America’s energy demand is soaring, driven by surging growth in AI, data centers, and manufacturing. Utilities are rushing to replace aging infrastructure and build costly, slow-to-deploy resources like gas and nuclear plants. But there’s one powerful solution—with technology that is ready and available today—that is currently under threat in the budget bill making its way through Congress: residential energy upgrades.

New analysis from Rewiring America shows that technologies supported by the Energy Efficient Home Improvement Credit (25C) and the Residential Clean Energy Credit (25D)—like heat pumps, insulation, and rooftop solar—could slash residential electricity demand by nearly half in some states.

This isn’t just good news for the grid. It’s a smart infrastructure investment that delivers long-term benefits to American families by way of lower bills and greater community and individual resiliency. 

Using all of the tools at our disposal is especially important as concerns grow over the effects of new data centers in communities across the country. Making residential investments core to the data center build-out is a way to lift all boats as policymakers and industry shape our collective energy future.

The hidden power of American homes

The calculation is relatively straightforward. These technologies reduce and shift electricity demand in key ways: weatherization lowers the energy needed to heat and cool homes, heat pumps replace inefficient electric resistance systems, and rooftop solar generates power on-site. Together, they form a powerful combination that allows households to play a leading role in meeting rising energy needs while saving money and improving comfort. 

Our analysis shows that upgrading homes in fast-growing states like Texas, Florida, and Arizona at scale could reduce residential electricity consumption by about half. That’s expensive electricity infrastructure we wouldn’t have to build and that ratepayers wouldn’t have to subsidize while seeing little else in the way of benefits.  

This analysis follows a previous Rewiring America report that looked specifically at the impact of 25C-specific technologies—insulation, weatherization, modern heating and cooling—on reducing peak demand. 

Many of the same states that would see a sizable reduction in overall residential demand also stand to benefit the most in terms of peak demand reduction, including Texas, the Carolinas, and Arizona. For these states in particular, this approach will relieve pressure on the grid year-round, including during those peak demand hours when it's most expensive to generate and deliver electricity.

Analysts warn that too many states are currently engaged in a “panicked rush to gas,” a high-stakes gamble to build out new gas plants that ratepayers have to cover regardless of how often the plants are used. And despite industry claims, gas plants are vulnerable during extreme weather events. If states and utilities want to meet rising demand and build resiliency without overburdening consumers, investing in residential upgrades must be part of the plan.

A growing cost burden

This demand-side approach is especially important amid rising energy costs. As the New York Times recently reported, communities near new data center developments are concerned that ratepayers will be saddled with the cost of power plant construction and grid upgrades. Residential electrification gives policymakers a more cost-effective, politically popular alternative to ease demand and keep household bills under control, while still enabling economic growth.

The problem? The very programs foundational to this investment—the 25C and 25D home energy tax credits, which states and utilities can build on with complementary efficiency programs—are now at risk in Congress. Lawmakers are debating a federal budget bill that would eliminate these credits, despite their popularity, bipartisan history, and proven benefits. Making rooftop solar more affordable is the surest way to lower bills for homeowners, but the bill would kill the rooftop solar industry boom in this country. 

America’s energy solution is already in progress. It’s happening on rooftops and behind front doors. Now we need Congress to keep it going.

The methodology and assumptions used in this analysis are available here. 

Read related Rewiring America analyses on 25C and 25D’s impact on jobs, household savings, and peak demand: 

• This tax credit is an essential tool to help meet growing energy demand

  • A new Rewiring America analysis shows how the Energy Efficient Home Improvement Tax Credit (25C) can reduce peak demand and free up additional capacity equivalent to hundreds of energy-intensive data centers.

• The small but mighty federal tax credit that supports 240,000 jobs nationwide

  • A new Rewiring America analysis shows how the 25C Energy Efficient Home Improvement Tax Credit drives consumer spending critical to supporting domestic jobs.

• Energy prices are going up and these two tax credits will deliver relief in every single congressional district

  • A new Rewiring America analysis shows how the Energy Efficient Home Improvement Tax Credit (25C) and the Residential Clean Energy Tax Credit (25D) can wipe out past and future energy price inflation.

• Millions of households are making these efficiency upgrades that keep contractors working and thriving

  • For homeowners, the 25C tax credit is a powerful way to boost comfort and cut energy costs. For contractors, it drives growth, jobs, and year-round demand.

1. Not included in this analysis is the impact of home batteries. Batteries would further enable homeowners and communities at scale to use energy when the grid is less stressed, i.e. off peak, and contribute to even greater resiliency, as evidenced in states like Texas.