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For Builders and Developers

There are several reasons for builders to be proactive in building more healthy, efficient, and electric new homes:

  • Many homebuyers want to purchase these types of homes.

  • Efficient, electric homes are only marginally more expensive to build, and there are utility and federal rebates to offset those costs.

  • Local building codes will require more energy efficiency and become increasingly more friendly towards electric space and water heating and all-electric homes.

These points were discussed at the recent “Colorado Electrification Leadership Summit” during the afternoon session. On the other hand, it may be a challenge to find HVAC subcontractors who are adequately trained to install variable speed, cold-climate heat pumps. Another approach is simply to install an efficient heat pump instead of the central AC system, along with a backup gas (or propane) furnace. Although not as optimal, more HVAC contractors will feel capable and confident in using this approach.

We describe the key features of healthy, efficient, electric new homes on this page, and we highlight several examples here.

Selling Points for Homebuyers

Healthy, efficient, electric homes offer the following benefits for homeowners:

  • Lower energy use for heating and cooling, lower energy costs, and reduced exposure to future gas price spikes.

  • Improved, energy-efficient ventilation, indoor air quality, and health and safety.

  • Excellent comfort and low noise.

  • Very low emissions of carbon and regional air pollutants.

Cost Comparison for Builders

These types of new homes cost about the same to build as conventional homes, as shown in the following table.

Initial Cost of Efficient, Electric Home vs. Conventional Home

(2000 sq. ft., 4 bedroom in Colorado Front Range, Eastern Plains and Western Slope – Climate zone 5)

Efficiency Level or HVAC Type

Initial Cost

Heat Pump Rebates to Builder

Final Cost Compared to Conventional Home

Energy Efficiency
Conventional home: assume complies with 2018 IECC
More efficient home: Energy Star new home certification in addition to IECC 2018 (1) About $5,000 – $8,000 more than IECC 2018 $2,500 federal tax credit for Energy Star-certified home, plus $500 utility rebate +$3,500
HVAC System Choices
Conventional: Efficient AC and gas furnace $22,000 (2)
Electric option 1: Ductless mini-split HP system $40,000, -$10,000 (no ducting) $2,400 +$5,600
Electric option 2: Cold-climate heat pump (HP) with electric strip $27,000 $2,000 +$3,000
Electric/dual-fuel option 1: Cold-climate HP with propane furnace $27,000 $2,000 +$3,000
Electric/dual-fuel option 2: Efficient HP with gas furnace $23,500 $1,500 +$0
Domestic Hot Water
Conventional: Energy Star gas water heater $2,000 $50
Electric: Heat pump water heater $3,500 $600 +$950
Electric: Standard electric water heater $1,800 -$150
Subtotal — Conventional vs. Electric option 2 and HPWH +$4,450
All-electric home bonuses: Avoided gas piping ($5,000) (3); Xcel Energy rebate ($10,000) (4) -$15,000
Total for all-electric — Electric option 2 with HPWH, Xcel territory, vs. Conventional -$10,550

Notes: 1) Note that due to the requirements of House Bill 22-1362, many local governments will adopt the 2021 IECC, plus electric- and solar-ready requirements, by July of 2026, eliminating the need for Energy Star certification. 2) Cost does not include ducting. 3) If the new home is all-electric, the avoided costs for gas piping will be about $5,000 per home. This applies to electric options 1 and 2, and the dual-fual option with propane. For a more detailed analysis, see this report, p. 15-17. 4) Xcel Energy will be offering a $10,000 rebate for all-electric new homes, starting in 2024, which will apply to electric options 1 and 2, with HPWH, plus induction/electric range, and EV-ready.

HVAC Design Options

There are several options for building these types of homes. Some options are more challenging and would require subcontractors who have received specialized training, for example installation of a cold-climate heat pump.

Ductless mini-split heat pump system

  • Eliminates the need for and cost of gas infrastructure.

  • No ducts – simplifies house infrastructure layout, provides more room for other needs and design priorities.

  • Simplifies and reduces time for HVAC system installation.

  • Highest energy efficiency of all heating and cooling systems.

Cold-climate heat pump with electric strip

  • Eliminates the need, cost of gas infrastructure.

  • Very low energy use for heating and cooling.

Cold-climate heat pump with propane furnace

  • Eliminates the need, cost of gas infrastructure.

  • Removes the need for electric strip heat and allows additional electric capacity  to be used for other electric requirements (e.g., EV charging).

