Finance
South Dakota opts out of Inflation Reduction Act energy rebates
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A handful of states have rolled out rebates to consumers who make their homes more energy-efficient, just months after New York became the first state to do so, in May.
Meanwhile, South Dakota officials in August declined the federal funding, which is tied to two new programs created by the Inflation Reduction Act, a landmark climate law enacted in 2022.
The IRA earmarked $8.8 billion for consumers via two Home Energy Rebates programs.
Consumers can access up to $8,000 of Home Efficiency Rebates, and up to $14,000 of Home Electrification and Appliance Rebates.
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Together, the two rebate programs aim to defray — or in some cases fully offset — the cost of retrofitting homes and upgrading appliances to be more energy-efficient. Such tweaks can help consumers cut their utility bills while also reducing planet-warming carbon emissions, officials said.
The two programs have varying rules that determine which consumers are eligible and how much money they can access. In some cases, rebates will depend on household income and a home’s overall energy reduction.
Nearly every state has indicated it will launch a rebate program for residents, according to a U.S. Department of Energy spokesperson.
State officials had an August deadline to officially decline the federal funds. They have a Jan. 31, 2025 deadline to submit a program application to the DOE.
South Dakota is the only state so far to have signaled publicly that it won’t administer the rebates.
“With good faith, we did look into this,” Jim Terwilliger, commissioner of the South Dakota Bureau of Finance and Management, said during a July 30 appropriations hearing. “We just don’t believe that it’s the right thing for South Dakota.”
Here are the states that have applied
States, which administer the federal funds, have some leeway relative to program design. They must apply for funding and can distribute rebates to consumers after their application is approved.
New York launched the first phase of its rebates May 30.
Five others — Arizona, Maine, New Mexico, Rhode Island and Wisconsin — have since launched rebate programs, too, according to U.S. Department of Energy data as of Sept. 24.
“I’m expecting more and more to roll out,” said Kara Saul-Rinaldi, president and CEO of AnnDyl Policy Group, a consulting firm focused on climate and energy policy.
Many more states, as well as Washington, D.C., have submitted applications or had them approved, according to DOE data: California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Michigan, Minnesota, New Jersey, New Hampshire, Massachusetts, North Carolina, Oregon, Tennessee, Vermont, Washington and West Virginia.
Together, these 26 states plus the District of Columbia have applied for $4 billion in total funding so far, the DOE said.
The rebates are a new program, and “complex government programs like these take time and coordination to set up,” according to a DOE spokesperson.
“The Inflation Reduction Act put states in charge of designing and implementing Home Energy Rebate programs that fit their local needs,” the spokesperson wrote in an e-mail. “As each state has different resources and capabilities, each state’s timeline will be different.”
South Dakota is not participating
South Dakota Gov. Kristi Noem at the Republican National Convention on July 15, 2024.
Scott Olson | Getty Images News | Getty Images
However, South Dakota officials in August signaled they wouldn’t participate, the lone state so far to decline the federal rebate funding.
“South Dakota will have no part in facilitating the Green New Deal,” Ian Fury, a spokesperson for Gov. Kristi Noem, a Republican, said in an e-mailed statement.
States had an Aug. 16, 2024 deadline to officially decline the funds.
“We don’t think the administrative burden and the expense of administering a program like that is the appropriate thing to do, and we generally disagree with the policy,” Terwilliger, of the South Dakota Bureau of Finance and Management, said in a July hearing.
The Inflation Reduction Act allows states to use up to 20% of its funding for administrative purposes.
Fifty-one states and territories have applied to DOE for early administrative funding, the agency said.
The $68.6 million of federal money that had been set aside for South Dakota rebates will be redistributed among participating states.
Fury also noted this isn’t the first time South Dakota has rejected federal spending. It was the only state to reject extended unemployment benefits in 2020 during the Covid-19 pandemic, Fury said.
The Green New Deal is a climate-change policy initiative supported by congressional Democrats starting around 2019. Bipartisan legislation to create an energy rebate program had existed almost a decade earlier, like the Home Star Energy Retrofit Act in 2010.
The concept of consumer rebates tied to energy efficiency “predates the Green New Deal by many years,” said Saul-Rinaldi.
Florida reverses course
It appears Florida officials reversed course from their original stance on the rebates.
