Combating Energy Poverty in the U.S.

Energy justice and poverty have come to the forefront of public dialogue, and are part of long-standing inequities that continue to persist in the United States. In this country, a third of households find it difficult to afford the energy they need to heat and cool their homes, and to provide lighting and cooking. In response, federal and state agencies have turned increasing attention toward policies that might alleviate the energy cost burden.

Yet the success of these policies has been mixed, and in many cases programs that might reduce energy burden, such as through increased energy efficiency, have been shown to provide least benefit to communities that need them most. 

Tony Reames, leader of the Urban Energy Justice Lab at the University of Michigan and visiting scholar at the Kleinman Center for Energy Policy, discusses energy poverty in the United States and the challenge of effectively addressing the problem through public policy solutions. Reames also looks at the socioeconomic, racial and geographic underpinnings of energy poverty, and some of the historic factors that have contributed to inequities.

Full Transcript

Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone. Energy justice and poverty have come to the forefront of public dialogue and are examples of long-standing inequities that continue to persist in the United States. In this country, a third of households find it difficult to afford the energy they need to heat and cool their homes and to provide lighting and cooking. In response, federal and state agencies have turned increasing attention toward policies that might alleviate the energy cost burden. Yet the success of these policies has been mixed, and in many cases, programs that might reduce energy burden — such as through increased energy efficiency — have been shown to provide least benefit to communities that need them most.

On today’s podcast, we’ll look at energy poverty in the United States and at the challenge of effectively addressing the problem through public policy solutions. We’ll also discuss the socioeconomic, racial, and geographic underpinnings of energy poverty and some of the historic factors that have contributed to inequities. My guest is Tony Reames, an Assistant Professor at the University of Michigan and Leader of the Urban Energy Justice Lab. Tony’s work focuses on disparities in residential energy generation, consumption, and affordability. Tony is also a virtual Visiting Scholar here at the Kleinman Center. Tony, welcome to the podcast.

Tony Reames: Thanks for having me, Andy.

Stone: The issue of energy justice has gotten increasing attention, and that’s despite the fact that the issue really has deep historic roots. Why is energy justice getting more sustained national attention?

Reames: I think, as with everything, the pandemic has really highlighted a bunch of disparities, whether it’s geographic disparities, racial disparities, or age disparities. With energy, I think, the issue has come to the fore because everybody is at home, right? We have this shift in the energy burden from people going to school during the day, people going to work. Now everyone’s at home. Everyone’s on their computer, and so people are seeing increased energy consumption. And for people who were already struggling to pay their energy bills, the crisis has really heightened and highlighted that issue.

Stone: So your work at the University of Michigan and with the Urban Energy Justice Lab focuses on energy poverty specifically. How do you define “energy poverty?”

Reames: Under the broad umbrella of energy justice, we have a bunch of terms. I use “energy poverty” because it relates to this inability to adequately afford energy services, whether that means you don’t have access to different technology that can reduce your energy consumption and reduce your energy bill or that your energy cost is just too high, based on your income. There are different measures of energy poverty, whether it’s 10% of income, 6% of your income, but anything that seems like a larger proportion of your income is going to energy costs that make it unaffordable, that you end up forgoing basic necessities like food or medicine, or you cut back and keep your home at an unhealthy temperature. So there are some symptoms of energy poverty that we can use as proxies for understanding that people are suffering.

Stone: The data is pretty amazing. I wouldn’t have known this, okay? So in this country, a third of households, as I said in the intro, find it difficult to afford the energy that they need. Is that right?

Reames: Yes, the Residential Energy Consumption Survey is a survey conducted by the Department of Energy roughly every three to five years. Their last survey actually highlighted this issue of energy insecurity, energy poverty. And again, 33% of U.S. households face some form of energy poverty, whether it’s unaffordable energy bills, forgoing basic necessities like food and medicine, or keeping their home at an unhealthy temperature. And so when we think about that — and this was survey data from 2015 — we see additional studies during the pandemic that show that has just been exacerbated, and there are clear racial and socioeconomic disparities that show up with Black and Latinx households experiencing that at a high level when compared to white households. Older households experience energy insecurity and energy poverty at greater levels. And so again, this issue has been heightened by this economic and health downturn that we’re experiencing.

