Confronting the energy burden – Achieving energy equity for low-income communities

by Hannah Rothschild, City-Business Collaboration Officer, ICLEI – Local Governments for Sustainability

To learn more about the Urban Transitions Alliance visit www.urbantransitions.org

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Cities in the Urban Transitions Alliance are moving away from their industrial energy-intensive heritage and setting ambitious energy efficiency targets. A broad range of projects and programs have spearheaded sustainability efforts, reduced energy-related carbon emissions and led to utility cost savings for residents at the local level. However, ensuring equal access to the benefits that these initiatives provide remains a challenge. Now cities are confronting the question of how energy efficiency can reduce energy burdens in low-income households.

Rising inequality: Defining the energy burden challenge

The energy burden refers to the strain put on local residents struggling to afford their energy needs, such as electricity and heating, due to the percentage of their household income spent on energy bills being too high. Several interventions, including subsidies and tax incentives for residential energy efficiency upgrades or municipality-led consulting on energy saving practices as seen in Dortmund’s Unionviertel, promise to reduce energy consumption and alleviate prohibitive costs. However, many of these programs fail to reach the low-income households. This group is often hit the hardest by high energy burdens and would benefit the most from energy retrofits that promise a substantial reduction on utility bills. Thus, while energy efficiency projects in cities improve livelihoods for a number of residents, they may also contribute to rising energy inequality.

Solving this juxtaposition is not easy since low-income households are often difficult to reach with local programs for energy upgrades. Low-income families often rent in multi-family residences, while subsidy programs are commonly target homeowners. In addition, due to limited disposable income, low-income households often still cannot afford energy upgrades even with city-provided cost reduction incentives. Cincinnati for example has the 9th highest energy burden in the US and over 60% of its urban population lives in rented housing. The city has seen a high participation of single household homeowners in its Greater Cincinnati Energy Alliance local subsidy and support programs but low-income residents renting in multi-family buildings are not sufficiently addressed by such schemes.

But where do the challenges lie? The crux is often a case of split incentives. Cities face difficulties when trying to incentivize landlords to make substantial energy efficiency investments when the return on investment is a reduction in monthly utility bills paid by tenants. Cities also noted the high costs and related subsequent financing challenges of energy interventions. European cities including Dortmund and Essen in Germany and Katowice in Poland have steadily improved the energy efficiency of their low-income housing stock but these programs have cost upwards of several hundred thousand euros in energy efficiency subsidies and related program costs and also required strong support from regional and national governments.

Limited awareness and accessibility are also pervasive challenges. Low–income households frequently lack information or face choice constraints when it comes to energy efficiency investments. In order to find ‘affordable’ housing, low-income households are forced to rent in older, poorly-maintained buildings as property owners who have already implemented energy efficiency retrofits are able to ask for higher rents.

Transition Actions: Reinforcing equality through energy efficiency

Reducing inequality caused by energy burdens is a fundamental aspect of the sustainable urban transitions currently underway in cities that are part of the Urban Transitions Alliance. By engaging in strategic project planning and including low-income residents as key stakeholders, the positive impact of energy efficiency investments can increase exponentially.

Gelsenkirchen has run an energy efficiency consulting service for low-income households since 2009. The program provides energy-saving advice, a subsidy to help households replace inefficient appliances and supplies energy efficient lamps and energy-saving sensor power strips for free. On average, low-income households have saved over 100 euros in utility bills per year from adopting advised energy saving practices. The initiative also employs and trains long-term unemployed residents to conduct the energy efficiency evaluations and provide guidance and support on energy efficiency upgrades. Looking beyond the jobs created, energy saved and reductions in utility costs, the project also helps to strengthen the local community. Low-income households are more open to trying energy-efficiency actions when the advice is coming from a member of the community who has a personal and locally-specific understanding of the energy challenges low-income households face.

Pittsburgh also chose to tackle inclusive energy for the Bloomberg’s Champion Mayors Initiative with a focus on ‘Bringing Housing Stock up to Scratch with Collaborative Energy Retrofits’. The city intended to incentivize residential energy refurbishments by reducing the cost of retrofit materials and facilitate DIY installation. However, it quickly became clear that the biggest challenge for equitable energy efficiency in the city was a lack of access to information, particularly amongst low-income households. This continues to prevent residents from accessing the resources they need to participate in energy efficiency upgrade programs. Currently, the city is piloting an online platform that will enable low income households to plug in their details, circumstances and needs in order to receive tailor-made assistance to access and participate in relevant local programs.

Urban Transitions Alliance cities have learned that ambitious climate goals need to be achieved in conjunction with social equity and inclusion. By focusing on improving equitable access to energy efficiency programs and directly addressing the specific needs of low-income communities, industrial legacy cities are able to steer their urban transitions in a more resilient and sustainable direction. Holistic project planning and a comprehension of how energy efficiency and other sustainability efforts tie into social, environmental and economic city needs will ensure that local governments make targeted investments that will have positive long-term benefits for all citizens.