What you need to know about electricity burdens

Electricity prices are turbulent and unpredictable – especially over this past year; the average electricity price has continued to rise, making this abundantly evident to ratepayers. Although no one likes to receive an unexpectedly high electricity bill, not everyone is similarly affected by the cost of keeping the lights on. Some people won't notice the bill increase, but to some, a high electricity bill may mean sacrificing adequate heating and cooling.

Electricity is a central part of life; it directly affects the safety and security of a household. But it also costs money to power a home. Luckily, energy-efficient technologies, incentive programs, and renewable energy systems like solar power grant ratepayers an opportunity to save money on the electricity their home produces. Even still, many of these cost-cutting solutions are only accessible to those who can afford the upfront investment. This article explains electricity burdens, where they are the highest, and possible avenues to lessen them.

Electricity burden is the percentage of gross household income spent on electricity, calculated by dividing the amount a household spends annually on utility bills by household annual income. For example, a household with $150,000 in yearly gross income that spends $2,000 a year on electricity would have an electricity burden of 1.3 percent – which is low. Now, say the household pays the same amount on electricity but has an annual income of $40,000. Their electricity burden comes out to 5 percent – a considerable difference. 

Notably, we also discuss energy burden in this article, but it's not entirely synonymous with electricity burden; it encompasses all energy costs, not just electricity. Check out the Sierra Club energy burden calculator to calculate what portion of your income goes towards gas and electricity bills.

According to The American Council for an Energy-Efficient Economy (ACEEE), a high energy burden consumes 6% or more of household income, and a severe burden exceeds 10%. Demographics, local weather, electricity consumption, and a home's heating fuel all influence energy burdens. Regionally, the central southeast region experiences higher energy burdens than others.

Low-income households tend to experience higher electricity burdens than the average household. The ACEEE found that one-fourth of all U.S. households and two-thirds of low-income ones have high energy burdens. Likewise, two out of five low-income households experience severe limitations. 

Electricity burdens also tend to be higher amongst minority communities. The 2020 study done by the ACEEE showed that Black, Hispanic, and Native American households respectively spend 43%, 20%, and 45% more of their income on energy costs compared to white (non-Hispanic) households.

Source: Department of Energy Low-Income Energy Affordability Data (LEAD) 

Community solar subscribers save anywhere from 5 to 15 percent annually on electricity bills! Signing up for a community solar project can help ease your electricity burden without upgrading your existing systems or adjusting your consumption habits.

It works like this: a large-scale solar array, called a solar farm, feeds electricity to the local grid. People and organizations serviced by the cooperating utility can purchase a portion of the power produced, usually through a subscription, and receive a discount on their electricity bills. As a subscriber, you'll save money while supporting local, renewable energy without installing anything on your property and paying little to no upfront costs. While community solar is helpful to any ratepayer, low-to-moderate-income (LMI) community solar programs offer impactful relief to those who qualify.  

The availability of community solar as a solution to low-income electricity burdens is growing and is expected to continue to do so with the recently announced guidance from the Department of Housing and Urban Development (HUD) – the goal is to enable the 4.5 million eligible families in HUD-assisted rental housing to subscribe to local community solar. Additionally, the Community Solar Subscription Platform, developed by the Department of Energy (DOE) and Department of Health and Human Services (HHS), serves as a digital platform to expand low-income community solar access through the Low-Income Home Energy Assistance Program (LIHEAP). The program is set to be piloted by Colorado, Illinois, New Jersey, New Mexico, New York, and Washington, D.C. 

The Inflation Reduction Act benefits LMI community solar projects through the solar investment tax credit (ITC). Previously set at 26 percent and scheduled to drop in 2023, the ITC for commercial solar projects under the IRA jumped to 30 percent until 2025. Furthermore, starting in 2023, community solar projects under 5 megawatts (MW) located in low-income communities will be eligible for an additional 10 percent, and those installed as part of low-income residential building projects or economic benefit systems could qualify for another 20 percent tax credit. Significantly, in most cases, these tax credits won't go directly to the subscribers; however, because the projects will cost less for developers to build, subscriptions should also be cheaper.

Community solar is gaining popularity and availability for a good reason. On top of easing electricity burdens, community solar creates local jobs and promotes a cleaner environment. Use the EnergySage Community Solar Marketplace to explore and compare projects near you. With programs and incentives like those we covered in this article, new projects are being developed nationwide. To learn more about community solar, check out our ultimate guide to community solar.