The billions in energy incentives that never get claimed

From federal to local programs, energy incentives are funded but unfindable

Somewhere in the United States right now, a homeowner is sitting at a kitchen table with a contractor’s quote in front of them. The heat pump upgrade they need costs $12,000. They’ve heard vaguely that rebates exist. They go to their utility’s website, click through three menus, land on a PDF published in 2022, and close the tab.

They don’t make the upgrade.

The incentive money that could have changed that decision was real. It was funded. It was waiting. They just couldn’t find it—and when they got close, they couldn’t navigate it. So the program sits. The funding goes undeployed. And the utility files another flat participation quarter.

This scene plays out millions of times a year. And almost nobody in the policy conversation is talking about it honestly.

The funding announcement is not the finish line

The story the energy industry tells about electrification incentives usually centers on the funding announcement—and the awareness campaigns that follow. A new federal program. A state rebate expansion. A utility launching a heat pump initiative, backed by targeted outreach and marketing spend. Press releases go out, campaigns drive visibility, and the policy is treated as a success.

What gets far less attention is everything that happens after awareness. The moment a customer tries to move from interested to enrolled—especially across multiple programs — the system starts to break down.

In the 2023 tax year, roughly 3.4 million U.S. households claimed more than $8 billion in federal home energy and efficiency tax credits. That number sounds substantial until you hold it next to this one: the United States has more than 120 million households.

The system wasn’t designed to be navigated. It was designed to exist.

To understand why participation is this low, you have to understand how incentive programs actually get built.

Federal programs are created by Congress and administered by the IRS or the Department of Energy. State programs are created by state legislatures and run by agencies or utilities. Utility rebates are designed by program managers inside individual utilities, governed by public utility commissions, and administered by third-party implementers. Local programs layer on top of all of that.

Each program was designed in isolation. Each has its own eligibility criteria, application portal, documentation requirements, and timeline. Nobody sat down and asked: what happens when a customer tries to use all of these at once?

The answer is: they don’t. They try for a while, hit a wall, and stop.

Contractors—who should theoretically guide customers through this—spend an estimated 30 to 40 percent of their project time navigating incentive paperwork on behalf of clients. That’s not installation time. That’s not customer time. That’s administrative friction that exists because the incentive ecosystem was never designed with navigation in mind.

The result is a system that is technically generous and practically inaccessible. The money exists. The programs exist. The infrastructure to help customers find and claim them does not.

Who benefits from the system staying broken

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

When incentive programs have low participation rates, nobody is immediately accountable. Utilities can point to the programs they’ve funded and the marketing they’ve run. State agencies can point to the dollars they’ve allocated. Federal agencies can point to the tax credits they’ve created. Everyone has done their part, on paper, and the system still isn’t working.

Low participation is not a crisis for the organizations running these programs. It is, in many cases, a quiet relief. Undeployed incentive dollars either roll forward or return to regulators. 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 a few more years.

That asymmetry—where the downside of failure lands somewhere other than the organizations running the programs—is a structural reason why the problem persists. It’s not malice. It’s the predictable result of a system where the incentive to solve the navigation problem is weaker than the incentive to fund another program and announce it.

The customers sitting at their kitchen tables, closing browser tabs, are not in the room when those decisions get made.

The math on what we’re leaving behind

The numbers are worth sitting with.

If 3.4 million households claimed energy incentives in 2023, and the available incentive pool supports something closer to 20 to 30 million households with realistic upgrade needs, the participation gap represents tens of billions of dollars in unclaimed incentives annually. Some of that is timing. Some is eligibility. But a substantial portion is simply navigation failure—customers who could have claimed and didn’t.

At the utility level, the math is just as stark. A utility with 500,000 customers running five active incentive programs—each with a realistic 15 percent participation ceiling—is likely seeing actual participation rates of 4 to 6 percent. The delta between what’s possible and what’s happening isn’t a marketing gap. It’s a navigation gap.

For program managers, that gap has a dollar figure. For utilities facing regulatory scrutiny on DSM targets, that gap has a political cost. For the electrification commitments that depend on customer adoption at scale, that gap has a timeline cost that compounds every quarter it goes unaddressed.

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.

The next problem to solve isn’t funding. It’s findability.

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

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

The homeowner at the kitchen table closing the tab is not uninformed. They are not unmotivated. They are navigating a system that was never designed to be navigated—and they are making a rational decision to stop when the friction gets high enough.

What changes participation rates is reducing that friction. Not with another awareness campaign. With infrastructure that connects customers to the programs they qualify for, guides them through how those programs interact, and routes their claims to the right place—the first time, without requiring a contractor to spend a third of their project time on paperwork.

That infrastructure exists in other industries. E-commerce solved product discovery years ago. Financial services solved account opening. Healthcare is solving prior authorization, slowly and painfully, because the cost of not solving it became undeniable.

The energy incentive ecosystem is at the same inflection point. The funding is there. The programs are there. The customers are there—or they were, until the tab got closed.

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, can be fixed.

The question is whether the organizations that run these programs decide to fix it—or wait until the regulatory and reputational cost of inaction makes the decision for them.

What other industries figured out that energy hasn’t

The navigation problem is not unique to energy. Several industries have already solved versions of it—and the solutions share a common pattern worth examining.

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

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

Healthcare is solving prior authorization right now—slowly, painfully, because the cost of not solving it became impossible to ignore. Prior authorization—the process by which insurers approve or deny medical treatments—was for decades a fragmented, paper-based system that caused treatment delays, physician burnout, and patient harm. The system was technically functional. It processed claims. What it failed to do was make the path between patient need and treatment approval navigable at scale. 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 became a documented, quantifiable public health cost.

The pattern across all three is identical. A product or benefit exists. Funding or inventory exists. Customers want access. But the layer between intent and action is fragmented, underfunded, and nobody’s explicit responsibility. Participation suffers. The cost accumulates quietly. Eventually the gap becomes undeniable and the infrastructure gets built—often after years of avoidable loss.

Energy incentives are at that inflection point now. The question is not whether the navigation infrastructure will eventually get built—it will. The question is how many years of unclaimed incentives, missed electrification targets, and frustrated customers accumulate before it does.

Sources

1. IRS Statistics of Income — Energy Credits claimed under the Inflation Reduction Act, 2023 tax year filings.
2. U.S. Census Bureau — American Housing Survey, household count estimates.
3. U.S. Department of Energy — Home Electrification and Appliance Rebates (HEEHRA) program guidance and funding levels.
4. Lawrence Berkeley National Laboratory — Utility Energy Efficiency Program data, participation rate benchmarks.
5. Rocky Mountain Institute — Electrification program friction and contractor time-cost analysis.