Helping low-income families electrify could save Americans $96 billion

Americans who electrify their homes could reap a massive net savings of $96 billion over the coming decades, but only if policymakers ensure lower-income households aren’t left behind.

That’s according to a new report released Tuesday by the American Council for an Energy-Efficient Economy (ACEEE), which quantifies the benefits of swapping fossil-fuel and electric-resistance appliances for far more efficient electric ones, such as heat-pump heaters/air-conditioners, water heaters, and clothes dryers.

The report’s authors also found that the broader societal benefits of helping those with lower incomes electrify their homes are staggering: Savings would add up to $2 trillion from now to 2050 because of the avoided social and health costs of burning fossil fuels.

“You can save an awful lot of money with equitable electrification,” said Steven Nadel, executive director at ACEEE.

The report illuminates what’s at stake, especially for vulnerable families, as states and municipalities grapple with how to decarbonize homes and buildings in the pursuit of climate goals.

“The upfront price of electrifying can be prohibitive for low-income households, but the benefits of helping these homes go electric dwarf the costs,” Lyla Fadali, senior researcher at ACEEE and lead author of the report, said in a statement. ​“If we don’t invest in energy upgrades in lower-income homes, we risk both higher energy costs and real impacts on human lives from air pollution and climate change, like having a family member hospitalized or a home being flooded.”

There’s more federal funding than ever to chuck fossil fuels out of homes, thanks to the historic 2022 Inflation Reduction Act, which includes $4.5 billion in targeted rebates to electrify the appliances of low- and moderate-income households. That amount isn’t nearly enough to cover the cost of retrofitting the roughly 36 million lower-income U.S. households that heat with gas, propane, and oil — estimated at $625 billion, according to Nadel. But it’s a down payment, he said.

To determine the effects of prioritizing electrification for lower-income households, the study authors modeled two very different futures in which 75 percent of U.S. residential energy use is electrified by 2050. In one scenario, lower-income households lag far behind higher-income counterparts and only about half have electrified. In the other, they’ve kept pace and 80 percent have electrified by midcentury.

The first scenario would overall end up costing $88 billion, the team found, while the second would result in net savings of about $96 billion through reduced utility bills. Moreover, accounting for the social and health impacts, equitable electrification would yield $140 billion more in benefits than an inequitable approach.

The team estimated these costs and benefits of electrifying lower-income households by drawing on building characteristics and energy use data for a representative sample of more than 18,000 homes from the U.S. Energy Information Administration’s 2020 Residential Energy Consumption Survey. The authors also relied on federal sources and tools to model the social impacts of greenhouse gases and outdoor air pollution.

The authors concluded that switching households to heat-pump water heaters and heat-pump HVAC systems delivers the greatest benefits. ACEEE recommends policymakers promote these swaps first.

Still, the biggest hurdle to electrifying lower-income homes is that ​“it’s not cheap,” Nadel said. ​“Some type of public financing will be very important.” To help cover the upfront costs, states will likely need to pull from a mix of sources, he said, such as the tax base, the federal government, and cap-and-invest programs that put a price on carbon and use the revenue for carbon-slashing initiatives. The societal benefits of these public investments, he noted, will pay off.