Low-income families don’t get a fair share of energy-efficiency funds

Electric and gas utilities across the country have a bevy of energy-efficiency programs to help families reduce their energy bills.

But the programs are disproportionately leaving out low-income households (defined as those with incomes at or below 200 percent of the federal poverty guidelines), according to a recent report by the American Council for an Energy-Efficient Economy, an industry research nonprofit. While approximately 27.5% of all U.S. households fall into the low-income category, utilities are only spending about 13% of their energy efficiency budgets on this demographic.

“So these households are…not receiving quite their fair share of total spending,” said Steven Nadel, executive director of ACEEE and co-author of the report. ACEEE surveyed the programs of 97 utilities serving the 100 largest metro areas in the country and drew on 2019 figures for the study.

Low-income households tend to have high energy burdens, meaning that a large proportion of their income goes to paying for energy. According to 2020 ACEEE statistics, the median U.S. household spends 3.1% of their income on energy, while the median low-income household spends more than double that: 8.1% of their income.

“Their budgets are tight. And it’s very important that they try to keep their energy costs to affordable levels,” Nadel said. Otherwise, they might be forced to make incredibly hard choices, Nadel said, such as, “‘Do I pay the utility bill? Or do I buy food? Or do I buy medicine?’”

So why do lower-income families get a comparatively smaller slice of the pie when it comes to energy-efficiency program funding? Nadel says it’s a complex problem that encompasses a number of factors.

A major pitfall is that utilities aren’t spending enough, Nadel said. Utilities and their regulators can be reluctant to increase program budgets because utility customers pay for them via their monthly bills, he added.

Moreover, low-income programs tend to be relatively expensive per kilowatt-hour saved. Cash-strapped households need more financial help to make energy efficiency improvements, while higher-income households can pay more out of pocket for them.

Utility energy-efficiency programs provide a range of services with widely varying costs per household served. For example, a program can give out LED light bulbs and weatherization kits with, say, $40 worth of easy-to-install items such as rope caulk, low-flow shower heads and plastic storm window inserts, Nadel said.

Because they’re low-cost, these ​“shallow” measures can reach many people. That is useful, Nadel said. ​“But ultimately, we need to provide much deeper services for these [lower-income] households.”

That means whole-home weatherization retrofits. Shallow measures might save a household up to 5% on their energy costs, although Nadel called that estimate ​“generous.” But deep retrofits can save households 20% to 30%, he said.

The cost for these more comprehensive services will vary widely, but ACEEE pins the average at roughly $6,000 per low-income household. Actual utility spending on low-income households that participated in energy savings programs in 2019 fell far short of that, at just $2,059 per residence.

The report offers several recommendations to help utilities make their efficiency programs more accessible to low-income households.

First, utilities should dramatically increase their program budgets (for investor-owned utilities, this step entails securing the approval of their regulators, public utility commissions). Spending would need to grow sixfold to provide all eligible low-income households at least $4,000 in energy-saving measures in the next 20 years — ​“an aggressive but feasible timeline” according to ACEEE’s press release.

Second, utilities should coordinate with complementary programs, including federal funding sources administered by state and local agencies. Programs include the federal Low Income Home Energy Assistance Program, Weatherization Assistance Program and even sometimes Medicaid for ​“households where it can be demonstrated that weatherization will reduce medical costs,” Nadel said. For example, weatherization can cut the creep of mold, which can cause or exacerbate asthma symptoms. (ACEEE has more on the use of Medicaid funds for home weatherization measures in this 2020 report.)

And lastly, utilities should work with partner organizations based in the community. These groups can let their neighbors know that energy-saving resources are available to them, as well as help implement these programs.

One such partnership is that of Commonwealth Edison and the nonprofit Elevate in Illinois. Together, they created the Multi-Family Energy Savings Program, which has installed insulation, air sealing, and efficient heating and hot water systems in thousands of units in multifamily buildings, according to ACEEE.

Nadel added that it’s important that utilities regularly evaluate their programs and track key metrics — such as how many households they’re serving and how much those households are saving — so they can improve their efforts.

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