The real bottleneck in electrification isn’t funding. It’s everything in between.

Billions are flowing into energy incentives. Customers are showing up. But without infrastructure to guide them through the messy middle, most of that money never moves.

Picture a homeowner in Columbus, Ohio. She’s done the research. Her aging gas furnace needs to go, and she’s heard that between federal tax credits, her state’s efficiency program, and her utility’s rebate, a heat pump could be nearly half-covered. She goes online. She finds the utility’s rebate page. She finds the IRS guidance for the 25C credit. She finds something from her state that looks relevant but hasn’t been updated since 2023. She opens four tabs. She reads for twenty minutes. She closes the laptop.

The furnace stays.

This is not a story about awareness. She was aware. This is not a story about funding. The money was there. This is a story about what happens in the middle—between a customer who wants to act and a system that was never designed to be navigated.

That middle is where electrification is stalling. And the industry hasn’t been honest enough about why.

The funnel that nobody is responsible for

Electrification policy has a funnel problem, and it’s not at the top.

At the top of the funnel, policymakers have done their job. The Inflation Reduction Act extended and expanded residential energy tax credits. The High-Efficiency Electric Home Rebate Act created up to $14,000 in direct rebates per household for qualifying upgrades. State programs layered additional support. Utility rebates—roughly $8 billion per year in available funding—rounded out the stack. On paper, the support structure for residential electrification is the most generous it has ever been.

At the bottom of the funnel, utilities and program implementers are ready. Applications get processed. Rebates get issued. When a customer makes it all the way through, the system works.

The problem is the distance between those two layers.

Between a customer who is interested and a customer who is enrolled sits a navigation layer that is fragmented, inconsistent, and almost entirely the customer’s problem to solve. No one owns it. No one is measured on it. And because it’s invisible—the failure mode is a closed laptop, not a rejected application—it rarely shows up in program performance reports.

In 2023, roughly 3.4 million U.S. households claimed federal home energy tax credits. The United States has more than 120 million households. Even accounting for renters, recent upgrades, and ineligible systems, the gap between who could benefit and who actually claimed is not a rounding error. It is the actual performance of the system.

What’s actually happening in the middle

To understand why participation is this low, you have to understand how incentive programs get built—and what they assume about customers.

Federal programs are created by Congress and administered by the IRS or the Department of Energy. Each has its own eligibility criteria, documentation requirements, and tax filing mechanics. State programs are created by state legislatures, governed by state agencies, and often administered by third-party implementers with their own portals and timelines. Utility rebates are designed by program managers inside individual utilities, subject to public utility commission approval, and frequently updated mid-cycle as budgets shift.

None of these programs were designed to work together. Each one was designed in isolation, by teams optimizing for their own program’s goals, with no shared view of what a customer experiences when they try to stack all three.

The customer trying to finance a heat pump upgrade using a federal tax credit, a state rebate, and a utility incentive is navigating three separate systems with three separate eligibility rules, three separate documentation requirements, and three separate timelines—often without any guidance on how they interact or which to pursue first.

Contractors, who are theoretically positioned to guide customers through this, spend an estimated 30 to 40 percent of their project time on incentive paperwork rather than installation. That’s not inefficiency on the contractor’s part. That’s the predictable result of asking skilled tradespeople to serve as ad hoc navigators for a system that was never designed to be navigated.

The customer who closes the laptop isn’t confused because the incentives aren’t explained well enough. She’s closing the laptop because the cognitive load of assembling her own path through a fragmented system has exceeded the value she expects to get from completing it.

That’s a rational response to a broken navigation layer. It’s not a customer education problem. It’s an infrastructure problem.

Who benefits when participation stays low

This is the part of the conversation the industry tends to skip.

When incentive programs have low participation rates, the organizations running them face almost no immediate accountability. A utility can point to the programs it funded, the awareness campaigns it ran, and the rebate dollars it made available. A state agency can point to the budget it allocated. A federal program can point to the guidance it published. Everyone has technically done their job. The system still isn’t working.

What’s more, low participation is not a crisis for the organizations managing these programs. Undeployed incentive dollars typically roll forward or return to regulators. The administrative burden of processing fewer claims is lower. The cost of low participation is almost entirely borne by customers who didn’t get the upgrade they needed—and by the electrification targets that keep getting pushed out another year.

That asymmetry matters. When the downside of failure lands somewhere other than the organizations running the programs, the structural incentive to fix the navigation problem stays weaker than the incentive to fund the next program and announce it.

The customer at the kitchen table, closing tabs, is not in the room when those budget decisions get made.

This isn’t a critique of the people running these programs. Many of them are deeply committed to electrification outcomes and genuinely frustrated by participation rates. It’s a critique of the structure—of a system where the measurement of success stops at funding deployed and awareness generated, rather than extending all the way to customers enrolled.

The math that program managers don’t want to run

The participation numbers are worth sitting with, because the gap between what’s possible and what’s happening has a dollar figure.

If 3.4 million households claimed federal energy incentives in 2023, and realistic upgrade eligibility extends to somewhere between 20 and 30 million households when accounting for heating system age, income eligibility, and homeowner status, the participation rate is somewhere between 11 and 17 percent at the federal level alone. That means 83 to 89 percent of eligible households didn’t claim.