Republican Gov. Ron DeSantis in 2023 had vetoed the state’s authority to spend about $5 million of federal funds to administer the energy rebate program. At the time, a spokesperson for the state’s Department of Agriculture and Consumer Services told CNBC that Florida wouldn’t be applying for the rebates as a result.
Florida Gov. Ron DeSantis at the Republican National Convention on July 16, 2024.
Robert Gauthier | Los Angeles Times | Getty Images
Now, Florida is preparing for a soft launch of the rebate programs in late 2024 and a full launch in early 2025, according to information on a state website.
A spokesperson for the Department of Agriculture and Consumer Services didn’t return a request for comment on the change in position.
‘Every state is approaching [its program] differently’
At a high level, consumers will be able to get the rebates at the point of sale, when they buy an appliance directly from a retailer or from a qualified contractor who’s helping a household complete an efficiency project.
“Every state is approaching [its program] differently, for many reasons,” Saul-Rinaldi said.
Many are rolling them out in phases. For example, New Mexico is starting by offering a $1,600 rebate for low-income consumers in single-family homes who buy insulation from a participating retailer.
Similar to other states, qualifying New Mexico residents will be able to later access additional rebates such as:
- $8,000 for an ENERGY STAR-certified electric heat pump for space heating and cooling;
- $4,000 for an electrical panel;
- $2,500 for electrical wiring;
- $1,750 for an ENERGY STAR-certified electric heat pump water heater;
- $1,600 for air sealing; and
- $840 for an ENERGY STAR-certified electric heat pump clothes dryer and/or an electric stove.
Consumers and contractors should consult their state energy department website to learn more about their specific programs and eligibility, Saul-Rinaldi said.
The U.S. Energy Department suggests households don’t wait to accomplish necessary home energy upgrades or projects if their state hasn’t formally rolled out rebates. They may be eligible for other federal programs, “including tax credits, the Weatherization Assistance Program, and other state, local, and utility programs,” the agency said.
Cybersecurity and enterprise software stocks have been market dogs in 2026, with fears that AI will wipe out a wide range of companies in the enterprise space dominating the narrative. But they snapped a brutal losing streak this past week, joining in the broader market rally that saw all losses from the U.S.-Iran war regained by the Dow Jones Industrial Average and S&P 500.
Cybersecurity has been “a victim of some of the AI-related headlines,” Christian Magoon, Amplify ETFs CEO, said on this week’s “ETF Edge.”
It wasn’t just niche cybersecurity names. Take Microsoft, for example, which was recently down close to 20% for the year. Its shares surged last week by 13%.
A big driver of the pummeling in software stocks was a rotation within tech by investors to AI infrastructure and semiconductors and some other names in large-cap tech, Magoon said, and since cybersecurity stocks and ETFs are heavily weighted towards software companies, they were left behind even as those businesses continue to grow on a fundamental basis.
But Wall Street now has become more bullish with the stocks at lower levels. Brent Thill, Jefferies tech analyst, said last week that the worst may be over for software stocks. “I think that this concept that software is dead, and then Anthropic and OpenAI are going to kill the entire industry, is just over-exaggerated,” he said on CNBC’s “Money Movers” on Wednesday.
“Big Short” investor Michael Burry wrote in a Substack post on Wednesday that he is becoming bullish about software stocks after the recent selloff. “Software stocks remain interesting because of accelerated extreme declines last week arising from a reflexive positive feedback loop between falling software stocks and changes in the market for their bank debt,” he wrote.
The Global X Cybersecurity ETF (BUG), is down about 12% since the beginning of the year, with top holdings including Palo Alto Networks, Fortinet, Akamai Technologies and CrowdStrike. But BUG was up 12% last week. The First Trust NASDAQ Cybersecurity ETF (CIBR) is down 6% for the year, but up 9% in the past week.
Piper Sandler analyst Rob Owens reiterated an “overweight” rating on Palo Alto Networks which helped the stock pop 7% — it is now down roughly 6% on the year. Its peers saw similar moves, including CrowdStrike.
Performance of Global X cybersecurity ETF versus S&P 500 over past one-year period.
