The Indicator from Planet Money

Warming your house the green way just got more expensive

February 4, 2026

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  • The expiration of federal clean energy tax credits, which previously offered significant savings (up to $2,000 or 30% of the cost for items like heat pumps), is making green home upgrades more expensive for consumers, as highlighted in "Warming your house the green way just got more expensive." 
  • Critics argue that the expired tax credits disproportionately benefited higher earners who could afford to front the initial installation costs, suggesting a more efficient use of government resources would target lower-income individuals. 
  • Despite the federal credit expiration, the long-term trend favors renewable energy adoption, evidenced by heat pumps outselling gas furnaces for the fourth consecutive year and the potential for state-level rebates to continue incentivizing energy-efficient home improvements. 

Segments

Introduction and Setting Context
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(00:00:12)
  • Key Takeaway: The expiration of clean energy tax credits immediately impacts homeowners seeking greener heating alternatives like heat pumps.
  • Summary: The Indicator from Planet Money opens by framing the issue: consumers facing high energy bills might find green upgrades suddenly more expensive. This is due to the expiration of tax credits that previously saved thousands on items like heat pumps and insulation. The episode promises to explore the impact on homeowners, the renewables industry, and critics of the policy.
Heat Pump Cost and Tax Credit Mechanics
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(00:02:08)
  • Key Takeaway: A single heat pump installation could cost $10,000 out-of-pocket, which the federal tax credit reduced by up to $2,000 (30% of the cost) when claimed during tax filing.
  • Summary: The segment details the case of homeowners in Juneau, Alaska, installing a heat pump to move away from heating oil. The Biden-era tax credits, enacted under the Inflation Reduction Act, allowed taxpayers to write off 30% of the cost, up to $2,000, when filing taxes. These credits were scheduled to last until the 2030s but were sunsetted early by Congress, prompting immediate installation decisions.
History of Energy Efficiency Credits
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(00:03:59)
  • Key Takeaway: Energy efficiency tax credits date back to the 1970s Carter era, originally aimed at reducing reliance on foreign oil.
  • Summary: Tax credits for energy efficiency have existed since the 1970s, initially promoted by Jimmy Carter to combat the energy crisis by encouraging insulation and storm window upgrades. While home efficiency has improved, other factors like high energy prices and building codes also played a role. The current, broader credits under President Biden were enacted to push Americans away from fossil fuels.
Criticism of Tax Credit Distribution
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(00:05:36)
  • Key Takeaway: Critics, like those from the Competitive Enterprise Institute, argue the credits functioned as a tax break for higher earners who already had the capital to make efficiency upgrades.
  • Summary: Data from the Congressional Research Service showed millions used the credits in 2023, but over half of users earned $100,000 or more annually. This suggests the benefit required enough upfront money to purchase expensive items like heat pumps or solar panels. The Energy Efficient Home Improvement Credit cost the government over $2 billion in lost revenue in 2023.
Impact on Renewables Market
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(00:06:40)
  • Key Takeaway: The end of federal credits is projected to increase U.S. natural gas demand and prices by up to 7%, though the long-term shift toward electrification remains strong.
  • Summary: The renewable energy sector anticipates a market dip following the credit expiration, with one analysis predicting higher natural gas demand. However, experts remain optimistic because the residential energy market is structurally leaning away from fossil fuels, with over half of new 2024 homes built with all-electric heating. Heat pumps also outsold gas furnaces for the fourth straight year.
Alternative Incentives and AI Demand
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(00:07:46)
  • Key Takeaway: State-by-state rebates can significantly stack with prior federal incentives, and the rise of AI data centers creates a utility incentive to promote household energy efficiency.
  • Summary: Incentives like an EPA-funded program in Southeast Alaska offered up to $8,500 for heat pump switches, drastically lowering the final cost for some residents. Furthermore, the massive power consumption of AI data centers is pressuring utilities to seek efficiency gains from households to manage grid load. Analysis suggests meeting data center electricity needs is possible by investing directly in household upgrades like heat pumps and solar.