Stone: One of the themes that comes through on your research is that energy poverty is often tied to certain places or neighborhoods, right? And it tends to occur in clusters. You’ve looked at energy poverty neighborhoods in Kansas City and in Detroit. What commonalities have you found?

Reames: I’d like to say I’m not a geographer, but I play one in my research because I recognize that there is this importance to place — where people live, how those places developed over time. There are some clear connections that people are starting to look at between historic red-lining that segregated people by race and the persistence of income segregation, where you have clusters of low-income households. And what you see is that in those areas of higher minority populations, higher low-income households, there is a confluence of challenges that are centered a lot on the housing consumption, and so you see inefficient housing, inefficient technology and appliances in the houses that cause people to waste energy or use energy less efficiently, which then drives up your energy costs.

So you can begin to kind of map out things like which stores have LED bulbs, something as simple as that. Or what the cost is of LED bulbs in certain communities and see how place is tied to a lack of access to energy efficiency, tied to energy inefficient homes, and also tied to shut-offs and high-energy burdens. And so all of these things can be tied to place. In my research, I usually call for a targeted place-based approach to solutions.

Stone: I just want to make sure I understand. So we’re talking about older neighborhoods, so I’m assuming that’s older housing stock, less efficient housing, less well insulated, and you also mentioned the access to lighting. Can you tell me a little bit more about that?

Reames: Yes, so as you say, if we can look at the time period that homes were built, and we know that neighborhoods were built around the same time. So in an area, those homes were built under certain building codes. If they haven’t been upgraded or renovated in recent time, which is pretty common when you have lower incomes, because people have less disposable income to do that, you’ll see clusters of housing that’s inefficient. And if people have low incomes, then you see clusters of high energy burdens or high energy poverty.

The light bulb study, interestingly enough, we did in and around the Detroit area because people say, “Well, why don’t low-income people just buy the most efficient technology?” And so we wanted to see — do low-income households in their community have access to something as simple as an LED bulb? What we found was that stores in poor neighborhoods may or may not have LED bulbs at all on their shelves, and if they did, they were two times the cost that they were out in the suburbs in higher-income areas that had the advantage of stores like Walmart and Target and Home Depot and Lowe’s that aren’t located in many of our urban cores.

Stone: So these are kind of like food deserts, but they’re hardware store deserts in a sense.

Reames: Yes, or you could call it “energy efficiency deserts,” because the technology just isn’t in stores where people live, and so if you don’t have a car or you don’t have the funds to pay for delivery, it could be very difficult to get a new, highly efficient dishwasher or a refrigerator because it’s not in your local store.

Stone: Or if it is, it sounds like it’s going to be more expensive.

Reames: It’s more expensive, yes.

Stone: It’s interesting because you have this metric that you use in the research that you’ve done. It’s called the “energy use intensity.” Basically what we’re seeing is that not only are the energy bills a higher portion of the income and the expenditures for low-income families, but the houses are less efficient, so their energy use intensity, the amount of energy they use to do the same task is actually higher, which adds to the burden — if I understand that correctly.

Reames: That’s correct. Energy use intensity is a metric that’s used to compare energy consumption across countries, and so a lot of times that’s measured per capita or per population of a country. So it stuck out to me as something that we could compare apples to apples because right now, if you look at consumption, just general consumption, what you find is that on average low-income households, often households of color, actually consume less energy, so let’s say less kilowatt hours, not as much electricity when compared to white households or higher-income households.