Magoon said expectations may have become too high in cybersecurity, and with a crowding effect among investors, solid results were not enough to to push stocks higher. But the down-and-then-back-up 2026 for the sector is also a reminder that when stocks fall sharply in a short period of time, opportunity may knock.
“Once you’re down over 10% in some of these subsectors, you start to see the contrarians start to say, ‘well, maybe I’ll take a look at this,'” Magoon said.
He said AI does add both opportunity and uncertainty to the cybersecurity equation, increasing demand but also introducing new competition. But he added, “I think the dip is good to buy in an AI-driven world,” specifically because the risks to companies may lead to more M&A in cyber names that benefits the stocks.
For now, investors may look for opportunity on the margins rather than rush back into beaten-up tech names. “I think investors are still going to remain underweight software,” Thill said.
But Magoon advises investors to at least take the reminder to keep an eye on niches in the market during pronounced downturns. “The best-performing are often the least bought and do the best over the next 12 months versus late-in-the-game piling on,” he said.
While that may have been a mindset that worked against the last investors into cybersecurity and enterprise software in mid-2025 when the negative sentiment started building, at least for now, it’s started working for the stocks in the sector again.
Meanwhile, this year’s biggest winner is also a good example of what can be an extended trade in either a bullish or bearish direction. Last year, institutional ownership of energy was at multi-year lows, Magoon said, referencing Bank of America data. “Reverse sentiment can be a great indicator,” he said.
But he cautioned that any selective buying of stocks that have dipped does have to contend with the risk that there is a potentially bigger drawdown in the market yet to come in 2026. That is because midterm election years historically have been marked by large drawdowns. “If you think it is bad right now, it could get a lot worse,” Magoon said. But he added that there’s a silver-lining in that data, too, for the patient investor. The market has posted very strong 12-month returns after midterm election drawdowns end. So, for investors with a longer-term time horizon and no need for short-term liquidity, Magoon said, “stick in there.”
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New innovation in the exchange-traded fund industry could come at a cost to investors during extreme conditions.
According to MFS Investment Management’s Jamie Harrison, ETFs involved in increasingly complex derivatives and less transparent markets may be in uncharted territory when it comes to violent downturns.
“Those would be something that you’d want to keep an eye on as volatility ramps up,” the firm’s head of ETF capital markets told CNBC’s “ETF Edge” this week. “As innovation continues to increase at a rapid pace within the ETF wrapper, [it’s] definitely something that we advise our clients to be really front-footed about… Lack of transparency could absolutely be an issue if we’re going to start seeing some deep sell-offs.”
His firm has been around since 1924 and is known for inventing the open-end mutual fund. Last year, ETF.com named MFS Investment Management as the best new ETF issuer.
“It’s important to do due diligence on the portfolio,” he said. “Having a firm that has deep partnerships, deep bench of subject matter experts that plays with the A-team in terms of the Street and liquidity providers available [are] super important.”
Liquidity as the real issue?
Harrison suggested the real issue is liquidity, particularly during a steep sell-off.
“We’ve all seen the news and the headlines around potential private credit ETFs. That picture becomes much more murky,” he added. “It’s up to advisors, to investors [and] to clients to really dig in and look under the hood and engage with their issuers.”
He noted investors will have to ask some tough questions.
“What does this look like in a 20% drawdown? How does this liquidity facility work? Am I going to be able to get in? Am I going to be able to get out? And if I’m able to get out, am I able to get out at a price that’s tight to NAV [net asset value], and what’s the infrastructure at your shop in terms of managing that consideration for me,” said Harrison.
Amplify ETFs’ Christian Magoon is also concerned about these newer ETF strategies could weather a monster drawdown. He listed private credit as a red flag.
“If your ETF owns private credit, I think it’s worth taking a look at, kind of what the standards are around liquidity and how that ETF is trading, because that should be a bit of a mismatch between the trading pace of ETFs and the underlying asset,” the firm’s CEO said in the same interview.
Magoon also highlighted potential issues surrounding equity-linked notes. The notes provide fixed income security while offering potentially higher returns linked to stocks or equity indexes.
“Those could potentially be in stress due to redemptions and the underlying credit risk. That’s another kind of unique derivative,” Magoon said. “I would very closely look at any ETF that has equity-linked notes should we get into a major drawdown or there be a contagion in private credit or something related to the banking system.”
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