A quarter of all U.S. households and two-thirds of low-income households have high energy burdens, meaning they spend more than 6 percent of their annual income on energy costs, and two out of five low-income households have severe energy burdens, meaning that they spend more than 10 percent of their income. The national average energy burden for low-income households is 8.6 percent, according to the Department of Energy.
These energy burdens weigh especially heavily on Black, Hispanic and Indigenous American households, with Black households spending 43 percent more of their incomes on energy costs, Hispanic households spending 20 percent more and Indigenous households spending 45 percent more.
Low-quality housing stock, including poorly maintained or malfunctioning HVAC systems and poor weatherization, represents a huge drain on energy efficiency. Addressing these deficiencies could improve energy efficiency for low-income homeowners by up to 25 percent and reduce their energy burden by 35 percent. Although low-income households make up 44 percent of the population, they compromised only 17 percent of households that completed an energy efficiency improvement over a two-year period.
The lack of access to energy efficiency improvements is because of insufficient upfront funding available for those improvements. Heating and cooling systems realize the greatest amount of energy efficiency savings, making up an average of 42 percent of a home’s energy consumption. Water heaters come in second, taking up an average of 12 percent. However, both require a significant upfront investment, one that is often out of reach for low-income homeowners, because of their inability to finance upgrades and lack of credit.
This is a wide-spread problem, with approximately 44 percent, or 50 million, households in the U.S. defined as low income. It has additional implications outside the staggering amount of wasted energy – a lack of energy efficiency can impact indoor air quality, safety and comfort, and families may cut costs by reducing spending on food, medicine and other necessities because of their energy burden.
Low-income household members suffer from mental and physical health problems because of a lack of energy efficiency resulting in a greater-than-average energy burden. These can include thermal discomfort as their HVAC systems either operate inefficiently, malfunction or those with high energy burdens reduce their energy use to cut costs. Studies have linked improper heating and cooling to increased cases of asthma, respiratory problems, heart disease and rheumatism.
The Low-Income Heating and Energy Assistance Program (LIHEAP) is a finger in the dike. The program cannot keep up with demand, distributing more than $3 billion, but only reaching one-in-five of those eligible to receive it in 2015, and it was cut from nearly $13 billion in 2009 to $3.6 billion in 2018. Of the dollars distributed, only a small portion go toward energy efficiency measures – up to 15 percent of LIHEAP dollars can go toward the Weatherization Assistance Program, but that program doesn’t address energy-gobbling HVAC systems and water heaters.
With many low-income households struggling to pay their bills, energy utilities are facing the specter of increasing bad debt, after being financially battered by the pandemic and series of moratoriums, coming out of 2020 with $32 billion in arrearages and up to 20 percent of all households behind on utility payments.
What more can utilities do to help improve customers’ energy efficiency? A partnership with HomeServe provides a suite of affordable emergency home repair and maintenance plans to help your customers proactively address safety and performance issues with their HVAC systems, water heaters and interior and exterior electric and gas.
For more information on how we can help your customers make their homes more energy efficient, contact us.