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How Utilities Can Help Lower-Income Homeowners Afford the Transition to High-Efficiency, All-Electric HomesPrint

Clean Energy | January 6, 2020 | By Jeff Smith

How Utilities Can Help Lower-Income Homeowners Afford the Transition to High-Efficiency, All-Electric Homes

An essential piece of the nation’s transition to a clean energy economy requires eliminating the use of fossil fuels in the home by swapping out inefficient appliances powered by gas and oil and swapping in super efficient appliances that use electricity—electricity that can be made cleanly and sustainably.

In 2019, Groundwork Clean Energy Policy Specialist Ric Evans (pictured) was part of a research team that looked at a handful of electric cooperatives—mostly Midwest rural cooperatives—leading efforts to help homeowners make that transition to 100% electric appliances. The team authored a report that assessed leading technologies for electrically heating air and water and looked at ways co-ops are helping families finance the transition without negatively affecting household budgets. Expense has always been a primary hurdle for families wanting to make the transition, so an innovative financing solution would help pave the way to widespread adoption. Researchers also assessed how utilities can make the transition to 100% clean energy homes in an equitable way—so much of previous renewable energy assistance has gone to upper income brackets.

The report team is part of ReAMP (reamp.org), a nonprofit member organization dedicated to speeding the transformation to an equitable 100% clean energy economy. The report’s lead author and researcher is Miguel Yanez, of Environmental and Energy Study Institute (EESI), a Washington, D.C., nonprofit. 

We asked Ric to share some thoughts in a q/a interview.

 

Ric, give us a sense for where the report idea came from.

There was a group of about a half-dozen of us that felt we’d been hearing about this trend of going to all-electric appliances with power generated by clean energy—it’s called beneficial electrification—and we thought we could learn a lot by looking at which co-ops are doing this and what seems to be working and not working.

Is there a finding that, for you, really stands out when you think of the research?

The main thing we found is, quite frankly, there are not that many programs being implemented around the country, so one of our main recommendations is that these programs should be greatly expanded and properly promoted.

Another finding that really resonated with me, and that I knew from my previous work as an energy auditor with the local community action agency, is that low- and low-middle-income homes are quite often some of the most costly to live in. The homes have the most energy loss, and they have the oldest, most inefficient equipment. People think that low-income people have low energy bills, but that is not the case. It can cost $700 to fill the propane tank, and that is a big chunk of money for a lot of folks. The good news is that changing to an electric air-source heat pump can save a lot of money, while also being better for the environment and safer for all of us long term.


"What I love about this report is it reveals real possibilities,
things people can do today!"

 
What I love about this report is it reveals real possibilities, things people can do today. You can completely electrify a home and then move on to decarbonize the production of electricity using solar and wind and other renewables. That is how we can achieve a zero-carbon energy economy for everyone’s home. You can also then extend that to electric cars and electrifying transportation—very fun stuff!
SAVE THE DATE!

Did there seem to be a specific strategy that was most effective in propelling the transition to electric appliances?

The biggest thing that will enable this to happen is what’s called “on-bill financing.” The utility offers a deal to customers that allows the customer to make the upgrades with no out-of-pocket money needed, and the money is paid back each month on the electric bill. But the key thing is that monthly expenses do not go up for the customer. The electric bill itself might go up, but when you factor in the savings from not buying fossil fuels and lowering heat loss from the home, the customer actually saves money and has a far better system. There is, by the way, an energy audit up front, so things like better insulation and sealing leaks is also a big part of the plan and is one of the biggest components of lowering a family’s total energy costs. And we can’t forget about comfort—once a home is properly sealed up and insulated, the comfort level in the home goes way up, too!

The other piece of this that is super important is that the financing cost is tied to the meter, meaning that if the customer sells the house and moves, the financing transfers to the new owner, who continues paying it on the electric bill. That also allows for the financing to happen regardless of an individual’s credit score, which from an equitable standpoint is a big thing that can really help with the transition and dramatically improve the condition of homes that need it most.


The USDA already has made available $100 million that municipal-owned utilities and co-ops can borrow and in turn loan to their customers at very low rates.
 

Where would the capital come from to make those kinds of loans to customers? If widely adopted that would require a tremendous amount of money.

The USDA already has made available $100 million that municipal-owned utilities and co-ops can borrow—and in turn loan to their customers at very low rates. For the utility, the money is interest free and no payments are needed for 10 years. But very few have taken the USDA up on the offer. Utilities are hesitant to get into the business of loaning money and collecting on loans. But the program is geared to moderate to low-income customers, which typically take up a lot of utility resources dealing with late pay and no pay and other billing problems, so lowering the cost of energy and possibly lowering the amount of the bill for that group can have a lot of beneficial cascading effects for utilities. Two utilities that have been out front on this—Ouachita Electric Cooperative (Arkansas) and Roanoke Electric (North Carolina)—have had zero defaults in the two years they have been doing this, so it has been a very successful program for them. And those two utilities have high rates of poverty within their coverage area, so that is especially impressive. I hope their experience will relieve utility anxiety and show the muni’s and co-ops that they probably have more to gain than lose by participating in programs like this. The programs are working well and are making a difference in family lives.

Muni? Co-Op? Investor Owned Utility? What's the Difference?

The way an electric utility is owned shapes its mission, core values and the way it does business. Here's a primer on the three most common ownership models.

Co-operatives, or Co-ops: Electrical co-ops are owned by their members and profits are returned to members.

Municipal-owned utilities: Owned by the local municipality, "munis" serve the residents and businesses of the town. In some cases the muni is simply a department of the city and in other cases the muni has a separate semi-autonomous board.

Investor-owned utilities: Run as a for-profit venture and owned by private investors, the IOUs are the largest suppliers of electricity across the nation. 

What about other benefits that flow from helping people finance the upgrades?

The utility has a serious role to play as a community member and as an economic driver. If you have thousands of homes being fixed up, that is a large amount of labor for electricians and other contractors and much of that money stays local. The money that the family saves also stays local. So when you start adding it all up, there are lots of wins here. People get their homes improved, making them safer and more comfortable. They also reduce their energy bills. The utility has another chance to be a good partner and engage with their members/customers. And as a nation, we all benefit because our energy systems are more resilient and sustainable. How can you go wrong with all of that?!

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