Power For The People: Overcoming Barriers To Energy Efficiency For Low-Income Families

Editor’s Note: This column comes to us as a cross post courtesy of Center for American Progress. Author credits for the column go to Jorge Madrid and Adam James.

Energy efficiency upgrades to low-income homes help struggling families use less energy and lower their utility bills while still meeting their daily energy needs. A family living in an older home, for example, could cut their yearly energy bill in half with a full home weatherization.

Despite the clear benefits of energy efficiency upgrades, only a small portion of America’s low-income homes, which qualify for assistance based on the Department of Energy’s weatherization metric, have been retrofitted with such upgrades to date. Why is this the case?

image via Shutterstock

In this issue brief we will examine three barriers to weatherization in low-income communities and discuss three strategies to unlocking widespread energy efficiency in low-income households, among them:

  • Generating greater access to energy-efficient products
  • Paying for the purchase and installation of these products
  • Boosting demand for energy-efficient upgrades through innovative community outreach and education programs

Clearly identifying and overcoming barriers is crucial to expanding the use of energy-efficiency programs and measures in low-income communities. While the strategies discussed here are not necessarily the definitive answer to overcoming all barriers—other effective programs certainly exist—they nonetheless represent a crucial and much-needed step forward.

Barriers to energy efficiency

The average low-income household in the United States spends upward of 15 percent to 20 percent of their total monthly income on energy costs—money that could otherwise be used for groceries, education, health care, or other basic necessities.

A recent USA Today article notes:

Households paid a record $1,419 on average for electricity in 2011, the fifth consecutive yearly increase above the inflation rate. The jump has added about $300 a year to what households pay for electricity. That’s the largest sustained increase since a run-up in electricity prices during the 1970s.

In light of these high costs and the fact that low-income families are financially hard-pressed in our struggling economy, energy efficiency should be a priority for states and cities. Unfortunately, some formidable barriers stand in the way of significantly increasing the number of homes retrofitted with energy-efficiency upgrades.

Cash flow, capital costs, and financial incentives

For a family struggling to get by, retrofits requiring major capital costs upfront are off the table, even if it meant saving money in the long run. This lack of short-term cash flow represents the first major barrier to adopting energy efficient upgrades in low-income communities.

A second barrier compounding the cash-flow problem is the issue of split incentives for families who rent their homes. Specifically, building owners don’t make efficiency investments because it’s the renters who pay the energy bills. Conversely, renters aren’t likely to make investments in property they don’t own.

What’s more, even if renters did desire to take on the costs themselves, they are at a significant disadvantage when it comes to securing financing for large capital projects. The reason: They usually don’t have the equity to leverage such as owning a home.

Information and outreach

A third barrier is the dearth of information and outreach needed to educate communities about available avenues for low- or no-cost weatherization services. A number of case studies and analyses of low-income weatherization programs, including one by Lawrence Berkeley National Laboratory, note a lack of demand from consumers, even those who qualify for low- or no-cost energy-efficiency assistance.

These case studies note similar information and outreach barriers, including customers being unaware of the service due to insufficient marketing; the application and paperwork being too complicated to navigate; and a pervasive sense of mistrust among low-income families toward their utility company and its representatives, and toward individuals selling energy-efficiency serviceswhat Lawrence Berkeley Labs calls “a lack of trusted messengers.”

Credible solutions

While the aforementioned issues are formidable barriers to deploying energy efficiency in low- income communities, we propose a suite of solutions that can bridge the financial and information gaps. They include generating access through financing and through community outreach and education. Let’s consider each in turn.

Generating access through financing

The Weatherization Assistance Program, or WAP, has been around since 1972 and is the traditional method for financing low-income home energy-efficient retrofits. WAP channels federal appropriation dollars into state programs, which in turn fund individual home weatherization programs for those who qualify.

While this program was underfunded and saw only meager growth over the first several decades, it has experienced a period of great expansion in the past few years after receiving $5 billion in funding through the American Recovery and Reinvestment Act. In 2010 homes that benefited from the Weatherization Assistance Program across the country saved $2.1 billion for low-income families, including $437 on heating and cooling costs alone for individual households per year. More than 600,000 homes to date have been weatherized with Recovery Act funding, and more than 788,000 have been weatherized, when including the money given to WAP through annual appropriations.

As we have argued before these numbers stand in stark contrast to those of critics of the program. With the cost of weatherization clocking in at a modest $6,500 per home, and the multitude of environmental and economic benefits that energy savings brings, the Weatherization Assistance Program has been a resounding success.

Still, with an estimated 38.6 million American households still eligible for weatherization services, and factoring in that we as a nation are still spending about $231.1 billion annually for residential energy use, it is clear that there is plenty more work to be done. And while the Weatherization Assistance Programis making meaningful strides in penetrating the market for low-income homeowners, renters are unfortunately still literally being left out in the cold since the program is mostly used by homeowners (see the “split incentive” barrier above). The renter population is a crucial demographic to assist, with 18 millionvery low-income people (50 percent of the median) in the United States renting—representing an increase of almost 2 million renters in six years.

The Center for American Progress is an independent nonpartisan educational institute dedicated to improving the lives of Americans through progressive ideas and action. Building on the achievements of progressive pioneers such as Teddy Roosevelt and Martin Luther King, our work addresses 21st-century challenges such as energy, national security, economic growth and opportunity, immigration, education, and health care. We develop new policy ideas, critique the policy that stems from conservative values, challenge the media to cover the issues that truly matter, and shape the national debate.