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How Upgrades Can Cut Costs and Reduce Energy Burden

Increasing energy efficiency in homes is a great way to reduce our collective energy consumption and the associated emissions and costs. 


Any home not operating at peak efficiency has the opportunity to benefit from upgrades, but some homes and households stand to benefit more than others. For example, the 54% of homes built before 1980 tend to be less efficient and have a greater opportunity to reduce energy intensity due to both normal wear and tear, and the improvement of building codes, materials, equipment since that time.


When it comes to cost savings associated with reducing energy use, some households have a greater opportunity to reduce their total expenses with energy efficiency projects than others. One way of understanding and measuring the impact of energy costs on American households is through what’s called ‘energy burden’.


Energy burden considers how much of a household's total gross income is spent on their monthly energy bills. It's a useful metric to consider when assessing the social impacts of energy efficiency upgrades. 


On a pure energy (or emissions) savings measure, larger homes tend to consume more energy, and so the emissions reduction potential is greater. However, higher income is also associated with larger home purchases, meaning those households are often less price sensitive to changes in their energy bills.


However, for the 30 million energy burdened American households, even small changes in utility bills can make a difference (good or bad). According to the 2023 Economic Well-Being report recently released by the Federal Reserve, 17% of all adults in the US reported not being able to pay all their bills in full, and utility bills (electric, gas, water) were most frequently named as the bills that group could not pay (5%). Families with income below $100,000 were twice to six times more likely to be unable to pay bills compared with families whose income was greater than $100,000.


For a typical homeowner or renter, a savings of even $40 a month can reduce their annual electricity spend by 30%.


There are many motivations for increasing home efficiency in the US - reducing our energy intensity and demand, reducing carbon emissions, increasing comfort and health - but for many Americans the long term cost savings are at the top of the list.


 

Sources: This article includes information sourced from The Federal Reserve System's Economic Well-Being of U.S. Households in 2023 report, published in May 2024; Drehobl, A., L. Ross, and R. Ayala. 2020. How High Are Household Energy Burdens? Washington, DC: American Council for an Energy-Efficient Economy; EIA.

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