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Three Obstacles for Lower-Income Energy Consumers

Clean and smart energy technologies, such as rooftop solar, smart thermostats and electric vehicles (EVs), have weathered the COVID-19 pandemic relatively well. Despite a tumultuous year, the largest solar company actually installed more rooftop solar in Q3 compared 2019, and signs suggest that the EV market is rebounding strongly after a sharp decline in the spring.

While consumers still seem to have considerable interest in these technologies during the pandemic, data suggests that most adopters of rooftop solar and other distributed energy resources (DERs) are still largely wealthier consumers – despite the fact that lower-income communities would significant benefit from clean energy technologies and energy efficiency. Is the lag in adoption among lower-income Americans due to a lack of interest or are there other factors at play here?

To illuminate lower-income consumers’ interests and values related to renewable energy, smart home technology and energy efficiency, the Smart Energy Consumer Collaborative (SECC) administered an online survey to 1,000 consumers with annual incomes under $50,000 this fall. In the study, consumers earning less than $25,000 were categorized as low-income consumers, and those earning over $25,000 as moderate-income consumers.

The “Understanding Lower-Income Consumers and the Smart Energy Future” research found that lower-income consumers’ values largely align with those of higher-income Americans. Saving money is their primary driver of energy decision-making, but there's also considerable concern for the environment and support for investments in clean energy. In fact, eighty-one percent of lower-income consumers value these two priorities.

So, what’s preventing lower-income consumers from adopting new energy technologies and participating in the smart energy future? Let’s look at three notable obstacles that the new research revealed.

Obstacle 1: These consumers still have transactional relationships with their providers.

While there has been a customer-centric shift for many electricity providers in recent years, this research revealed that this transition hasn’t yet reached lower-income consumers. For most lower-income consumers, their relationship with their electricity provider is purely transactional – paying their monthly bill or checking on the status of an outage.

We asked these consumers about their contacts with their electricity provider over the last two years, and no more than 10 percent of respondents had contacted their provider for a reason other than billing. For example, only 10 percent stated they had contacted their provider about rebates/credits, and only five percent had contacted their provider specifically to learn more about renewable energy alternatives.

If providers view every touchpoint with lower-income consumers as an opportunity to leverage the abundance of data to personalize recommendations, a new level of trust and new type of relationship can be built. Once that trust is established, lower-income consumers may be more likely to enroll in smart energy programs.

Obstacle 2: There’s a lack of awareness of existing programs targeting low-income consumers.

While almost all electricity providers offer programs that are uniquely targeted to help lower-income consumers access and afford the electricity that powers their homes, many lower-income consumers are unaware of these opportunities. For example, two-thirds of lower-income consumers state that they are not aware of any programs or discounts (from either their provider or the government) to help pay for energy-efficient upgrades/technologies.

Once the awareness barrier is broken, however, 90 percent or more of these consumers state that they will take advantage of the available assistance programs. The most common expressed interest related to efficiency assistance was purchasing energy-efficient lighting (38 percent), followed by improving insulation (26 percent) and buying energy-efficient appliances (22 percent). These upgrades can save consumers significant money on their bills and help build trusted relationships with providers.

This research shows that when consumers are aware of opportunities, they will take advantage of them. Improved communication is the key, and the electricity providers should consider partnerships so that they are not the only channel. One constant we see in our research with lower-income consumers is that family/friends, social networks and community organizations are effective ways to reach this population.

Obstacle 3: High upfront costs and a lack of financial assistance are preventing participation.

Of course, there are also significant financial obstacles for lower-income consumers. Compared with energy-efficient upgrades, awareness of bill pay assistance programs is slightly higher. However, 60 percent of all lower-income consumers are still unaware of any programs. For those that were of assistance programs and weren’t currently participating in them, we asked about their specific barriers.

For moderate-income consumers, the primary issue by far (38 percent) is that they do not meet the income qualifications. Even for low-income consumers, this is a commonly cited problem (19 percent), along with there being too much red tape (19 percent) and it being difficult to find more information (17 percent). It’s also notable that low-income consumers cited that program funds had run out before they were able to access them (15 percent) and that moderate-income consumers cited a lack of clarity of the discount they would receive (17 percent).

With many financial assistance programs available only to the lowest-income consumers, stakeholders should consider increasing income parameters where possible. In addition, energy-efficient upgrades have long-term savings potential for consumers. An expansion of assistance for larger investments in HVAC, energy-efficient appliances and renewable energy upgrades could bring more consumers along, helping them save more money over time. For renters, shifting the financial burden of upgrades (and the incentives to support them) to landlords may provide community-wide benefits through broader adoption of energy-efficient technologies.

This new research shows that lower-income consumers share many of the same values and aspirations as consumers with more disposable income. The difference with lower-income consumers – and the reason they are often underserved – is their ability to take action to achieve their energy-related values. By building trust and awareness, personalizing programs and services, and providing financial assistance, electricity providers and other stakeholders can help these consumers meet their energy goals and participate in the cleaner, smarter energy future.

Discussions

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Bob Meinetz's picture
Bob Meinetz on Dec 17, 2020

Patty, it seems all of the "Smart Energy" programs you're considering to help lower-income electricity customers "achieve their energy related values" require they accept a corresponding burden of inconvenience.

Time-of-Use (TOU) pricing, for example, requires lower income customers to use electricity when it's least useful in order to save money. Why would anyone believe this isn't an attempt to shift utilities' responsibility for providing adequate electricity to their customers?

Patty Durand's picture

Thank Patty for the Post!

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