And so when we target energy efficiency programs most often, we target highest consumers, and so inherently, those programs are going to be racially and income biased to white households and higher income households. But the energy use intensity metric allows us to say, “Okay, for the same size of home — so dividing by square foot — how much energy are homes consuming per square foot?” And that’s where you see those numbers flip, where households of color, lower-income households, older householders have a higher energy use intensity, so they’re using less energy, but they’re using that energy less efficiently. And that’s where you cause problems with affordability.

Stone: To take that to the next step, then, as you just alluded to, one means of reducing the economic burden of energy is to improve energy efficiency, right?

Reames: Right.

Stone: So you’ve looked at energy efficiency programs, and you’ve found, as you just began to talk about, that they have been much less helpful in reducing the energy cost burden in low-income communities than in communities that are better off economically. Can you tell me a little bit more about why that is?

Reames: Yes, this is why, Andy, an equity lens is so important to program development and program implementation primarily. Again, a lot of our energy efficiency programs have been mandated or designed to reduce energy consumption. So just how many kilowatt hours can you save so we don’t have to build as many power plants? And to get to that target, we need to go after the highest energy consumers, right? And so there’s an inherent flaw in that type of approach because again, it does target people who consume more, which are often people who live in larger homes, have more gadgets, have more luxury to consume more energy.

And so now we see that states are including low-income carve-outs in their energy efficiency programs because there’s a recognition that these programs don’t serve the people who need it the most or the people who are actually living in the most inefficient housing. So whether you do that by a place-based approach and target certain neighborhoods or zip codes, or whether you do that with some racial equity lens and target minority populations, communities with higher minority populations, or have a senior carve-out program, or a renter program — because again, these are all sociodemographic characteristics that we know are associated with higher energy burdens and higher inefficiency.

Stone: Can you tell me a little bit more about what these carve-outs look like?

Reames: Yes, we did a project where we wanted to look at utility-sponsored programs or utility-funded programs. When I say “utility-funded,” it’s usually the large utilities funded by a rate-payer, so we all pay for these programs. If everybody looks at their bill, they’ll see a charge somewhere on the bill for an energy efficiency program in their state. And so if we take a state like Michigan that says, “X% of your dollars that you collect from your rate payers to fund all types of energy efficiency programs, whether it’s rebates on light bulbs or rebates on efficient appliances, some of that money should go to low-income households, people who make 200% or less of poverty.”

Some states say what that percent should be, so 10% of that money should go to low-income households. Some states say it should be proportionate to the amount of low-income households in their serviced territory. And so we wanted to see how well utilities across the country are doing, so we created this energy efficiency equitable baseline tool that’s on our website UrbanEnergyJusticeLab.com. You can click on your utility and see how well your utility is funding its low-income population based on the proportion of low-income population in the serviced territory. Some are doing great; some are not. I think that is the challenge to push utilities to think about how to serve the population that is most in need and ensure that they’re benefiting from the programs that they’re paying into.

Stone: I want to jump into that metric that you just mentioned. It’s a bit of a mouthful, the Energy Efficiency Equitable Baseline. And what that does, per my understanding, is it essentially measures the extent to which energy policies offer equal benefit to consumers, regardless of their economic level. So what this measures, then, is kind of the bottom line. What does it tell us about how much investment in efficiency needs to be directed towards communities where energy poverty is common? You hinted that it’s more, but can you give us a little bit more? Actually, there is a very interesting metric I want to bring up before I jump away from that. In some of these energy waste reduction programs that you’ve talked about, the benefits were almost ten times greater for higher-income households than low-income households. So there’s a huge gap that’s there. How do you direct enough funding to the lower-income communities, that they get the same proportional — at least the same proportional benefit — out of any policy program that the higher income groups would get?

Reames: Yes, that’s a really great question, Andy. We’ve come up with E3D for short. Again, we use this terminology baseline because when we talk to advocates about this metric, they didn’t want utilities to see it as a ceiling, right? If 40% of your population in your utility territory is low income, we wanted to see if 40% of the energy efficiency investment was spent on low-income households. Again, that’s a baseline.

