Why we need to tackle energy inequality now

By EnPowered - June 28, 2021

Systemic inequality hampers low-income and racialized communities from accessing green energy and sustainability programs. EnPowered simplifies energy management


TL;DR

  • Despite shouldering a disproportionate share of climate change’s consequences, low-income and racialized households use more energy than similarly-sized wealthier residences and face greater energy insecurity as a result

  • Many government and private sector green programs and financing require high credit scores, checking accounts, home ownership, up front payments, and rely on exclusionary tax credits

  • Ensuring more diversity in both workforce demographics and business models is key to closing the energy inequality gap



Clean energy technology, renewables, digitization, and automation are all contributing to the creation of a new green economy. This 21st century economy seeks to tackle the negative externalities of the 20th, but no economic paradigm is created in a vacuum. We must be conscious of how current systemic inequality is perpetuated in the green economy and we need to take steps to create a just energy transition. The United Nations has touched on this very issue, stating in its 2020 World Social Report that:

“A just, equality-enhancing transition towards green economics calls for the integration of climate action with macroeconomic, labour, and social policies aimed at [...ensuring] adequate support for those who will be harmed [...and that] provide the means for low-income households to engage in environmentally sustainable livelihoods.”

A key part of ensuring a just energy transition is realizing the disproportionate impact on low-income households from higher electricity costs. Even small increases in electricity prices due to pricier green generation, carbon taxes, and other fees can push poor households into energy insecurity. If we do not implement means tested energy pricing, millions of households will be harmed and risk being left behind as wealthier segments of society enjoy the benefits of green reforms.

Green living should not be an exclusive perk


Renewable energy and home retrofits were long the purview of wealthy early adopters, and while clean tech has proliferated in recent years and prices have declined, barriers remain for low-income and racialized households. “An eco-friendly life shouldn’t be a luxury afforded only to those with lots of time, lots of money, or both,” writer Madeleine Somerville in The Guardian.

Nearly one-half of American households are poor or low-income and these people have largely been priced out of the green economy. Many of these individuals are not homeowners (e.g. 52% of Detroit residents are renters) so they cannot access federal and state green energy homeowner tax credits and retrofit programs. And landlords have been slow to install assets like rooftop solar in low-income properties, despite the fact that almost 60% of potential solar capacity in the United States is located in low-to-moderate renter-occupied and multi-family buildings, according to the National Renewable Energy Laboratory.

A one-size-fits-all solution that only takes emissions into account and neglects equality will squander the potential of the Green New Deal

Racialized households are overrepresented in low-income housing, residences that use more energy than more expensive homes due to older building codes, less insulation, and less efficient appliances, lighting, and HVAC equipment. These are also the very same neighbourhoods that suffer the most from fossil fuel pollution and other toxins such as asbestos and lead. Poor and racialized households are also the most at risk to economic energy insecurity. Of those families at risk from energy insecurity - the inability to access or afford sufficient energy - 49% are Black, 28% White, 18% Latino, and 5% Other, according to Synapse Energy Economics.

For example,Detroit households spend close to 10% of their income on energy, compared to just 2% in the predominately White and wealthy suburbs. Julius McGee, assistant professor of sociology at Portland State University explains that; “people just making ends meet and who can barely afford their energy bills will make a choice between food and their energy. We don’t think of energy as a human right when it actually is. The things that consume the most energy in our households - heating, cooling, refrigeration - are the things you absolutely need.”

Changing how green energy is bought and sold


How energy prices are structured is critical because they can exacerbate energy inequality. For instance, state-wide flat rates for electricity in places like Michigan place a greater burden on poorer households. And households without internet access can’t access online billing, nor can those without checking accounts set up automated billing. This prevents these households from benefiting from the discounts offered by utilities for using paperless and automated billing options. Many low-income individuals don’t have bank accounts and are unable to provide records of income or tax returns to qualify for incentives and other programs.

And in markets where utilities are compensated by volume, the transition to behind-the-meter generation by wealthier households means higher bills for those customers that cannot afford to transition. In other words, as wealthy energy users install solar and mostly go off grid to save money, overall grid costs don’t decrease so any remaining customers pay more. As each successive cohort leaves, only the poorest households ultimately remain and are left shouldering all the costs for grid upkeep. Utilities worried about losing market share are also fighting the proliferation of renewable energy projects, but these very projects often aim to remove barriers to entry for poorer energy users.

For example, in 2019 DTE Energy lobbied the state of Michigan to prevent community solar installations from powering more than one home or building. The NAACP has publicly criticized such moves, and the organization has launched its Solar Equity Initiative which aims to provide solar job skills training and strengthen equity in solar access policies.

Community solar a case study in tackling inequality


Community solar companies like WeSolar aim to spread the cost of purchasing solar capacity among many households, organizations, or businesses. This lowers the entry barrier for low-income households looking to green their energy use. “I got a front row seat of who gets to benefit from green rebates and other incentives. Mainly wealthier people,” explains Kristal Hansley who founded WeSolar in 2020 and is the first Black woman running a community solar company in the United States.

This institutionalized disparity in solar access is on display when you control for home ownership and household income, with Latino majority census tracts sporting 30% less solar than tracts with no racial majority. For majority Black census tracts this number is 69% lower than tracts with no racial majority. By way of comparison, majority White census tracts saw 21% more installed solar than those without a racial majority.

The solar business is glaringly White - from its C-suites to the higher income households who’ve primarily reaped the benefits of private rooftop panels,” writes Saijel Kishan for Bloomberg. This sentiment is echoed by Detroit city Councilman Scott Benson, who notes that the African American community’s attention has been preoccupied dealing with institutional racism, police violence, poverty, and other social ills. “As Black people, the environment has not always been something we have focused on. The message [of sustainability] typically comes from people who don’t look like us.”

There are over 2,000 community solar projects across 39 states, and 20 states plus DC have passed community solar legislation

In order to combat this disparity, many community solar projects focus on low-income and racialized areas, such as Clearway’s Underhill 2MW facility in Poughkeepsie, NY. The facility powers around 500 households, half of which are low or moderate income. Another example is Pivot Energy which operates community solar in Denver: 20% of its subscribers are low-moderate income households. Community solar installations tend to fall in the 2-5MW range, generating enough power for 350-900 homes.

There are over 2,000 community solar projects across 39 states, and around 20 states plus DC have passed legislation that support community solar. Minnesota and Massachusetts together account for roughly 50% of cumulative capacity, followed by New York and Florida. Over the past decade community solar in the US has increased to 2.6GW, and around 1GW is expected to come online in 2021 alone, in part due to pandemic-related backlogs.

The benefits of community solar vary by company, state, and utility, but typically low and moderate income residents can save 15% on their energy bills. Community solar members also receive a credit for the energy generated by their share of the array. Community solar alone will not overcome the barriers faced by poor and minority households in accessing green energy, but it is an important step.

Community solar needs to be implemented alongside programs that combine energy audits and financial instruments for building renovation, as the OECD has found these measures to be the most successful at targeting low-income households. Similarly, subsidies for microgrids in remote, off-grid areas and public spending on public transportation are other progressive options, since they disproportionately benefit lower income households.

Failing to ensure a just green energy transition will limit the number of people who can avail themselves of clean tech and enjoy sustainable livelihoods. A one-size-fits-all solution that only takes emissions into account and neglects equality will squander the potential of this watershed moment that is the Green New Deal. A healthy environment (both ecological and social) needs us to adopt both sustainable ethics, as well as a sustainable economy.

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