Research

The project: Energy poverty, or the gap in energy affordability, is a burden on low-income households amounting to millions of dollars in utility arrears. This burden negatively impacts a household’s long-term health, education, employment, and financial stability. Energy efficiency offers an opportunity to address energy poverty through energy waste reduction measures such as LED lighting, energy-efficient HVAC systems, and insulation. Current state policies requiring utility-managed energy efficiency programs, aimed at producing statewide reductions in energy demand, often distribute funding and program benefits disproportionately across socioeconomic groups, although a spectrum of policy measures exist that should steer policy investments and outcomes towards greater equity. This study evaluated the current state of equity in energy efficiency programs across state policies and estimated the impact on the state’s home energy affordability gap if program investments were more equitable. Using a new metric called the equitable energy efficiency (E3) baseline, researchers measured the effectiveness of state policies at achieving equitable outcomes for low-income households.

The process: To compare equity in energy efficiency investments across states and electric utility companies, researchers developed a normative baseline metric for utility spending on low-income customers. This metric, known as the Energy Efficiency Equity baseline (E3b), accounts for the proportion of the population defined as low-income in a utility’s service territory and the total annual residential energy efficiency investment dollars. The E3b accounts for differences in policy approaches as well as socioeconomic characteristics per utility territory and each year. Researchers used the E3b to evaluate energy efficiency investments among low-income populations by 11 large utility companies in six states, from 2012 to 2021. 

Results: The analysis resulted in the following key findings: 

• The E3b is a useful metric for evaluating utility performance from an equity perspective. It can be used to compare among utilities and within states, among utilities with small to large portfolios, and utility performance over time. E3b provides flexibility for existing and future variations in state policy approaches, while accounting for the socioeconomic characteristics within utility service territories.
• Results suggest that while most utilities are underperforming relative to the E3b, positive investment trends are estimated into 2021. This is likely the result of a combination of factors: utility decision-making, stakeholder interventions, and state policy adjustments.
• State Energy Efficiency Resource Standards policies aimed at achieving equity in energy efficiency should integrate factors including: socioeconomic characteristics of each utility territory, low-income program qualifiers, proportion of the population qualified to participate in these programs, and the total size of the residential portfolio investment.

Tony G. Reames, School for Environment and Sustainability

Ben Stacey, School for Environment and Sustainability, Taubman College of Urban & Regional Planning