As I mentioned earlier, the lowest-hanging fruit are people who have the time and resources and capacity to recognize that these programs even exist. I don’t know how many people actually look at their utility bill and look at all the different fees and charges that are on there, outside of what’s the bottom line number.

Stone: I work in energy, and I don’t look at it.

Reames: Yes, for a long time I didn’t either, until I started studying this and having students bring in different utility bills from across the country to talk about how they look. And so recognizing that, “Oh, my state has a state-mandated energy efficiency program that I pay .001% of my energy costs into each month,” that ends up collecting millions of dollars that are then distributed through all these different types of programs. So it may come in the bill or it may be on the utility’s website to find out what you can participate in, but again, you have to have the resources and capacity to go out and seek that or be able to pay attention to it, to be able to wait for a rebate if it’s a rebate, so pay the upfront costs and then wait to be reimbursed at some later time. And so what you see in a lot of communities now is partnering with trusted partners, whether that’s community-based organizations or energy service providers that are in the community.

There’s a company in Detroit called Walker-Miller Energy Services, an African American woman-owned company, and they are a great community partner for our utility here in Michigan, DTE. And they do neighborhood campaigns. They go to neighborhoods. They have something they call the “Front Porch Initiative,” where they were going to people’s front porches and talking to them about energy efficiency, primarily in low-income and African American communities. They find interpreters for some of our Arabic communities and Latinx communities, because if you don’t go to people, it’s really hard for them to find this information on their own. It’s trying to figure out how you wade through that. So people who, again, are paying into these programs can actually reap the benefit.

Stone: There have been programs as well that offer tax incentives and rebates for energy efficiency upgrades, but my understanding is those also aren’t particularly helpful for the neighborhoods that we’re talking about. Is that right?

Reames: That’s so true. If you look at who benefits, especially from the energy efficiency in our federal tax code, you have to reach a certain level of tax liability to be able to benefit from those opportunities. So if you don’t make a ton of money, and you don’t spend a ton of money on energy efficiency, then it’s highly unlikely that you’ll be able to participate.

Luckily for low-income households, we do have programs like the Weatherization Assistance Program, which started in the ’70s and so this is our nation’s longest running federal energy efficiency program for low-income households. There are often long wait lists across the country for the program, but if you are fortunate enough to participate, it really brings down people’s energy costs. It makes their homes more healthy, more efficient by sealing windows or replacing windows, new insulation, new HPAC systems. And so that’s really one of the shining lights in our energy efficiency safety net system. I hope over time we’re able to expand that program to more households and see it as part of our infrastructure plan. How do we go through, create jobs, to weatherize and make tons of homes energy efficient? And so homes are good, then, for twenty years. And in twenty years, we do this process again, where we go through and improve the infrastructure of our housing quality.

Stone: It’s interesting because that’s a federal program that you’ve just brought up, so I want to jump to the big news these days, and that’s Biden’s 2 trillion-dollar infrastructure plan. As part of that plan, 40% of clean energy investment would be directed towards low-income communities. In your view, if you were to talk to the people who are going to write those laws, what would be the best way to direct that money?

Reames: Yes, I’m pretty excited about this idea to actually look at our nation’s housing infrastructure. Again, this idea is to think about housing as infrastructure. I’m a former civil engineer and did a lot of storm water design, storm water review, road plans. In local government, that’s what we did. You had a five-year capital improvement plan. Sometimes it was longer than that, but you knew where your old roads and pipes were, and so each year that plan was updated as you replaced pipes and streets. And so let’s do the same thing with housing, and let’s use some of the characteristics of place, again, like I talked about — places with high minority populations, places with high low-income households, places that have borne the burden of our energy system, so they’re over-polluted, or they have Superfund sites. How do we target those communities so that the people who are living there can now breathe fresh air inside their homes, and they can live in them more comfortably?

