9 Apr 2021
Being poor is expensive. From banking and childcare to transportation and shelter, the economy places a premium on goods and services sold to the poor. Energy is no exception. The Union of Concerned Scientists recently asserted that, “the average energy burden in the US typically hovers around 2.5-3 percent of one’s income, the average low-income household faces an energy burden that is 2x to 10x those levels…energy poverty falls directly onto the backs of millions of households from disadvantaged communities.”
As we look to greener energy, the economic outlook is exciting, but the outlook for the Americans who live at or below the federal poverty line remains precarious. While that same article proposed a tax-based solution to ending energy insecurity, I believe we need to look further into the future than that. America faces a fundamental tension: on the one hand, disadvantaged Americans have a harder time paying for energy, but going green will only cost more money, as Bill Gates has pointed out. Many have argued that going green only exacerbates energy insecurity: I disagree. The energy divide between rich and poor can be bridged when we go green. Here’s why.
One in three American households struggle to pay their electrical bills, not just those living below the federal poverty line. While fees have been levied on those who cannot pay over the years, such as arbitrary costs to “reconnect” power once it is cut (the energy sector’s answer to an overdraft fees), energy suppliers sometimes do provide relief. However, while lifeline plans can grant a measure of mercy, they do not constitute the greater vision we need as the country shifts to a greener grid. During my time as CEO at AGL, we took our own turn at addressing this problem by offering solar benefits and savings to hardship customers in New South Wales. While that was a step in the right direction, we need to keep pushing forward as a sector. What hangs in the balance is not just the fate of our planet, but also the promise of economic advancement. Ending energy insecurity is a matter of economic and social inclusion.
Going green is an opportunity to end that energy insecurity—a fundamental shift we are not talking about in the right way. Yes, it will require investment to accomplish massive electrification. However, it is imperative we get there because once the capital is invested, the marginal cost of energy will be zero within a broad range of consumption. Beyond trying to stem climate change, solar, wind, and storage can help maintain fixed energy prices, eliminating price volatility; this means energy bills can be structured to match individual circumstances.
Americans of all income levels can come along on this technological shift in infrastructure, something that has never happened before in our history. To understand how this is possible, we need to look at the ways in which marginalized populations have traditionally been left behind. The first way is chronic exclusion. Those who live paycheck to paycheck experience perennial income insecurity and often live in areas that are the dumping ground for industrialized society. Since the dawn of the Industrial Revolution, disadvantaged communities have been forced to contend with life in proximity to sewage, chemical treatment, water treatment, and all manner of runoff.
Historically, workers have garnered low wages for their labor and were often denied a living wage, as well as scant opportunities for quality healthcare, education, and housing. Those same workers experienced the most dangerous downsides of industrialization, both in rural and urban settings. They were also the last to benefit from the new technologies that industrialization produced. For instance, gas lamps were dirty, not healthy, and dangerous. The incandescent bulb was invented in 1879, but many trapped below the poverty line in tenements and on sustenance farms. lived with gas lighting well into the 30s. The TVA didn’t electrify Appalachia fully until the Johnson administration. Simply put, new technology comes to those who can afford it first. Similarly, today “approximately 19 million Americans—6 percent of the population—still lack access to fixed broadband service at threshold speeds,” according to the FCC.
The second way in which the poor are affected, is acute insecurity. We know what the socio-economic ramifications of catastrophe from climate change look like already. We saw this in Texas last month, in Puerto Rico four years ago, and in the brutal aftermath of Hurricane Katrina. In these acute moments, those in poverty experience outages longest and are charged the most for their energy. The rich have the funds to weather the storm—literally—and the ability to post up at a Ritz Carlton if necessary, or afford a Telsa power wall. Eventually, these acute crises—which occur with greater and greater frequency as climate change intensifies—accrete and constitute a new set of adverse conditions in which the marginalized not only suffer, but are then are left in chronically underserved, overcharged conditions.
Our plans for a green future cannot simply assume inclusion for all economic strata of American society. The so-called Green Tide will not lift all boats unless we structure it to serve all Americans. If we don’t, what the future holds will likely have a lot more in common with the digital divide. After all, the energy divide is far more fundamental than the digital divide: no one has access to a computer or a phone if they cannot turn them on. Real efficiency comes from smart appliances, but those who struggle to make ends meet cannot afford a smarter refrigerator.
When I was at AGL, Australian media fussed over a man who had the battery power to keep the lights on during the South Australian Blackout in 2016. This was a wonderful news item, but it isn’t a tenable solution for anyone living in hardship. We need to figure out how to bring electric solutions to the marginalized. Already, we are starting to see examples of how green energy might work in these settings. Rewiring America has helpfully broken down the cost analysis for electrification within a hypothetical household; New Orleans, home to so much climate tragedy, has also begun some admirable pilot programs.
These are wonderful developments, but they should serve as a reminder that we need an even bigger vision than that so we don’t leave our most vulnerable citizens behind in this next leap forward. This is not merely a matter of convenience and safety, but one of equality and inclusion. Technology is fundamentally challenging the economic paradigm of energy production and consumption. By generating power with wind and solar and then storing it, we can take variability out of the energy supply and give predictability to it. This allows a shift from commodity-linked product to a product that is purely invested capital. The implications for the consumer are enormous: the green energy bill will be one that can be tailored for affordable consumption, much like a car lease or a mortgage on a house. We can rewrite the script on home energy costs.
Now is the time to design a model to match consumption, so that marginalized communities can reap the larger benefits. Affordability is not just about price: we must think instead about wallet share that goes to energy, so that capital is freed up to go around society, and to businesses within our underserved communities. Leaving marginalized communities out of this new equation will not only have ramifications for Americans in those communities, but also for society at large which will have to support them, as they are trapped at the bottom of the ladder without a lifeline, living month to month with as much as 30% of their income going to energy. Productive citizens need to be healthy and educated; they cannot be stuck spending nearly all of a household budget on energy.
The existence of so much societal benefit also implies that there ought to be a role for government in this matter. The government ought to invest in societal good—and get a return on its investment. Green energy is not an expense, it’s a capital investment; for this reason weatherization grants are actually much better suited to green energy. Should the government take the chance to invest—either directly or in the form of green bonds—it will play a critical role in breaking the cycle of poverty on top of helping to save the planet. For this reason, I must wonder: why is the digital divide mentioned in Biden’s infrastructure plan, but energy insecurity isn’t? We need to change this.
Leaders in the green energy transition have a responsibility to society to make their vision an inclusive one that brings all economic tiers of our communities along. They need to think hard about what happens to those who won’t have access to affordable energy and how much more it will cost us all in terms of economic and human capital. If we don’t act and move toward inclusion, we will ALL lose out on a brighter future.