A transition toward more efficient energy infrastructure serves as a focal point for combatting human-induced climate change. However, this transition raises questions regarding the current state of energy access across the United States and the nation’s ability to implement equitable energy transition policy for all.
The U.S. Department of Energy (DOE) defines energy burden as “the percentage of gross household income spent on energy costs.” “Energy costs” consist of payments for powering amenities, like lighting, heating, and air conditioning, that require any sort of energy input — often in the form of electricity and natural gas. Unfortunately, paying to access energy supplies is a challenge for many households.
According to a recent report released in 2020 by the American Council for an Energy-Efficient Economy (ACEEE), low-income households face a median energy burden of 8.1% nationally, over three times higher than the non-low-income household median burden of 2.3%. Such a burden is an increase from ACEEE’s previous report from 2016 detailing a median low-income burden of 7.2%.
Both DOE and ACEEE index income levels around Area Median Income (AMI), the median income at which 50% of households earn more than and 50% earn less than that income. The Department of Housing and Urban Development deems a household to be low-income if its annual income is less than or equal to 80% of the area’s median income.
National energy inequalities are disproportionately represented not only among low-income households, but also among Black, Hispanic, and “renter” households (households that don’t own property but pay rent). Such national trends are, of course, apparent within states, including Virginia.
In Virginia, households considered low-income (≤80% AMI) face energy burdens of 6-8%. While Virginia’s average low-income burden is lower than the median within the South-Atlantic region (~8.4%), it still highlights a stark inequality across demographic lines.
In cities like Richmond and Virginia Beach, reports organized by ACEEE in 2020 and 2016 highlight inequality in access due to differences in energy burdens across household characteristics.
In the Richmond metropolitan area, median energy burdens are 2.6% compared to 8.2% for low-income households. In fact, 24% of Hispanic households and 28% of Black households face energy burdens greater than 6%, which is considered high by most analysts.
In Virginia Beach, median energy burdens were 3.85% for the median households compared to 7.46% for low-income households, 4.98% for median Black households, 3.75% for median Hispanic households, and 4.54% for median renter households.
However, the strain of utility costs is not limited to just metropolitan areas. Rural Virginia, according to 2019 data from the American Community Survey, had a poverty rate of 16% compared to 9.1% in urban areas. Nationally, low-income rural households had an energy burden of 9% in a 2018 report, higher than that of non-low-income rural households with a burden of 3.1%.
Factors & Solutions
Among the many factors influencing the disproportionately high energy burden in low-income households, energy inefficiencies within homes are a large contributor.
Often, inefficient housing conditions place upward pressure on energy costs, leading low-income households to pay more for their energy use despite using utilities less. According to the Virginia Poverty Law Center, “a low-income household spends on average $1.23 per square foot for utilities, while a non-low-income household will spend $0.98 per square foot.”
Lower-income households experience barriers in switching to more efficient systems that could help to reduce utility costs, like solar energy technologies. According to a 2018 report by the Lawrence Berkeley National Laboratory, the share of solar adopters in median-income groups increased since 2010, representing over 40% of adoptions. However, low-income groups represented just 15% of all adoptions.
Financial strain from energy costs and a lack of income to allow for a freedom of expenditure on basic needs, such as food, clothing, and housing payments, can often lead to tough decisions.
Issues also arise with a lack of property ownership, as 59% of low-income households rent homes. A lack of property ownership often excludes households from efficiency upgrades if landlords aren’t willing to front the costs of installation and maintenance.
In a New York Times report on 2016 eviction rates in Richmond, over 10% of renter households were given eviction judgements. One evicted resident who was making just $178 a week spent some of her earnings on space heaters and insulation. Another renter, evicted in 2014, had a poor heating system and resorted to keeping the oven running to warm the house.
There is a clear need for greater intervention into low-income households, as well as those of Black and Hispanic households and renters, who face disproportionately higher rates of energy burden compared to those of the median Virginia resident.
Policy aimed at solidifying energy efficiency improvements within homes is, therefore, a key target for helping to reduce the usage of energy resources as well as to alleviate the financial stress of utility bills.
While many Virginia state programs center on commercial and industrial incentives aimed at improving non-residential efficiencies, the state has recently begun to instill a greater foundation for improvements in low-income homes and communities.
In 2020, the Virginia General Assembly enacted the Virginia Clean Economy Act, requiring gradual utility efficiency improvements from Virginia’s main utility providers, Dominion and Appalachian Power, starting in 2022. The Clean Energy and Food Preparedness Act was also passed last year, instructing the Department of Environmental Quality to allocate government revenues from Virginia’s carbon pricing strategies, like the Regional Greenhouse Gas Initiative, into low-income energy efficiency programs.
These two laws establish a necessary precedent for the future of Virginia policies aimed at alleviating energy-induced inequalities.
However, Richmond’s “RVA Green” plan fails to establish clear energy burden reduction goals outside of broad home improvement “initiatives.”
If cities like Richmond are to combat energy inequalities, they must outline explicit goals to reduce burdens, ensuring accountability and execution of such policies.
All of the provided data detailing state and national energy burdens utilized samples collected prior to the pandemic of the past year. Therefore, it stands to reason that the effects of the COVID-19 virus on household income flows will only serve to propel existing energy inequities among Virginia households and their ability to pay for necessary expenditures.
Moving forward, home efficiency programs must be more focused on low-income households, not only as a means of minimizing energy use but also as a way to alleviate the poverty that has only been exacerbated by the pandemic.
The General Assembly’s most recent climate legislation will hopefully encourage cities across the Commonwealth to adopt more serious implementation strategies. These initiatives are, unfortunately, needed now more than ever.
The views expressed above are solely the author's and are not endorsed by the Virginia Policy Review, The Frank Batten School of Leadership and Public Policy, or the University of Virginia. Although this organization has members who are University of Virginia students and may have University employees associated or engaged in its activities and affairs, the organization is not a part of or an agency of the University. It is a separate and independent organization which is responsible for and manages its own activities and affairs. The University does not direct, supervise or control the organization and is not responsible for the organization’s contracts, acts, or omissions.