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What is incentive stackability?

When energy incentives offered by various entities, such as federal, state, and local governments, utility companies, and other organizations, can be combined (or stacked together) to increase the overall value of the incentive for a single project or investment, we refer to the incentives as being “stackable.” The degree to which this is possible is what we call stackability.

By stacking these incentives, the total financial benefit becomes greater than what would be available from any single incentive alone. This combined approach can significantly reduce the upfront costs or enhance the return on investment for energy efficiency projects, renewable energy installations, or other energy-related improvements.

For example:

  • Federal Tax Credits: A homeowner installs solar panels and qualifies for a federal tax credit that reduces the cost by a certain percentage.

  • State Rebates: The same homeowner also qualifies for a state rebate that provides additional savings.

  • Utility Company Rebates: The local utility company offers a rebate for energy-efficient installations, which the homeowner can also apply for.

  • Local Government Incentives: Some local governments may offer further incentives such as property tax exemptions or additional rebates.

By combining all these incentives, the homeowner significantly lowers the total cost of the solar panel installation, making it a more financially attractive investment. However, there are nuances in the ways in which incentives can be stacked. We define some common nuances in the following ways:

  • Net Cost Limited: Individual program values can be added together as long as the total value of programs does not exceed the total project cost. This is the most common form of stackability.

  • Formula or Absolute Value Limited: Individual program values can be added together as long as the total value of programs does not exceed the maximum value established formulaically or set by the program administrator.

  • Disallowed: Individual programs may not be combined. This is often the case when incentive program funds are derived from similar pools of funding, such as ratepayer funds.

Key Points of Combining Energy Incentives:

  • Increased Affordability: Reduces the overall cost of energy projects.

  • Enhanced ROI: Improves the return on investment for energy-efficient upgrades or renewable energy installations.

  • Broader Adoption: Encourages more individuals and businesses to undertake energy-saving measures.

  • Maximized Benefits: Ensures that all available resources are utilized for maximum financial benefit.

The ability to combine energy incentives is crucial in driving the adoption of sustainable energy solutions by making them more economically viable for a wider audience. It’s why we’ve spent much effort in developing stackability as a core part of Pencil’s estimation engine – to reduce uncertainty and drive more adoption of technologies that are better for people and the planet.

To learn more and see how you can access our estimation engine within our web application and API, check out our products page.


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