Achieving Energy Equity
This past week, the Biden administration released the draft guidance for its Justice40 Initiative, a framework announced in EO 14008 that at least 40% of the benefits from federal energy and environmental spending reach disadvantaged communities. This action by the administration sets into motion its efforts to address environmental justice in its policies and programs.
Within environmental justice is energy justice, which the Initiative for Energy Justice refers to as the “goal of achieving equity in both the social and economic participation in the energy system, while also remediating…burdens on those disproportionately harmed by the energy system.”
To understand energy justice, you must understand the concept of equity. Equity and equality are often mistakenly assumed to mean the same thing, and while they are similar, they have very different meanings. Equity refers to justice and fairness, while equality refers to treating everything the same. Equity importantly recognizes that in order to achieve a level playing field, it is important we acknowledge that we do not all start from the same place. While equality would call for everyone to be treated the same, equity may actually call for unequal investments in certain communities in pursuit of a more equal society.
Unfortunately, there are unequal energy and environmental risks and impacts that affect disadvantaged communities, often African American, Hispanic, and Native American communities. Energy justice works to resolve these unequal impacts and create a society where everyone has access to clean and reliable energy.
Disadvantaged communities often experience energy insecurity, the inability to pay their energy bills, which has been especially highlighted during the pandemic and during the climate change era. According to the latest Residential Energy Consumption Survey (RECS) from 2015, 31.3% of reported households experienced some kind of energy insecurity, and 17.2 million households had at some point received a disconnect or delivery stop notice.
During the pandemic, energy insecurity has been made worse as people have lost their jobs, are left without safety nets, and often find themselves facing higher energy bills from staying home 24/7. A study released this January reported that 4.7 million people could not pay an energy bill in 2020. Energy insecurity will worsen even as the pandemic begins to subside because moratoriums on utility shutoffs will lapse and utilities will start to collect unpaid energy bills.
Post-pandemic, climate change will also worsen energy security, and we are already seeing its impacts on energy customers. First, extreme weather puts tremendous pressure on the electric grid, raising energy prices to unaffordable levels. For example, during the late winter storms from earlier this year, natural gas prices skyrocketed, leaving customers with high energy bills. Second, utilities are currently spending more and more on new generation resources and resiliency measures, all of which will create upward pressure on energy prices. Energy prices are mostly impacted by generation, distribution, and transmission prices, and investments like expanding grid capacity and burying power lines could increase energy bills.
Unequal Access to Clean Energy
Because clean energy technologies like rooftop solar PV systems and battery energy storage systems do not utilize fossil fuels, they neither release GHG emissions nor direct air pollution, thereby reducing building owners’ contribution to climate change and improving their air quality. Unfortunately, these technologies have only been around for the past 20 years, some less than that, so they are still relatively expensive. Clean energy technologies’ high prices, policy barriers, and housing status usually limit clean energy access to affluent communities.
According to NREL, residential solar PV systems between 4 kW to 7kW are priced at $2.71/Wdc. Even though prices have fallen 64% since 2010, a rooftop PV installation can easily cost a homeowner over $15,000. Battery storage systems cost similarly, with NREL reporting that they can be over $20,000 each. Most electric vehicles also cost well over $20,000, despite many auto manufacturers pledging to go all-electric by 2030. Without access to capital and loans, many low-income homeowners are unable to obtain these and other types of clean energy technologies.
Policy barriers can also get in the way of underserved communities from obtaining access to clean energy technologies and their benefits. Policies and incentives such as net metering can be crucial to supporting a robust clean energy market. Net metering allows homeowners to sell back excess electricity produced by their renewable energy systems to the energy grid. If compensation rates are generous, homeowners can quickly pay back their clean energy systems, but without net metering or with low compensation rates, rooftop solar does not make financial sense. Lower-income communities do not have the financial flexibility to purchase clean energy technologies just for their uncompensated environmental benefits.
Lastly, most people within low-income communities do not own their own homes, so they are unable to obtain major energy upgrades. Upgrades such as rooftop solar PV, EV charging stations, and electric water heaters may all be dependent on the landlord who can pass along system costs to their tenants while benefiting from the energy savings. Consequently, disadvantaged communities’ housing situations often keep clean energy technologies out of reach.
Achieving Energy Equity
The Initiative for Energy Justice (IEJ), a think tank centered on energy justice, identifies several issue areas that reveal potential solutions to energy inequity.
