Inclusive utility investment policies allow more households, commercial organizations, and others to access and increase investment in energy efficiency programs. This summer, a paper written by Clean Energy Works on this financial mechanism “100% targets mean reaching everyone: The imperative for inclusive financial solutions” was included in the European Council for an Energy Efficient Economy’s (eceee) peer-reviewed Summer Study proceedings.
This paper showcases best practices in increasing participation in available energy efficiency programs, demonstrating the potential to replicate these programs in more states to bolster the likelihood of achieving the goal of 100% net-zero emissions by 2050.
Meeting that goal will require a massive scaling-up of energy efficiency improvements in all buildings, yet most financial solutions for essential building energy upgrades have not proven to be fiscally sustainable or scalable to even remotely approach those aims. California and New York have each found that access to financing is a significant barrier to efficiency, electrification, and on-site solar upgrades necessary to reach state decarbonization targets.
In fact, most households in the U.S. are systematically disqualified from participation in the clean energy economy by pervasive barriers like upfront cost or the split incentive between renters and landlords.Affluent households, especially homeowners who live in their respective dwellings, with access to cash or financing options are more likely to reap any benefits of existing energy efficiency programs. Although energy efficiency upgrades would most benefit low- and medium-income potential participants due to reduced utility bills, these households often lack the ability to provide the upfront costs for energy efficiency upgrades or the ability to benefit from certain programs such as rebates or tax incentives. Renters in particular are hesitant to provide any upgrades for homes which may be temporary, and landlords who do not pay utility bills may not find the upgrades to be financially incentivizing.
In a search for remedies, several U.S. states have sought to popularize consumer loan products for energy upgrades. Consumer loan programs, backed by state or federal governments, which seek to provide opportunities for energy efficient upgrades almost entirely only reach households with prime or better credit scores. Four of the best performing state-backed consumer loan programs for energy efficiency upgrades have reported reaching a maximum of 0.1% of the eligible households in any year. This points to a dire need to address those left behind by existing financial services policies.
Existing inclusive utility investment programs have been able to reach six times more participants than consumer loan programs, by assuring that a combination of funding and financing can reach every building regardless of income, credit score, or renter status of the occupant.
Inclusive utility investment programs are designed to remove the barriers preventing energy efficiency upgrades. With such programs, nearly all customers qualify due to removal of typically restrictive elements, such as payment history or credit checks. Programs tether upgrades to a meter location rather than individuals, creating more flexibility for renters seeking energy efficiency upgrades and reduced utility costs. A large scaling-up of such programs can help to provide vital improvements to homes of those most in need of relief from high energy bills. Program participation is vital to meet the goal of achieving 100% net-zero emissions. Every building must eventually become as energy efficient as possible.
But participation alone will still not be enough. As electrification of homes continues to increase and reliance on fossil fuels decreases, electric utilities must also develop the infrastructure necessary to provide such energy. Energy efficient homes will ease demand on the grid and help everyone electrify more easily.
As of today, 20 states plus the District of Columbia and Puerto Rico have set decarbonization or net-zero carbon emissions targets for 2050 aligned with the federally declared Nationally Determined Contribution. Where inclusive utility investment programs exist, nearly all customers qualify for participation. The need for widespread adoption of such programs is imminent. Wide-scale policy changes to help everyone have access to clean and affordable energy can be an effective and affordable method to achieve net-zero emissions targets.