  • Low annual propane use requires only 120 gallon tank which can also supply other amenities such as outdoor cooking and fireplaces.

  • Some customers and contractors are more comfortable with secondary non-electric heating option.

Efficient heat pump with gas furnace

  • Much lower energy use for heating and cooling than conventional system.

  • Easiest option for contractors to install (similar to conventional furnace/AC systems).

  • Avoids need for electric strip heat and allows additional electric capacity to be used for other electric requirements (e.g., EV charging).

  • Some customers and contractors are more comfortable with secondary non-electric heating option.

Heat Pump Water Heaters

Heat pump water heaters are very efficient, reducing energy costs and carbon emissions associated with hot water. For new homes, HPWHs can be successfully installed in basements, utility rooms, closets, etc., and we provide installation and technical guidelines here, as well as a summary of the costs and benefits.

Resources for Builders and HVAC Sub-contractors

Rebates and Tax Credits for Builders

Many electric utilities in Colorado, including Xcel Energy, Tri-State member co-ops, and Holy Cross Energy, offer rebates to builders for all-electric new homes. In addition, under the IRA, if the new home is Energy Star certified, the developer/builder can receive a tax credit of $2500. For a Department of Energy Zero-Energy Ready home, the developer/builder would receive a tax credit of $5,000.

  • Colorado Springs Utilities

    (See Builder Incentive Program.) Builders receive rebates for energy-efficient new homes, based on the home’s Home Energy Rating Score (HERS). The rebates are on a sliding scale: a home with a HERS rating of 60 qualifies for an incentive of $200, and a home with a HERS of 0 qualifies for $2,250. In addition, there are bonuses for additional home certifications or technologies:

    • $800 for Energy Star, SEER min. of 15 Heat Pump installed in place of Air Conditioning unit and integrated with Energy Star gas furnace for backup
    • $700 for Energy Star HPWH with UEF greater than 3
    • $2,000 for full electrification of home, which requires:
      • NEEP-listed Cold Climate Heat Pump (with no backup furnace)
      • Energy Star HPWH with UEF greater than 3
      • No natural gas connection
    • $350 for achievement of one or more of the following Home Building Standards:
      • National Green Building Standard
      • Leadership in Energy and Environmental Design
      • Passive House
  • Holy Cross Energy

    Holy Cross Energy also offers the same rebates for heat pumps and HPWHs in new single-family homes that it offers to homeowners for existing homes. For new homes, the rebates go to the builder. In addition, for multi-family new homes, Holy Cross has a custom rebate program, with rebate amounts based on specific factors such as costs and estimated fuel savings.

    Holy Cross and Tri-State co-ops’ rebates can be found on the Love Electric rebates page.

  • Tri-State Member Co-ops

    For new homes, Tri-State Member Co-ops can offer the same rebates for heat pumps and HPWHs as are offered for existing homes, but in this case the rebates go to the builder. For example, most Tri-State members offer rebates of $1800 for a “tier 1” heat pump 2.5 tons or greater. (Tier 1 means a minimum HSPF of 9.0 and minimum SEER of 15, but the heat pump does not have to be “cold-climate.”) In addition, there are two member co-ops, San Miguel and Mountain Parks, that are offering additional rebates of $1500 or more for all-electric new housing (single-or multi-family) for income-qualified customers (less than 120% of AMI). These rebates would also go to the builder.

  • Xcel Energy

    Xcel Energy offers rebates to the new home builder, based on the homes’ energy savings compared to the code requirements. For example, for an “all-electric” home that is at least 10% more efficient than the applicable code (2012 – 2018 IECC), Xcel provides a rebate of $500. (All-electric means the home has a heat pump for space heating and an electric water heater.) In addition, for a home at least 10% more efficient than the code, if the home has a qualified heat pump water heater, Xcel provides an additional rebate of $600 ($800 if it has a grid-controllable port for demand response). This additional prescriptive rebate also goes to the builder.

Building Codes & Additional Resources

Colorado Local Building Code Updates

Here is an excellent presentation on state and local building code requirements for energy efficiency, electric space and water heating, and electric-ready or electric-preferred requirements. (See presentation by Christine Brinker, second part of the pdf.)

The Colorado Energy Office maintains a current list of local building codes, including requirements for electric-ready and EV ready.

Energy Codes Training

The Colorado Energy Office offers free building energy codes training to building departments and stakeholders to support jurisdictions with adopting new codes.