AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY (ACEEE)
ENERGY EFFICIENCY FOR ALL
The High Cost of Energy in Rural America: Household Energy Burdens and Opportunities for Energy Efficiency
Executive Summary
In this report we examine residential energy affordability in rural and small-town America. We analyze how rural household energy burdens—the percentage of household income spent on energy bills—vary across regions and among specific groups. Overall, Americans living in rural areas spend a disproportionally high share of their income on energy bills. Rural households have a median energy burden of 4.4%, compared to the national burden of 3.3%. Rural low-income households are even worse off, shouldering a median energy burden almost three times greater than the burden faced by their higher-income counterparts. Other rural residents hit particularly hard include the elderly, nonwhite, and renting households, and those living in multifamily or manufactured homes. The problem is most glaring in the East and Southeast.
In this report, we define rural households as those not located in a metropolitan census tract as specified by the US Department of Agriculture’s rural-urban commuting area codes. These make up roughly 16% of all households and are spread across 72% of the nation’s land area (USDA 2017a).
We calculate energy burdens for subsets of rural households according to:
Housing type
- Manufactured, also referred to as mobile homes (homes that are manufactured in a controlled environment or manufacturing plant and then transported to their final destination)
- Single-family
- Multifamily
Tenure status
- Renters
- Owners
Race
- White
- Nonwhite
Age
- Elderly
- Non-elderly
Income
- Low-income (defined as less than 200% of the federal poverty level)
- Non-low-income
Rural housing stock is more dispersed than in urban areas, and three-quarters of rural homes are singlefamily units. In some regions, more than 20% of rural households live in manufactured housing. About a quarter of all rural households are renters, the majority of them in single-family homes.
This study focuses on energy costs related to the physical housing structure. Energy costs in this analysis do not include transportation costs or water bills, although those costs do represent a large portion of household expenditures in rural areas. The report concludes with an overview of program options to address energy affordability, as well as challenges and opportunities related to serving rural households with energy efficiency.
Rural Energy Burden
Our analysis shows that while energy burdens vary greatly by region, rural households throughout the United States have a higher median energy burden (i.e., spend a higher percentage of household income on energy bills) than their overall region as well as a larger burden compared with metropolitan households. Other key findings include:
- East South Central, New England, and Mid-Atlantic regions have the highest median rural energy burdens at 5.1%.
- Low-income households have the highest energy burdens in the New England, Mid-Atlantic, South Atlantic, and East South Central regions, where the median energy burdens for these households are above 9.5%.
- Nationally, rural low-income households experience the highest median energy burden at 9%, which is almost three times greater than the non-lowincome rural median of 3.1%. Some low-income households are even worse off: In several regions, one-quarter of the low-income rural households have a median energy burden greater than 15%.
- Residents of rural manufactured housing experience a median energy burden that is 42% higher than that of rural single-family homes. The median energy burden of residents of rural manufactured housing is also 32% higher than the overall rural energy burden. Residents of multifamily structures with 2–4 units have a median energy burden that is 20% higher than that of rural single-family households.
- The median energy burden of rural elderly households is 44% higher than that of non-elderly households.
- Rural renters experience a median energy burden 29% higher than that of owners.
- The median energy burden of nonwhite households in rural areas is 19% higher than that of their white counterparts.
Identifying high energy burdens in rural areas is an important step toward addressing rural energy affordability. Across the country, rural poverty and unemployment underscore the need for affordable energy. Approximately 41% of households in rural areas have incomes below 200% of the federal poverty level, or $49,200 for a family of four in 2017.
A number of other factors besides income level may also contribute to higher energy burdens, including the physical condition of a home, a household’s ability or inability to invest in energy-efficient equipment and upgrades, and the availability of efficiency programs and incentives that put energy-saving technologies within reach. (See table 2 for more details on the drivers of high energy burdens.) Elevated energy burdens have also been correlated with negative health outcomes, especially for children and the elderly, that may result from extreme temperatures in the home or dampness and mold. Energy-burdened households may improve their financial stability, comfort, and health by addressing these drivers.
