Many households can’t afford energy efficiency upgrades, but layered solutions like no-cost weatherization, rebates and other financial incentives, and consumer-friendly financing can bridge the gap, cutting utility bills for those who need it most.
Read the Topic Brief Low- and moderate-income (LMI) families spend larger-than-average shares of their incomes on energy bills, but efficiency improvements that would cut bills are often unaffordable. Coordinating and expanding existing energy efficiency programs can help expand their reach and make them accessible to these families, an ACEEE topic brief argues today.
Our brief recommends program administrators sequence different funding streams so that LMI households can receive efficiency upgrades at little to no cost.
Start with no-cost weatherization and efficiency measures
Programs like the Department of Energy’s Weatherization Assistance Program provide insulation, air sealing, and other efficiency upgrades at no cost to income-eligible households, delivering energy savings and increased comfort. Utilities can offer similar whole-home retrofit programs that fully cover costs for participants. For example, San Antonio utility CPS Energy’s Casa Verde program, provides no-cost services to households whose energy costs exceed 9.9% of annual income, allowing moderate-income customers to participate alongside low-income customers. Households can receive weatherization measures and other efficiency upgrades to reduce their energy burdens.
Add rebates and incentives
Both federal and utility programs can make heat pumps and efficient appliances more affordable. Several states have launched federally funded Home Energy Rebate programs to help Americans pay for efficiency and electrification projects. The rebates are structured so that the highest incentives are available for low-income customers. Other states are waiting for federal approval and hope to begin their programs soon.
In addition, utilities and third-party program administrators can offer rebates. In Massachusetts, the utility collaborative Mass Save offers generous rebates ranging from $10,000 to $16,000 for replacing oil, propane, and electric resistance heating systems with a heat pump. But heat pump installation in Massachusetts can cost about $22,000, showing there can still be a need for additional funding tools to minimize upfront costs for consumers.
Use financing carefully
The brief recommends against loans for low-income customers, who often have lower credit scores and thus are often charged higher interest rates. Low-income households are also at higher risk of incurring debt they cannot afford to pay off. Some moderate-income households may be candidates for loans or financing after they’ve taken advantage of low- or no-cost programs and all available rebates and incentives. Loans and financing for moderate-income households should generally be provided by mission-driven lenders with the goal of helping lower costs for these households.
Another option is tariffed on-bill financing programs in which the utility or a third party pays for efficiency measures and the customer repays the cost through an additional charge on their utility bill. For the program to work, the efficiency measures must reduce energy costs by more than the amount of monthly surcharge. This ensures that customers’ utility bills do not increase. Therefore, the projected energy savings and cost reductions should be estimated conservatively (i.e., be lower than actual values), to provide a buffer so the new utility bill with the surcharge does not exceed previous bills. For tariffed on-bill financing and all other financing options, strong consumer protections are essential to mitigate consequences for vulnerable households.
Because of the benefits energy efficiency can bring LMI households and the barriers to accessing these upgrades, sequenced and accessible funding is vital. It’s especially important for governments and utilities to expand low- and no-cost efficiency upgrade options and work with mission-driven groups seeking to reduce energy burdens.
