The Path Forward for Natural Gas

by | May 24, 2021 | Energy Solutions, Natural Gas Industry, Partnership

Published by American Gas Association, May 2021

Even as decarbonization efforts accelerate, customer energy equity relies on recognizing the value in a robust energy mix that includes natural gas and a renewed focus on energy efficiency.

Utilities represent a disproportionate percentage of a low-income household’s expenditures. As some states accelerate decarbonization efforts through electrification, residential natural gas customers face a developing paradox of increasing costs for service, with low- and moderate-income, or LMI, consumers especially impacted.

Yet customer energy equity relies on recognizing the value in a robust energy mix, including natural gas. A renewed focus on energy efficiency efforts marks the path forward.

The True Cost of Electrification

It’s estimated that 75% of American homes rely on two or more sources of energy, though some states and municipalities have launched promotional campaigns focused on complete home electrification.

Feasibility and affordability of home electrification are called into question when considering certain home types and income levels. For example, older homes may have lower amperage service and can’t manage the added strain of complete home electrification, which requires considerable initial outlay. The cost of upgrading electrical service to 200 amps can range from $800 to $3,000, and the average cost to install a heat pump is more than $10,000. Rebates and tax credits can defray the costs, sometimes considerably depending on location, but the homeowner must still cover substantial amounts out of pocket.

The Impact to Low-Income Households

Not only is retrofitting a home expensive on the front end, but there’s also added expense on the back end, as a natural gas home costs homeowners an average $879 less than electric per year. Another concern is whether landlords will pass down increased heating costs to renters after electrifying rental properties.

LMI households should not have to take on these additional costs, especially when they are facing the economic challenges that the coronavirus pandemic has presented. Even before the economic downturn, 71% of people working a minimum-wage job had difficulty meeting their basic bills, according to a survey by The Harris In addition, nearly 80% of survey participants said they lived paycheck to paycheck at least sometimes. Debt is up and savings are
down across the board, with just over 50% of people saving $100 or less each month.

Seniors on fixed incomes are also at risk. One in six older adults lives in poverty, and half of those facing retirement have less than $10,000 in savings. The median annual income of retirees 65 to 69 is $37,200, according to U.S. News and World Report.

Utilities, including energy and water, represent more than 20% of a low-income household’s monthly expenditures, a significantly higher portion than that of middle-class wage earners. The energy burden is also disproportionate across racial lines. In comparison to white households, Black households spend 43% more of their income on energy costs; Hispanic households spend 20% more; and Native American households spend 45% more.

Analysts and community organizers also are sounding the alarm, acknowledging that a large shift to complete home electrification could adversely impact the grid, requiring significant upgrades to meet increased demands. A recent study by the California Center for Sustainable Communities at UCLA analyzed time-of-use data from more than 17,000 households in a low-income portion of Southern California Gas Company’s service territory. The study revealed a correlation between patterns of hourly natural gas usage and daily peak electricity loads. The study concluded that widespread electrification of residential end-use appliances may intensify daily peak demand, increasing household energy expenditures and delivering only limited reductions in carbon dioxide emissions.

Some groups have also expressed concern that as those households able to electrify do so, they will leave behind a shrinking natural gas ratepayer pool made up mostly of those same LMI households. Those households will then shoulder an increasingly larger socialized debt burden to maintain and upgrade natural gas distribution infrastructure. It’s estimated their bills could balloon to $400 per month.

The Path Forward

A renewed focus on energy efficiency and its role in decarbonization is one answer to preserve customer energy equity. Energy efficiency investments for lower-income homes are particularly important for quality of life and safety, ensuring that homes have basic utilities. Low-income efficiency programs also help avoid utility shutoffs, a benefit for both customers and the utility. Such programs fit well with requirements to fund programs to help LMI customers
conserve energy.

Programs that improve a home’s building envelope can significantly contribute to energy and carbon savings efforts, so managing a weatherization program—including having dedicated building science advisors—could be an important part of a utility’s equity strategy. Even if it isn’t, you can still communicate with your residents about the importance of weatherization and home energy management, share information on energy self-audits and easy, low-cost, do-it-yourself fixes, or provide marketplace recommendations for energy auditors.

Since an unexpected repair expense can be devastating to an LMI household, offering affordable monthly repair plans, such as those provided through partnerships with entities such as HomeServe, for home systems and appliances can be a predictable part of a limited budget that protects against an expensive issue that may result in the home being uninhabitable. Through partnership with a provider of these plans, utilities can receive royalties
that could help to fund equity programs and other assistance for at-risk customers.

Enlisting LMI ratepayers into focus groups to help evolve communications about energy efficiency and energy equity programs will ensure that those messages resonate with the very audience they are directed toward. Through focus groups, market research or surveys, these stakeholders also can provide input on program benefits and whether programs are effective and easy to navigate for LMI customers.

The same stakeholders can potentially be engaged and educated so they can act as local, knowledgeable sources of information about energy within their own communities, helping their neighbors. People trust people they know above marketing campaigns—in a Nielsen study, 92% said they trusted people
they knew over any other form of advertising. Studies have shown that, on subjects like energy conservation, what people think their community’s stance is on a subject can influence their own behavior.

Relationships with state and local governments and social service organizations are just as important to maintain. Organizations working daily with LMI residents can help utilities identify emerging needs that can be addressed through energy savings assistance, equity and efficiency programs.

The Takeaway

The fact is that natural gas is cleaner than coal and oil, cheaper than electric and more reliable than renewable energy. As we go forward, natural gas has a role to play in the decarbonization of the energy mix, not only to firm the grid when renewable energy is intermittent, but as a cleaner energy source in and of itself. LMI households will continue to need inexpensive, plentiful natural gas to heat their homes and power their appliances.

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