We also found that energy efficiency upgrades can lower household energy burdens by as much as 25%. For some of the subgroups we studied, this translated into more than $400 savings annually. For example, the median low-income rural household would save about $420 a year, and the median manufactured housing resident, $408. Overall, every rural subgroup would benefit from improved housing efficiency.
While raising the efficiency of the housing stock in rural areas can help alleviate high energy burdens, comprehensive energy efficiency programs and services have not taken hold in many of these communities. Further, many rural households lack the discretionary income—and therefore the upfront capital—to invest in energy efficiency upgrades such as a more efficient HVAC system or improved insulation, or they do not have the authority to undertake upgrades because they are renting their home. Additionally, energy efficiency programs that do serve rural communities could benefit from improved design and targeting in order to address long-term energy affordability needs.
To address high energy burdens, several types of program options exist to assist customers in rural and non-rural areas. These programs fall into three main categories: bill assistance, energy efficiency and weatherization, and on-bill financing options for efficiency upgrades. In this report, we focus on opportunities and challenges surrounding such efforts to make energy efficiency more accessible in rural areas.
Challenges and Ways Forward
LOW-INCOME HOUSEHOLDS
Rural communities have high concentrations of low-income households that experience high energy burdens and often cannot afford the upfront capital costs needed for energy efficiency improvements. To meet these needs, energy efficiency program administrators can partner with local community organizations to leverage funding and deliver resources. They can also encourage low-income families to invest in efficiency alongside other important issues related to household health, comfort, and safety. Programs that allow customers to make energy-saving investments and pay for some of these costs over time on their bills can help individuals whose credit history is a barrier to borrowing capital for efficiency upgrades.
RENTERS
Renters, who make up about a quarter of rural households, experience higher-than-average energy burdens. Split incentives may be a barrier to efficiency in rental properties. If the owner does not pay the energy bills, then he or she may not want to invest in efficiency upgrades to lower those bills. On the other hand, the renters who pay the bills may not have an incentive to invest in energy efficiency upgrades for a property that they do not own, even if such investments would lower their energy bills over time. To counteract these disincentives, utilities should make efficiency programs easy to enroll in, easy to understand, and cost effective for both property owners and their residents.
MANUFACTURED HOMES
Approximately 70% of all manufactured homes are located in rural areas. Even though manufactured homes consume 35% less energy than site-built homes due to their smaller size, residents spend 70% more per square foot on energy. The majority also rely on electricity and electric resistance furnaces as their main heating source.2 In some cases, manufactured homes can be more challenging and expensive to weatherize or repair through efficiency programs due to air leakage or infiltration, crossover ducts, lack of insulation, poor thermostat placement, and inefficient heating systems. To address these challenges, utilities must design innovative programs that facilitate repairs and efficiency upgrades for existing manufactured homes, as well as incentives that encourage greater efficiency in factory-built home construction.
BROADBAND
Broadband Internet expands economic opportunities in rural areas and allows energy efficiency technologies to be co-delivered through local utilities or energy and Internet service providers (ISPs). These providers have an opportunity to leverage broadband expansions by jointly promoting broadband and efficiency technologies (e.g., smart thermostats). Some co-ops also offer broadband services themselves and jointly promote efficiency and broadband to customers.
PROPANE AND FUEL OIL
Although many rural households rely on propane and fuel oil for heating, providers of these fuels typically do not fund weatherization and efficiency programs. Electric utilities are frequently the main providers of efficiency programs in rural areas but often are unable to offer efficiency incentives for nonelectric end uses, such as propane or fuel oil heating. To address this, fuel-blind programs can provide measures to address a variety of end uses through bundled funds from energy utilities and other weatherization funding sources.
PROGRAM RESOURCES
Many rural utilities are unable to allocate sufficient funding and capacity to meet the efficiency needs of their communities, leaving many rural households with little or no access to affordable efficiency upgrades. One solution is for small co-ops to partner with their wholesale generation and transmission (G&T) co-op to spread costs and leverage resources in order to better serve their customers with efficiency programs. By recognizing the mutual benefits of energy efficiency, such as providing a service to customers or efficiency as a utility resource to meet customer energy needs, electricity distribution co-ops and G&T co-ops can work together to provide savings to their members.