Access to Energy
The IEJ writes that many advocates within the energy justice realm “consider energy as a human right to ensure affordable access to renewable energy to every single person.” They reference the energy disruptions from weather events or preemptive shutoffs to reduce wildfire risk, somewhat suggesting these types of disconnections would violate the “energy is a human right” principle.
While I agree with the spirit of the principle, I don’t think it is completely realistic. Renewable energy is quickly becoming more affordable, but it remains expensive. Energy resiliency measures and capacity building to ensure a continuous power supply will also raise prices on energy, contributing to energy insecurity. We must work towards providing reliable energy to everyone, but we need to quickly figure out how to afford it. Utilities cannot afford these upgrades without charging their customers, and many of their customers cannot pay higher bills.
IEJ suggests we need to rethink our energy market structure where utilities have dominant control over a geographic region and instead think of a decentralized system characterized by renewables.
Right-of-way laws and other regulatory mechanisms slow the advancement of renewable energy, so I completely agree with IEJ’s thinking. The current transmission and distribution system is largely monopolized by utilities, so policymakers should be searching for new solutions that recognize the financial investments of utilities while allowing small renewable energy systems to provide local, clean power to willing customers.
IEJ describes community solar as typically consisting of “offsite, but nearby, generation of electricity [via solar PV] that multiple electricity customers share.” They importantly recognize that equitable community solar considers issues like community ownership and access to the shared energy resource.
Community solar is an exciting solution that could benefit low-income communities that don’t have the ability to install their own rooftop solar PV systems. Through community solar, they can either collectively fund an offsite solar PV system, or they can “purchase” individual panels within the system to claim their generation and environmental benefits. Redesigning the energy utility market and providing fair access to capital will enable disadvantaged communities to pursue community solar as a strategy to obtain clean and resilient energy.
Net Metering/Value of Solar
IEJ speaks in favor of net energy metering, as rooftop solar PV owners can sell back their excess electricity, but they seem wary of a “value of solar” rate which could undervalue excess electricity from solar PV installations.
I believe net metering is crucial to the continued expansion of solar PV, as investors can recoup their initial investment much more quickly. We should also stay away from “value of solar” rates that may award below market rates and instead consider ambitious policies and incentives like feed-in-tariffs. These generous incentives give above-market rates to small-scale renewable systems owners for excess electricity delivered back to the grid. Massachusett’s SMART Program is an excellent example of how feed-in-tariffs can accelerate renewables’ growth, especially at the beginning of market development. You can even focus on building up renewables in certain locations like landfills, brownfields, and rooftops.
100% Renewable Energy Policies
IEJ mentions that many cities are developing 100% renewable energy goals, highlighting that pathways to these goals can create different benefits and burdens on historically disenfranchised communities.
IEJ rightfully brings up a major point that may be overlooked. A greener future doesn’t necessarily mean a more equitable one. Without the right policies that put clean energy in the hands of disadvantaged communities, we risk leaving these communities behind as we transition away from fossil fuels. This transition is an opportunity to invest in these communities, ensuring they are resilient against climate change and can participate in clean energy.
Don’t Forget Equitable Financing
While the IEJ does not explicitly mention equitable financing on their home webpage, I strongly believe they would agree that equitable financing is a key component to achieving energy equity.
Clean energy technologies are still expensive, and they will remain out of reach for low-income communities unless the right incentives and equitable policies are in place. For example, the federal government offers a $7,500 tax credit towards EVs and plug-in-hybrids, and many utilities offer rebates on electric heat pumps and other energy efficiency upgrades. While these types of incentives bring down the initial price of clean energy technologies, the buyer still needs the upfront cash to pay for the rest. If you are struggling to pay for your energy bills, a $7,500 tax credit towards a $30,000 electric vehicle doesn’t help a whole lot.
While working with the Environmental and Energy Study Institute (EESI), I learned about on-bill financing, an innovative financing model that provides affordable energy upgrades while saving customers money. On-bill financing is a mechanism where the utility provides energy upgrades, and customers make repayments on their monthly utility bills.
EESI’s on-bill financing initiative is an excellent example of equitable financing that could help disadvantaged communities gain access to clean energy and its benefits without having to break the bank. EESI recommends prioritizing cost-effective, cash-flow positive projects where customers will save money on their energy bill, and a percentage of their energy savings is paid to the utility towards the energy upgrade. EESI also suggests evaluating applicants through non-traditional means such as utility bill payment history instead of credit score to increase participation of low-income communities.
Overall, on-bill financing opens the door to affordable clean energy upgrades to underserved communities that need them the most. Hopefully, the Biden administration will consider on-bill financing and other equitable financing strategies in its Justice40 Initiative.