And this is also a climate adaptation plan, right? As the temperatures get warmer, or we see extreme winter temperatures such as what happened in Texas a few weeks ago, shutting down their power system, if people’s homes are more efficient, you wouldn’t have people freezing to death inside their homes. And so again, this can touch so many levels and areas of how we move forward as a country on environmental justice, on energy justice, on climate justice.

Stone: Are there programs — we just talked about some federal programs and some federal targeting of money — but are there programs at the state or local level that have been really, really successful at targeting energy poverty in low-income and minority neighborhoods? Are there any good examples that we should take note of here?

Reames: Yes, a couple I like to always talk about is — there are definitely some learnings from our last economic recession, billions of dollars into programs that focused on environmental sustainability. And so 5 billion dollars went into the Weatherization Assistance Program, this federal low-income community efficiency program that usually gets around 200 million dollars maximally. In 2009, 5 billion dollars went into that program. So again, think about doing a massive push for energy efficiency.

There was a project in Kansas City called the Green Impact Zone, which really took a community-based approach to working with neighborhoods to get homes signed up, to work with landlords who often don’t participate in these types of programs to make people comfortable with having contractors come in their house. So what you saw was that people wanted to know, like, “Oh, my neighbor is getting something done to her house. What’s going on? I want to do the same thing,” and sharing information between communities, having weatherization house parties where people would come over and show off their new furnace. So those types of community level, community-based opportunities to say, “We’re going to take this block, and we’re going to weatherize every house on this block, and we’re going to make this block an example for what could happen in the next block and the next block.”

I think if Biden creates his Civilian Conservation Corps, this massive workforce of people ready to create local labor, local projects that stay within communities, I think we’ll be off to a great start.

Stone: I just want to jump in here and ask you a statistical question. When we’re talking about weatherization and energy efficiency improvements in households, what kind of cost savings can we really get? What’s the percentage, and how much does this really impact people who are really struggling to pay their bills? Does it make it significantly easier? Does it get them over the hump, or is it still a challenge?

Reames: We see numbers from the federal program that say people saved 300 to 500 dollars a year, and we’re talking about households that spend 10 to 30% of their income on energy costs. So a 300-dollar savings is huge, especially if you aren’t putting any capital costs into those upgrades. And again, that can last for fifteen to twenty years. So 300 dollars to a household that’s at 200% of poverty for the next fifteen or twenty years — that’s a huge savings.

Now these programs should also be combined with any type of rate design. You know, a lot of people are thinking about, “Can we have income-based rates?” And so can a state set a target and say, “No one in my state is going to pay more than 10% of their income for energy costs.” And thinking about what the paperwork looks like, that —

Stone: That would be like a sliding scale?

Reames: Yes, yes. And I know there are some pilots. I’m blanking on who’s doing that now, but I know there are some pilots trying to test this out. But those types of programs have automatic discounts for households 65 and above. So combining the payment and rate structure with the energy efficiency, other people are asking for forgiving arrearages during the COVID period because people are racking up massive utility debt. So again, there’s not a silver bullet for this program, but I think we need a comprehensive energy poverty strategy that can get everybody on the right path.

Stone: One other element here that we haven’t really jumped into yet is the potential that renewable energy, community scale, distributed scale — for example, solar — can have to reduce energy costs. Last fall I had a guest on this podcast, Sara Bronin. She’s a Professor at the University of Connecticut, and she talked about how challenging it can be to develop clean energy such as, for example rooftop solar in older and urban neighborhoods. Have you experienced this in the neighborhoods that you’ve seen, Kansas City, Detroit, elsewhere?