ENERGY EFFICIENCY WORKFORCE
While the need for efficiency is high, energy efficiency investments in rural areas are hindered by numerous barriers, including limited utility program offerings, lack of information about programs to increase enrollment, and lack of trained contractor networks, to name a few. Contractors must have certifications and training in order to properly implement the US Department of Energy Weatherization Assistance Program and other, utility-led energy efficiency programs. Rural areas face barriers in terms of establishing certified energy efficiency contractor networks and maintaining the necessary volume of work to support them. Rural efficiency providers need to balance staff size and staff training with the demand for efficiency projects. To address this issue, contractors can be trained remotely taking advantage of distance learning opportunities through community colleges and education center programs or through rural utilities, to expand the efficiency workforce in rural communities.
PROGRAM MARKETING
All energy efficiency programs face challenges in effectively conveying program information, creating awareness of program options, ensuring language accessibility, and addressing customer or member skepticism regarding potential energy savings. Rural utilities can work to gain a better understanding of the households they serve, demographically and socially, which can facilitate improved marketing and targeting of programs. Program administrators can also improve marketing by jointly promoting efficiency programs with other offerings, such as broadband services or renewable energy options like solar, or by partnering with local agencies and service organizations to market and provide education to residents.
PROGRAM EVALUATIONS
Even if they are not required to evaluate programs, utilities can benefit from conducting evaluations to determine how to optimize their offerings. Evaluations can help identify ways to better serve customers; they can also address customer skepticism by verifying energy savings and other program goals. Due to the limited capacity of small rural utilities, federal and state governments can also consider providing assistance or standardization for evaluations of small rural co-ops and municipal utility programs. In addition, utilities can partner with local colleges or universities to help measure program outcomes and impact.
All of these ways forward can increase the reach, effectiveness, and energy savings from rural efficiency programs and investments. Energy efficiency not only can act as a strategy to reduce high energy burdens for rural communities but can also lead to other positive health, environmental, and economic development outcomes.
Conclusion
Our analysis reveals that rural households have higher energy costs, as a percentage of their income, than metropolitan households. Low-income, renting, nonwhite, and elderly households, as well as those occupying multifamily or manufactured homes, face even greater energy burdens than the rural median. Residential energy efficiency, an underutilized strategy in rural areas, can complement bill assistance and other social services to alleviate high household energy burdens. We recommend expanding current low-income program offerings, exploring no-risk or low-risk efficiency financing options, incorporating regional workforce development initiatives, and building relationships with other area service providers to strengthen program delivery. Energy utilities, in particular, are well positioned to work with community partners to design and deliver efficiency programs that meet the needs of their members or customers.
Programs that address high energy burdens can help alleviate poverty and provide other benefits to society beyond energy savings, including economic development, additional employment, education opportunities, and improved public health. Not only will rural households benefit from greater access to energy efficiency investments, but so will entire communities.
Download full version (PDF): The High Cost of Energy in Rural America
About the American Council for an Energy-Efficient Economy (ACEEE)
aceee.org
The American Council for an Energy-Efficient Economy (ACEEE), a nonprofit, 501(c)(3) organization, acts as a catalyst to advance energy efficiency policies, programs, technologies, investments, and behaviors. We believe that the United States can harness the full potential of energy efficiency to achieve greater economic prosperity, energy security, and environmental protection for all its people.
About Energy Efficiency for All
energyefficiencyforall.org
Energy Efficiency for All is dedicated to linking the energy and housing sectors together in order to tap the benefits of energy efficiency for millions of low-income families. We work with electric and gas utilities and their regulators interested in innovative energy efficiency program designs. We advise housing finance agencies on best practices in building owner engagement and finance products. We collaborate with owners, managers, businesses and advocates in order to achieve energy savings in multifamily properties. Our project is a partnership of the Energy Foundation, Elevate Energy, National Housing Trust and Natural Resources Defense Council. This project was made possible with funding support from The JPB Foundation.
Tags: ACEEE, American Council for an Energy-Efficient Economy, Energy Burden, Energy Efficiency for All, Energy in Rural America, Rural
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