Why Institute a Low-Income Lens for Energy?
Low-income households face disproportionately higher energy burden. Energy burden is defined as the percentage of gross household income spent on energy costs. According to the U.S. Department of Energy’s (DOE) Low-Income Energy Affordability Data (LEAD) Tool the national average energy burden for low-income households is 8.6%, three times higher than for non-low-income households which is estimated at 3%. In some areas, depending on location and income, energy burden can be as high as 30%. Of all U.S. households, 44%, or about 50 million, are defined as low-income.
How is Low-Income Defined?
There are several scales to define low- and moderate-income households in the United States. These definitions are used to determine who is eligible for various federal- and state-funded programs and are adjusted every year due to inflation. It should be noted that there is no direct relationship between these scales and there is no “one-size-fits-all” approach to poverty because different states and cities across the United States have varying costs of living.
The area median income (AMI) is the midpoint of a region’s income distribution—half of families in a region earn more than the median and half earn less than the median. The AMI is calculated every year by the U.S. Department of Housing and Urban Development (HUD) to set limits that determine eligibility for assisted housing programs. HUD considers households earning less than 80% of the AMI to be below-income. HUD’s Office of Policy Development and Research updates a spreadsheet of the AMIs nationwide every year.
AMI is usually referenced on the following scale:
- 0-30% AMI—extremely low-income
- 30-50% AMI—very low-income
- 50-80% AMI—low-income
- Over 80% AMI—no longer considered low-income
- 100%+ AMI—above median income
The federal poverty level (FPL) is a measure of income used by the U.S. government to determine who is eligible for subsidies, programs, and benefits. Each year, the U.S. Department of Health and Human Services (HSS) issues poverty guidelines for each household size. An example of an application of FPL is determining eligibility for HHS’s Low Income Home Energy Assistance Program (LIHEAP). Participants must make less than 150% of the FPL, except in states where the state median income is 60% higher.
Programs and subsidies are often offered to families that are a certain percentage of the FPL as listed in the following scale:
- 0-100% FPL
- 100-150% FPL
- 150-200% FPL
- 200-400% FPL
- 400%+ FPL
The state median income (SMI) is the midpoint of a region’s income distribution—half of families in a region earn more than the median and half earn less than the median. SMI can be used to determine eligibility for state-specific grants and programs. HUD’s Office of Policy Development and Research updates a spreadsheet of the SMIs nationwide on a yearly basis.
- 0-30% SMI—extremely low-income
- 30-50% SMI—very low-income
- 50-80% SMI—low-income
- Over 80% SMI—no longer considered low-income
- 100%+ SMI—above median income
How Can Energy Play a Role for Low-Income Families or Communities?
There are many factors that might influence high energy burden. Examples include higher-cost fuels, such as propane or other bottled fuels, and energy-inefficient homes. Energy-inefficiency can be due to a lack of insulation in older homes or older appliances. For households that face these challenges, there is a greater opportunity for energy and cost savings. Low-income communities face barriers to accessing energy technologies which help make energy more affordable, such as solar photovoltaic (PV). Solar PV adoption by moderate-income households has increased since 2010, representing 48% of adoptions. Low-income households, however, represented just 15% according to a Lawrence Berkeley National Laboratory (LBNL) report.
There are factors that can prevent low-income households from accessing energy technologies, including a lack of qualifying credit and the inability to finance upgrades. LEAD Tool data estimates that 59% of low-income households are renters—not owners—of their homes. This predominance of renters further compounds the issue into a split incentive: landlords may not be motivated to pay for energy improvements, leaving potential energy bill savings out of reach for the low-income tenants.
Energy efficiency and weatherization measures not only help to lower energy bills for low-income households, but are also proven to improve indoor air quality, safety, and comfort, thereby positively impacting human health. When hiring locally, these projects help to shore up neighborhood housing stock and create local jobs where they are often needed.
Resources for State and Local Governments and Low-Income Stakeholders
The following resources highlight issues and solutions for low-income households in accessing energy efficiency measures and renewable energy. These resources can be used by stakeholders to support program planning and inform existing initiatives.
The LEAD Tool is an online, interactive platform that allows users to build their own national, state, county, city, or census tract profiles. LEAD provides estimated low-income household energy data based on income, energy expenditures, fuel type, and housing type. Users can create and save their own profile and make side-by-side comparisons with other geographies. Users can also download visuals and data associated with various geographies, housing, and energy characteristics. The LEAD Tool has been used by stakeholders to improve understanding of low- and moderate-income characteristics in their locality, identify target areas, start new low-income programs, and use the information for outreach and educational purposes. The tool has also been used to inform strategic planning and independent research. Using data, maps, and graphs from the LEAD Tool, stakeholders can make data-driven decisions when planning for their energy goals.
The Clean Energy for Low-Income Communities Accelerator (CELICA) Toolkit contains resources and models based on promising practices to help administrators reduce energy burden for low-income communities by expanding upon work funded through utility, state, or federal programs. Led by DOE, CELICA was a two-year partnership with over 30 local partners from the government, utility, and nonprofit sectors, with support from 10 national partners. The partnership aimed to understand and address low-income residential energy challenges, and to demonstrate a wide range of locally designed energy efficiency and distributed renewable energy solutions. CELICA partners leveraged commitments of $335 million to help 155,000 low-income households access energy efficiency and renewable energy benefits. Find archived information on the CELICA Accelerator web page.
The Low-Income Energy Library: Federal Resources and Tools was created to provide a one-stop location for low-income energy resources across the federal government. Stakeholders can use the Program Funding Catalog, which is meant to be utilized as a worksheet to help map out relevant resources from the Low-Income Energy Library for low-income planning or program needs.
The National Community Solar Partnership (NCSP) is a coalition of community solar stakeholder working to expand access to affordable community solar to every American household by 2025. NCSP has three objectives to make community solar accessible to every U.S. household, ensure community solar is affordable for every U.S. household, and enable communities to realize supplementary benefits and other value streams from community solar installations. To meet these goals, NCSP provides stakeholders with a network of partners through an online platform, access to technical assistance from DOE, and collaboration with others around specific goals and common barriers.
The Solar in Your Community Challenge was a $5 million prize competition sponsored by the U.S. Department of Energy Solar Energy Technologies Office. The competition was designed to incentivize the development of new approaches to increase the affordability of electricity while expanding solar adoption across America. The challenge ran from May 2017 to October 2018 to improve solar access for nonprofits, faith-based organizations, state and local governments, and low- and moderate-income communities, all of which face unique barriers to adopting solar.
The Strategic and Interagency Initiatives Fact Sheet provides information on the Strategic and Interagency Initiatives (SI2) team, which coordinates low-income work for DOE’s Office of Energy Efficiency and Renewable Energy. The SI2 Team promotes collaboration between federal agencies on energy initiatives for low- and moderate-income communities. These staff-level collaborations aim to provide a future where low- and moderate-income households and communities can afford energy utility costs through energy efficiency and renewable energy measures.
Agencies involved include the U.S. Department of Housing and Urban Development, U.S. Environmental Protection Agency, U.S. Department of Agriculture, DOE, U.S. Department of Health and Human Services, U.S. Department of Homeland Security, Federal Emergency Management Agency, U.S. Department of the Treasury, U.S. Department of Transportation, and Federal National Mortgage Association.
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