Reames: Yes, that is a really good point. I talked about housing equality, right? One of the barriers, once you get beyond the cost of renewable energy, one of the barriers is roof space and roof quality — roof condition. And so we know that if houses are already suffering from deferred maintenance, you end up having older roofs, and so you have to replace the roof before you can install any solar, which could be expensive. You also have electrical system challenges in older housing. So yes, solar in older communities, in lower-income communities can definitely face a ton of barriers. But that shouldn’t keep us from implementing it. I’m just finishing up a study now that uses some data from the National Renewable Energy Lab to measure the solar suitability of homes across the country or areas across the country. And what you find in low-income communities and communities of color, 80 to 90% of the homes actually are solar suitable, based on the size of the roof, the tilt of the roof, and solar radiance. And so solar potential is actually there.

When you dig down, there are other things that we have to do to make that possible, but trying to think about community solar which removes the barriers of the roof and allows people to subscribe to a solar farm that may be in the neighborhood or may be outside of the neighborhood is another opportunity. So you look at programs like D.C.’s Solar for All, a very dense city with limited open space, but they’re doing a mix of rooftop solar and community solar particularly for low-income households.

Illinois is doing the same thing. They have a Solar for All program, and they’re targeting environmental justice communities, saying that 20% of all solar development must happen in environmental justice communities. California has had their solar affordable single-family housing program for years. When you see non-profits like GRID Alternatives putting solar on low-income households, calling it a JOBS program and an energy justice program —

Stone: What is that GRID Alternatives?

Reames: It’s called SASH, the Solar Affordable Single-family Housing program, and it’s funded by the investor-owned utilities there to actually cover the cost of low-income solar for customers that are at 200% of poverty.

Stone: Let me ask you a final question, if I may. You’ve noted in your research that many of the people who develop and write policy for energy efficiency programs, et cetera, focus broadly on economics but may not be attuned to the challenges surrounding energy justice specifically. Can you tell me a little bit more about that and what recommendations you may have to address this?

Reames: I think the lack of an equity lens inherently creates disparities in the development and the implementation of policies and programs. I talked earlier about looking at consumption numbers, versus energy use intensity. When you look at consumption, again, you’re comparing apples and oranges. But when you normalize it by square foot, then you’re able to see the true disparities that exist and create burdens for households of color, low-income households, renters, and seniors.

I think there’s this concept of recognition justice, where you recognize the needs or the varying needs of different populations. We don’t collect enough data on this, so we don’t know if, on a broad scale, if African American households are suffering more than white households or if low-income white households in Appalachia are suffering more than other households. So getting to some way to collect data, I think is key, and then still protect people’s privacy.

Coming up with metrics that we want to measure and trap over time, for us to know that we’re actually moving forward in an equitable and just manner, I think is key. So there are no real metrics in the energy efficiency, clean energy space to say, “Where are we right now?” — on some playing field, as far as equity in the space. Where do we want to go, and how do we get there? So we’re fortunate in the Urban Energy Justice Lab to have some funding from Energy Foundation and Joyce Foundation out of Chicago to try to create this through a collaborative process with different stakeholders, to say, “What should we be measuring, and where do we want the clean energy industry to go to ensure that it is equitable and just?”

And then lastly, I think if I had a magic wand, that the country would come up with some energy poverty strategy. Again, that includes those metrics that say, “Here’s where we are. We know households are struggling. We know households don’t have access to efficiency through renewables, and here’s how we get there.” We’re going to work on affordability first. Then we’re going to go through and weatherize and make homes more efficient. And then we’re going to set a plan to do this again in fifteen years, and then in fifteen years after that, and really just get us on a path to energy security for all households.

Stone: Tony, thanks very much for talking.

Reames: It has been great talking to you, Andy. Thank you for having me.

Stone: Today’s guest has been Tony Reames, Leader of the Urban Energy Justice Lab at the University of Michigan. For more energy policy conversations and news, visit the Kleinman Center for Energy Policy’s website, where you’ll find research, blog posts, and online events on a range of energy policy topics. For updates from the center, subscribe to our Twitter feed. Our handle is @KleinmanEnergy. Thanks for listening to Energy Policy Now, and have a great day.