At the utility level, the math is just as stark. A utility running five active incentive programs with realistic participation ceilings of 15 percent each is likely seeing actual participation in the range of 4 to 6 percent. The delta between what’s possible and what’s happening isn’t primarily a marketing gap. It’s a navigation gap.

For program managers, that gap has a dollar figure. For utilities facing regulatory scrutiny on demand-side management targets, it has a political cost. For the electrification commitments that depend on customer adoption at scale—the ones filed with public utility commissions and announced in press releases—it has a timeline cost that compounds every quarter it goes unaddressed.

At the aggregate level, the Lawrence Berkeley National Laboratory has documented roughly $1 billion in local electric utility incentives going unused annually. That’s not ambiguous. That’s a known, documented failure of conversion—not funding, not awareness, but the layer in between.

The question the industry needs to start asking isn’t how to fund more programs. It’s why the programs that already exist aren’t reaching the customers they were funded to serve.

Other industries have already solved this

The navigation problem is not unique to energy. It’s a recognizable pattern, and several industries have already built their way through it.

E-commerce solved product discovery in the early 2000s. Before Amazon built its recommendation and search infrastructure, online retail required customers to know exactly what they were looking for and where to find it. Conversion rates were low not because products were wrong or prices were unappealing, but because the navigation layer between customer intent and available inventory was fragmented. Amazon’s answer wasn’t to add more products. It was infrastructure—algorithms that connected customers to what they were looking for, and to what they didn’t know they were looking for yet. The result permanently reset consumer expectations for every retail category that followed.

Financial services solved account opening a decade ago. Opening a bank account once meant a branch visit, multiple forms of identification, a waiting period, and follow-up paperwork. Participation in savings accounts, investment platforms, and insurance products was constrained not by lack of customer interest but by friction between intent and enrollment. Digital-first banks reduced account opening to under three minutes. Participation in previously underserved demographics shifted dramatically within years. The product didn’t change. The path to it did.

Healthcare is solving prior authorization right now—slowly and painfully, because the cost of not solving it became impossible to ignore. Prior authorization was for decades a fragmented, paper-based system that caused treatment delays, physician burnout, and documented patient harm. CMS and major insurers are now mandating electronic prior authorization and real-time decision APIs not because the underlying coverage changed, but because the navigation failure accumulated enough visible cost that inaction became indefensible.

The pattern is identical across all three. A product or benefit exists. Funding exists. Customers want access. But the layer between intent and action is fragmented, underfunded, and no one’s explicit responsibility. Participation suffers. The cost accumulates quietly. Eventually the gap becomes undeniable and the infrastructure gets built—after years of avoidable loss.

Energy incentives are at that inflection point now.

The layer that’s missing

The next problem to solve in electrification is not funding. It’s not awareness. It’s the infrastructure that connects customers to what they’re eligible for, guides them through how multiple programs interact, and routes their claims to the right place the first time.

That infrastructure needs to do a few specific things that no current program does well.

It needs to work across programs simultaneously. The homeowner in Columbus doesn’t want to navigate federal, state, and utility programs separately. She wants to know, in one place, what she qualifies for, what the combined value is, and what she needs to do next. The programs exist. The connection layer doesn’t.

It needs to reduce contractor burden. If contractors are spending a third of their project time on paperwork, that cost is being passed to customers in the form of higher quotes—which undermines the economics that incentives were designed to improve. A functioning navigation layer routes claims correctly the first time and reduces the administrative overhead that currently sits on the trade workforce.

It needs to be accurate in real time. A PDF published in 2022 is not a navigation tool. It’s an artifact. Incentive programs change—budgets deplete, eligibility rules update, new programs launch. The navigation layer has to reflect what’s actually available today, not what was available when the page was last edited.

And it needs to be simple enough that a customer who has twenty minutes and a contractor’s quote can actually get through it. Not a portal. Not a checklist. A guided path that meets customers where their attention is and gets them to the right next step.

The question the industry hasn’t answered

The funding work of the last decade has been genuinely important. The IRA, HEEHRA, state efficiency programs, and utility rebate expansions represent a real investment in the energy transition. That work should be acknowledged.

But the evidence is increasingly clear that more funding and better marketing are not what move the participation needle at scale. The barrier for most eligible customers is not that the incentives are too small. It’s that the path from eligible to enrolled is too hard.

The gap between what electrification policy promises and what customers actually experience is not a policy failure. It is an infrastructure failure. And infrastructure failures, unlike political ones, have technical solutions.

The question is whether the organizations running these programs decide to build that infrastructure before the regulatory and reputational cost of inaction makes the decision for them—or after.

Every quarter that participation stays flat, eligible customers who could have made the upgrade didn’t. Every quarter, incentive dollars that were funded and ready went undeployed. Every quarter, electrification timelines get quietly revised.

The system is technically generous. It is practically inaccessible. Those two things can coexist for a long time—until they can’t.

Sources

IRS Statistics of Income, Energy Credits under the Inflation Reduction Act, 2023 tax year.

U.S. Census Bureau, American Housing Survey, household count estimates.

U.S. Department of Energy, HEEHRA program guidance and funding levels.

Lawrence Berkeley National Laboratory, Utility Energy Efficiency Program participation data.

Rocky Mountain Institute, electrification program friction and contractor time-cost analysis.