Use Energy Star Rebate Programs to Buy Efficient Appliances at Bargain Prices

What is the Energy Star Rebate?

IMPROTANT NOTE - As of this update on October 31, 2011, all Energy Star Rebate programs have been closed. Check with your state to see if the programs have been or will be renewed.

Open this file to see the contact information for your state's rebate program.

You are probably quite aware of these programs by now - The Energy Star Logo is seen at home centers or in the media. The Energy Star Program is a joint effort between the Environmental Protection Agency (EPA) and the Department of Energy (DOE) to make energy efficient appliances more affordable and help save energy on a national scale.

You can see the Energy Star Logo on refrigerators, freezers, air conditioners, washers, dishwashers, hot water heaters, furnaces, boilers, and heat pumps. Chances are there are rebates or government-supported cash back offers attached to many of these.

Can Energy Star Rebate Programs help you come out ahead when buying appliances?

Does it pay to buy Energy Star Appliances? Have these programs had any impact on the market economy, or reducing our energy usage in the US?

According to the US Department of Energy, the answer is a resounding YES on all fronts. Results for data from December 1, 2009 through June 30, 2011 are impressive. In short, 1.6 million consumer rebates ($246 million) were paid to consumers.

This contributed to an estimated $1.9 billion in consumer spending and $106 million in state sales tax. AND, annual energy savings resulting from the purchase of higher efficiency appliances is estimated at 1.6 trillion Btu. Well, that is just not too shabby!

But where are Energy Star Rebates concentrated? Mainly, major appliances. Sadly, heating, cooling and ventilation equipments was only 10 percent of the rebate applications, while hot water heaters were even more pathetic at 2 percent of the total rebates. Maybe those are lesser known, or more likely, the rebates still don't reduce the payback to an acceptable time period. In the residential world, we usually aim for 7 to 10 years to recoup the extra cost of an investment. In business, we usually aim for a 4 year and below payback.

How Do I Decide Which Rebates are Worth Applying For?

For example, when we were replacing our natural gas boiler a few years ago, we thought long and hard about the Energy Star rebate, and even at the rebated price, our annual cost savings over a standard efficiency were too low. Meaning, that we would make back the extra cost in about 15-20 years. At the time, having our clunker, energy-hog boiler replaced affordably with a standard new model was still a drastic improvement in cost and energy savings; ergo, our decision to pass on the Energy Star Logo.

However, when it came to replacing our dishwasher recently, and our washing machine a few years ago, the payback numbers were great - on the order of a couple of years - so, applying for the Energy Star Rebate was a no-brainer for us.

Replacing a clothes washer made before 2000 with a new ENERGY STAR model can save up to $130 per year. If the cost of the standard washing machine is $260 lower than the cost of the Energy Star model (without the rebate), then, it would take 2 years to make back the extra cost for the Energy Star model. If there is a $100 Energy Star Appliance Rebate for the more efficient model, then the extra outlay for it would only be $160 more than the standard model, and the energy savings would pay back for it in a little over a year ($160 divided by $130 is 1.23 years).

As another example, replacing a refrigerator made before 1993 with a new ENERGY STAR model can save up to $65 per year. If the cost of a similar refrigerator that is standard efficiency is $300 less than the Energy Star model (without the rebate), then it would take over 4 1/2 years to make back the extra cost ($300 divided by $65 is 4.6 years). If the Energy Star Rebate is $150, then the cost difference becomes $150 ($300 - $150), and it would only take about 2 years and 3 months to make back the initial extra cost.

In other words, to estimate how long it will take you to recoup the extra cost of the appliance, find the cost difference between the Energy Star Appliance and the standard model, subtract the rebate from the price difference, and divide it by the amount of savings per year that is listed on the Energy Star Appliance. Remember that these are all estimates, because they take into account a national average for the utility rate (about $0.11 per kWh), and an average amount of usage for a household of 4 people, etc. But for evaluating the rebates, the estimates are fine.

How do the Energy Star Rebate Programs Work?

First, the Federal government distributes the pot of money among states and then each state develops and administers its own rebate programs and how much funding goes into each. Most of the programs are scheduled to run till February 2012, or till they run out of money; many of the programs that expire get renewed depending on their effectiveness.

Each state creates its own set of rebate forms, and rules. This is where you have to do your research to see what is offered in your state. See this list of state rebate programs for details.

In many states, you can be eligible for more than one rebate - a rebate for each type of appliance you purchase. Others may have a maximum rebate amount per year per customer. Also, you may be able to combine your rebate with federal tax credits and other state or federal incentives to reduce the cost of the appliance even more. It all depends on your state's particular program rules.

If you purchase your appliance between a certain time period, you may also be able to retroactively apply for the rebate, if you haven't already done so.

Note that programs and the types of Energy Star Appliances rebated vary from state to state, and are determined by which appliance rebates will provide the "biggest bang for the buck". For example, heating equipment are a better bet in the Northeast US while cooling works best in the warmer regions.

Do you have your rebates planned out for the type of appliance you are going to purchase? Are you closed out of your rebate programs for now? Either way, there are several other opportunities to reduce the cost of your energy improvements.

Return from Energy Star Rebate Programs to Energy Rebates, Credits, etc. to find more programs.

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