Credit: Courtesy of the researchers
Ideas Made to Matter
‘Energy poverty’ hits US residents more in the South and Southwest, study finds
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One in three American households today experiences “energy poverty,” or the inability to access sufficient amounts of electricity and other energy sources due to financial constraints.
Though federal financial assistance is available, it’s allocated largely based on rules written in the 1980s and disproportionately provides aid to Northern states, which historically have had high heating bills.
In the decades since, populations have shifted, temperatures have risen, and energy needs have evolved. A recent paper co-authored by MIT Sloan professor Christopher Knittel. director of MIT’s Center for Energy and Environmental Policy Research and the MIT Climate Policy Center, calls for an update.
Knittel and his co-authors propose a more data-intensive formula for calculating how funds should be distributed. The formula would predict a household’s energy use, incorporate existing state-level population and income data, and be modified annually to better distribute aid where it’s needed most — primarily areas of the South that experience hot, humid summers.
“This misallocation is going to continue to grow,” Knittel said. “As the climate warms, it will reduce how much energy is needed to heat homes in the North but increase, by a large amount, cooling costs in the South. Southern U.S. households are going to suffer.”
Knittel and his co-authors hope that their findings will help guide U.S. policymakers toward a more equitable distribution of energy aid to homeowners. The information also could be useful to businesses when deciding how to appropriately compensate their employees, Knittel said.
Energy aid isn’t going where it’s needed
In response to rising energy prices in the late 1970s, Congress established the Low Income Home Energy Assistance Program in 1981 to give qualifying households help in paying their energy bills. LIHEAP gave a set amount of funding to each state to distribute to residents who applied for assistance.
Initially, LIHEAP accounted only for heating costs. A 1984 rewrite of the formula addressed cooling costs, but a legislative compromise left the program hamstrung: Two “hold harmless” clauses essentially ensure that individual states’ allocations can’t drop below a certain percentage of all LIHEAP aid.
Areas of the U.S. where the amount of household income spent on home energy exceeds 6% are concentrated primarily in the Southeast and Southwest.
That has led to a disproportionate allocation of funding. The proportion of aid to states has gone unchanged in the past four decades, even though winter heating needs in Northern states have softened and summer cooling needs in the South have accelerated. Meanwhile, Knittel and his co-authors found that energy poverty — when the amount of household income spent on home energy exceeds 6% — is concentrated primarily in the Southeast and Southwest.
“When you compare where LIHEAP is sending funds to where the energy burden actually exists, the two are not well connected,” Knittel said. Put another way, the areas of the country most harmed by rising temperatures are receiving too little aid. “Climate change will exacerbate where we see the energy burden,” he said.
Putting households on more equal footing
The first step in conducting the research was to use machine learning techniques to uncover where the energy burden actually exists across the more than 80,000 census tracts. The machine learning model that Knittel and his co-authors developed considers numerous factors that can contribute to energy burdens. These include geography, average heating and cooling expenses, the type of heating fuel used, household income, and household type (as multifamily units tend to have lower energy costs). Heating and cooling needs are treated as having the same burden on a household.
Knittel and his co-authors then used the results from the machine learning model to optimize where federal dollars should go. This optimized allocation formula sets a maximum allowable energy burden, given a total budget, to put everyone on equal footing.
Eliminating energy poverty entirely in the United States would mean that no household was paying more than 6% of its income on home energy costs. It would also require a fourfold increase to the LIHEAP budget and allocation of aid to more than 20% of American households, according to the calculations of Knittel and his co-authors. Ensuring that no household faces an energy burden greater than 10% would require $9.75 billion in aid, or more than twice the 2020 LIHEAP budget.
Equally distributing approximately $4.7 billion in LIHEAP aid, which is what the program received in 2020, would lower the maximum energy burden for a U.S. household to 20.3%, on average, and cap the number of U.S. households facing a severe energy burden at 10%. According to the paper, this would result in a more equal distribution of energy burdens, “whereas in the current system, states in the North are able to nearly eradicate energy poverty, but Southern states still see broad-sweeping concentrations of severe energy burdens.”
A necessary shift in how aid gets distributed
Critically, the proposed formula would allocate aid to the households with the greatest energy burden first, regardless of where they were located or whether their state had already exceeded its LIHEAP allotment.
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And, as is typical of European programs, providing proof of eligibility and setting up automatic payments would not be required to apply for aid. This would make it easier for recipients to receive aid and reduce the amount of paperwork states have to process.
“We think that’s probably the most equitable way to allocate the money so that no one state is worse off than the others. By doing that, you now have a different amount of money that should go to each state,” Knittel said.
Adopting the formula would require an obvious shift in how LIHEAP distributes aid. But the shift is necessary, Knittel said. The current allocations were “basically set over 40 years ago” and are unable to adapt to shifts in energy use or climate — and they are bound to stay that way unless LIHEAP receives a sudden infusion of funding.
“If we’re not going to grow the budget, which we should be doing, then we need to allocate our limited budget as efficiently as possible,” Knittel said. “Our results suggest we are far from doing that.”
Read next: Which US counties are most vulnerable in the energy transition?
