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Anne Arquit Niederberger9/27/16 12:00 AM4 min read

"Teach a man to fish…" The case for empowering low-income households to shop efficient

Thirty percent of California households (3.72 million) are classified as low-income, earning no more than 200% of the Federal Poverty Guidelines threshold. Although many of these households own their own appliances and research new product purchases online, energy efficiency programs intended to benefit low-income populations are rarely designed to empower these customers to manage their energy consumption.

The most common programs either target multifamily building owners or are designed as direct install programs like the Energy Savings Assistance Program (ESA), which provides income-qualified residents with retrofit measures at no charge to the participating household, and are sometimes seen as unwelcome handouts. The emphasis has clearly been on financial assistance provided to low-income customers and multi-family building owners to overcome a perceived lack of private capital to purchase efficient products or invest in upgrades, with almost no effort to steer low-income private investment towards efficient consumer products.

These programs are missing out on opportunities to better engage and empower low-income households to shop resource-smart.

Under SB 350, the California Legislature directed the Energy Commission to complete and publish a study on barriers and solutions to energy efficiency, renewables and contracting opportunities among low-income customers by January 2017. Enervee’s comments on the draft released this month highlighted three recommendations to move low-income programs in the right direction:

  1. Expand the study to include a dedicated discussion of plug load & appliance efficiency barriers and solutions, given their dominant role in projected electricity demand growth and their contribution to the energy burden of low-income households and disadvantaged communities;
  2. Address critical data-related barriers that have hampered plug load & appliance efficiency advances in the past, yet can now be overcome thanks to newly available market intelligence and data on online behavior;
  3. Adopt a customer focus and implement behavioral interventions to overcome barriers and drive efficiency.

Plug-in equipment and miscellaneous loads are responsible for two-thirds of California’s residential electricity consumption today, and are expected to contribute 70% of electricity demand growth from 2015 to 2024.

Another reason to tease out barriers and solutions with respect to plug load efficiency is that this is an area that positions utilities to develop a more trusted, ongoing relationship with lower income households that delivers greater value to both households and society.

One important strategy that has been neglected to date is to develop programs that empower low-income households and communities to be energy-smart consumers and large buyers. Low-income households are making 1-time purchasing decisions that lock-in energy demand — in particular, of electronics — and efficiency is hard to factor in, as it is essentially invisible.

To improve market transparency, Enervee operates consumer-facing marketplaces on behalf of California utilities that assign a relative energy efficiency score to each product model, with the goal of making consumer product shopping experiences easier for busy people — and the feedback has been positive. These Marketplaces are already available to 60% of California households (including munis like LADWP and investor-owned utilities like PG&E, but have yet to be fully leveraged to benefit low-income customers.

Our experimental results suggest that lower socioeconomic status participants prefer more efficient products when the Enervee Score is present, and that the effect is at least as strong as for the general population.

Leveraging such behavioral insights can expand the scope of low-income programs beyond direct install to fast growing electronics categories and behavioral interventions that influence low-income shopping decisions without large subsidies. These two program approaches complement each other nicely.

Electronics products are among the fastest growing categories, yet are often unsupported by existing efficiency programs. Televisions are a prime example; they are responsible for 7% of national purchased electricity and — given the lower average price tag of efficient models, short replacement cycles and large volume of TV sales, nudging low-income consumers towards energy-smart TV purchases can deliver large savings quickly and cost-effectively, as we pointed out here.

Direct install programs could also become more user friendly by giving customers more choice & control (e.g., bulk procurement to support online product selection by customers, or online scheduling of installation). Other data-driven solutions include geographically and temporally targeted marketing of demand management programs that provide PLA (e.g., air conditioning) incentives or services that overcome barriers faced by low-income households. Such a targeted approach would allow PAs to capitalize on the locational value of the energy savings and demand reductions to support higher incentives for (connected) super-efficient consumer products, such as room AC, so that direct install is not the only option to deliver low-income programs.

Customer expectations are changing rapidly, and low-income programs will need to deliver a better user experience, if they are to be accepted against the backdrop of experiences offered by telecom, transportation and entertainment companies among the increasingly influential cohort of millennials.

Taking a customer-centric approach and piloting new low-income program interventions that leverage utility-branded Marketplaces — and the consumer product market intelligence and behavioral insights they generate — should be a key strategy to drive low-income energy efficiency.