunities available.
The State Energy Policy Database only keeps track of financial incentives provided by state governments, rather than utilities. Ratepayers often fund incentives offered by utilities in the form of a systems benefits charge, which accrues into a Public Benefits Fund (PBF) that supports energy efficiency investments. State governments also can access PBFs to offer financial incentives. In some cases, states charge a third-party to administer PBFs, as in Wisconsin, Vermont, and Oregon. Since the financial incentives detailed on these pages are offered by state governments, most are funded by state appropriations, Recovery Act funds, and forgone tax revenue. ACEEE details financial incentives offered by states in order to clearly reflect the Financial Incentives element of the State Energy Efficiency Scorecard. Financial incentives offered by utilities are covered in ACEEE’s scoring of utility spending on energy efficiency. For complete information on utility incentives, visit the Database of State Incentives for Renewables and Efficiency (DSIRE) and review the site's Summary Table of state financial incentives.