Aligning climate and accessibility goals can save states billions
The following is an article written by Arjun Makhijani, President of the Energy and Environment Research Institute, and Boris Lukanov, Senior Researcher at PSE Healthy Energy.
One in three American households – about 40 million in total – face the persistent, difficult and fundamental challenge of paying their energy bills and paying for other essentials like food, medicine and rent. Utility bills have gone up, as have gas prices. Russia’s invasion of Ukraine and associated sanctions added high volatility to oil prices. Large, even temporary increases can have long-term negative effects on low-income households, as evidenced by the fact that more than a third of adults cannot easily afford an unexpected $400 expense.
A pressing question posed by the climate imperatives is: will the transition to fossil fuels increase the burden of energy costs or can it be managed in a way that increases energy affordability? Nearly half of all U.S. states have set legal targets to increase the share of clean energy resources and reduce greenhouse gas emissions, but few of these policies directly address long-standing concerns about energy affordability. and energy equity. Our recent study, prepared for the Colorado Energy Office by researchers from PSE Healthy Energy and the Institute for Energy and Environmental Research, provides the most comprehensive analysis to date of energy cost loads – a key metric for measuring energy affordability – and outlines strategies to meet state emissions goals while reducing the cost of residential energy for low- and middle-income households.
Our conclusion: Prioritizing investments in populations overburdened by energy costs can help states meet their emissions reduction goals while saving billions of dollars. These savings result from a significant expansion of energy efficiency, electrification, community solar and demand response programs for low- and middle-income households, reducing the total amount of direct assistance needed to making utility bills affordable for these households over time. The study also shows that an approach based on accessibility and equity more directly addresses long-standing social inequalities resulting from the use of fossil fuels, can more quickly reduce air pollution harmful to health and can accelerate the transition to clean energy, thereby benefiting society as a whole. including non-low-income households.
Our results contrast sharply with the conventional approach, which placed assistance on energy bills and climate-related investments on separate tracks. The result was that the assistance failed to make energy affordable and low-income households had limited access to the benefits of the clean energy transition. Moreover, unless the transition to clean energy directly corrects existing inequalities in the fossil fuel-based energy system, we risk exacerbating them. For example, as climate policies and market forces continue to drive clean energy adoption, wealthier households will tend to electrify their homes sooner. As they do, the costs of the natural gas system will be paid by fewer and fewer customers. Unless climate policies invest directly in electrifying low- and middle-income households early on, people at the lower end of the income scale will have to foot the bill for our legacy natural gas infrastructure.
Meeting Colorado’s Emissions Goals
Our goal was to design a strategy that would be fully compatible with Colorado’s emissions goals, while reducing energy costs to less than 6% of revenue for all low and middle income households in the state. To do this, we prioritized greenhouse gas reduction strategies that could simultaneously reduce the burden of energy costs. These strategies included the expansion of energy efficiency, electrification, community solar, and demand response programs for low- and middle-income households through a combination of grants and interest-free or low-cost loans. interest rate, with bill assistance being used only as a supplement, if necessary. . Once the investments have been made, the remaining need for assistance would be mainly at the lower end of the income scale. Other low- and middle-income households would not need any assistance with paying bills to achieve energy charges below 6% of income.
We found that fully integrating equity with climate change mitigation goals in Colorado would result in cumulative net savings of approximately $1.5 billion over a 20-year period compared to a 20-year approach. billing assistance only. The key to maximizing the effectiveness of these investments is to strategically target energy efficiency, electrification of heating, and access to low-cost community solar electricity for all low- and middle-income electricity customers.
In general, rural areas of Colorado have higher energy costs, especially in areas where propane is a common heating fuel; the electrification of heating, as well as the weatherization of buildings, would be a priority in these areas. Urban areas with a high fraction of Black, Indigenous, and People of Color communities would need increased investment in community solar gardens and energy efficiency to lower their energy bills. In addition, allowing low- and middle-income households, including tenants, to participate in demand response would provide them with the opportunity to further reduce their energy bills.
To achieve these savings, priority should be given to low- and middle-income households for energy efficiency and fuel switching programs. Instead of waiting for the cost of clean energy technologies to come down, we found it would be beneficial to invest in energy-burdened households from the start, recognizing that all households need to achieve increasing levels of energy efficiency. energy efficiency and electrification over the next few years. 20 to 30 years old.
Accelerating clean energy adoption for low-income households, renters, and people of color would help increase energy affordability sooner and reduce the need for utility bill assistance. energy over time, resulting in overall net savings. In practice, this will mean policies such as grants and low-interest loans, landlord incentives and Green Bank-funded loss reserves to enable low-income households to sign long-term contracts. term for community solar power.
Full integration of energy affordability into climate policy is a new approach, but our analysis shows that it supports greater social justice, emissions reductions and makes economic sense for society. in its entirety. Indeed, our research has found that a fairer approach to energy transition increases the overall financial benefits of greenhouse gas reduction policies. This is partly because lower-income households tend to live in less efficient structures and weatherization investments have greater potential for higher returns over time. Making energy more affordable through investment is also more politically sustainable than substantial increases in funding to help pay utility bills, which are typically difficult to sustain and vulnerable to cuts under adverse political circumstances.
The urgent need for a rapid transition to clean energy can and should be coupled with the longstanding problem of unaffordable energy faced by tens of millions of families. Our study shows that this is quite feasible and desirable. By investing in emissions reductions for communities facing the greatest difficulty in paying their energy bills, states’ climate goals can save taxpayers and ratepayers money and support a healthier and fairer energy system. .