Residential Retrofits: An Estimate of Inflation Reduction Act Effectiveness
Open Access
Author:
Yonke, Thomas
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
Stefan M Lewellen, Thesis Supervisor Brian Spangler Davis, Thesis Honors Advisor
Keywords:
Inflation Reduction Act Heat Pumps Solar Panels Price Elasticity of Demand Price Elasticity of Supply Linear Demand Equation Linear Supply Equation High-Efficiency Energy Appliances
Abstract:
This paper examines the contents of the Inflation Reduction Act (IRA) and the potential effectiveness of incentives put in place by the bill to motivate residential homeowners to retrofit their properties to be increasingly energy efficient. Specifically, the paper estimates uptake rates of high-efficiency energy products as outlined in the IRA using heat pumps as the primary proxy for other appliances included in the bill but also includes an abbreviated analysis on solar panels. The study uses a demand systems equation to estimate the effects of government subsidies and aims to identify how the IRA may affect uptake rates. The paper finds that the IRA will result in an annual increase of 260,551 in the quantity demanded for heat pumps and an annual increase of 210,000 in the quantity demanded for solar PV systems. However, the incentives as outlined in the IRA will fall significantly short of the White House’s projected effects. More specifically, the White House estimates 7.50 million new solar PV installations as a result of the bill, whereas this analysis suggests it will be closer to 2.10 million.
