Energy Efficiency: Key to Affordable Energy in Michigan
Today, October 5, marks Energy Efficiency Day, an important day to reflect on the many benefits energy efficiency provides year-round.
The theme of Energy Efficiency Day touches on three of those benefits, “Save Money. Cut Pollution. Create Jobs.” Related to the money-saving benefit, energy efficiency is a key tool for helping to improve long-term energy affordability. A high energy burden, which refers to the percentage of household income spent on energy bills, is a key indicator of unaffordable energy. A high energy burden is often considered 6 percent or higher, and a severe energy burden is considered anything above 10 percent. Currently, there are efforts underway in Michigan to better weave together and leverage energy efficiency and affordability efforts, with future opportunities to strengthen policies and programs to ensure energy affordability is always a priority.
The Need for Improved Energy Affordability in MI
Michigan residents are in serious need of energy affordability support. Energy bills are “a crippling financial burden for low-income Michigan households,” according to 2021 research on the home energy affordability gap. The latest research found that Michigan households below 50 percent of the Federal Poverty Level are paying 34 percent of their annual income simply for their home energy bills, way above that 6 percent threshold. Last year, three Michigan community-based and environmental justice groups (We Want Green Too, Michigan Environmental Justice Coalition, and Soulardarity) teamed up with the University of Michigan’s School of Environment and Sustainability to understand energy injustices and energy burden for the residents of Detroit and the Upper Peninsula of Michigan. Through phone interviews with around 700 residents, they found that 54 percent of the respondents had estimated energy burdens at or above 6 percent.
Finally, research from the American Council for an Energy Efficiency Economy (ACEEE) shows that energy burdens are not shared equally, as Black, Hispanic, Native American, older adults (65+), renters, and low-income multifamily building residents have disproportionately higher median energy burdens. This is true in the case of Detroit, where low-income, low-income multifamily, and Black households specifically experience the highest median energy burdens.
Energy Efficiency Program Improvements
Every two years investor-owned utilities in Michigan, like DTE and Consumers Energy, are required to file energy efficiency plans (referred to in Michigan as “energy waste reduction” plans) for approval at the Michigan Public Service Commission. These plans include details on all of the energy efficiency programs a utility plans to provide, how a utility plans to comply with the MI energy efficiency statewide standard, and any additional utility-specific requirements for energy efficiency.
When these plans get drafted, there’s an opportunity for non-utility groups, such as environmental, consumer, housing, and community-based organizations, to get involved to influence what goes into the 2-year energy efficiency plans. In the 2022-2023 utility energy efficiency plans, NRDC, Sierra Club, Ecology Center, the National Housing Trust, and Earthjustice intervened to ensure that the updated DTE and Consumers energy efficiency programs were benefiting Michigan's most energy-burdened communities. Untargeted utility energy efficiency programs often do not effectively reach communities of color and low-income communities, so specific program design and requirements are critical to ensure programs are effectively and equitably serving those communities.
Advocates were successful in settling the latest plan with DTE and Consumers Energy, which included critical improvements and commitments to ensure that Michigan’s energy efficiency programs make energy bills more affordable, including:
- Expanding Income Qualified (low-income) Energy Efficiency Program Investment
- DTE committed to a total income-qualified program increase of $10.5 million compared to what the company originally filed for 2022-23.
- Consumers increased its original proposal for income-qualified electric programs by 29 percent, and income-qualified gas programs by 56 percent
- Improved Performance Incentive Mechanism
- DTE and Consumers are now financially rewarded if their energy efficiency programs hit specific requirements related to lifetime savings, low-income spending, and installing high-impact measures in income qualified homes/buildings
- Targeting Programs to the Most Energy Burdened Communities
- Commitment from both utilities to develop studies and strategies to target high-need, energy-burdened areas with energy efficiency
- Health & Safety Funding
- Requirement to continue and and expand budgets for addressing health and safety issues (wiring, mold, asbestos, roof leaks, etc.) in income-qualified homes
- Coordinating Energy Assistance and Energy Efficiency Programs
- Commitments related to pairing and coordinating bill-assistance pilots and programs with energy efficiency and tracking progress.
- Expanded Reporting
- Requirements to track and report metrics that will help advocates better understand the equity of investments across current energy efficiency programs
- DTE agreed to publicly report a portion of this data at dteenergyeereportingsite.com
Work is underway to hold DTE and Consumers accountable to these new commitments, including through energy efficiency and affordability work groups, such as the MPSC-led Low-Income Energy Waste Reduction working group and Energy Affordability and Accessibility Collaborative. Consumers and DTE will be filing their next 2-year, 2024-2025 energy efficiency plans in the Summer of 2023, with another opportunity to influence them and ensure energy affordability is front and center.
The Whitmer Administration identified energy affordability as a top priority in the state’s climate roadmap--the MI Healthy Climate Plan--and through several workgroup initiatives run by the Michigan Public Service Commission (MPSC).
The MI Healthy Climate Plan includes two recommendations that tie affordability with energy efficiency priorities. One recommendation is to limit low-income Michigan households’ spending on heating and powering their homes to 6 percent of their annual income, putting in place an energy affordability threshold. The Plan also calls for utilities to set a minimum energy efficiency spending level for low-income customers.According to a 2016 study by the University of Michigan’s Urban Energy Justice Lab, 35 percent of state residents qualify for low-income energy efficiency programs. Still, only about 12 percent and 17 percent of electric efficiency investments by Consumers Energy and DTE Energy were dedicated to programs aimed at low-income households. While these investments have increased since 2016, low-income households are still not equitably benefiting from energy efficiency programs in Michigan.. Statewide requirements that promote low-income energy efficiency investments and affordability can help to address this gap.
The second relevant recommendation in the MI Healthy Climate Plan is to “…[r]educe emissions related to heating Michigan homes and businesses by 17 percent by 2030.” There is also discussion of investments in repairing and improving the health and safety of buildings and homes, to enable energy efficiency work to be done. Without dedicated funding to address at least some of the health and safety issues in a home, deep energy efficiency measures may be left incomplete. Combining energy efficiency and these health and safety funds will help the state to implement this recommendation, andmake Michigan households safer and eligible for energy efficiency funds, which will support lower emissions and energy bills.
In advancement of these goals, the MPSC has asked a newly established Low-Income Energy Policy Board to focus on issues affecting the complete delivery of energy efficiency programs to low-income customers and to identify ways to address gaps in energy assistance offerings. The board is hosting its first low-income energy affordability summit on November 3rd.
The implementation of the MI Healthy Climate Plan will be essential to meeting statewide energy affordability and energy efficiency priorities
Decarbonizing Buildings: The next step in addressing energy affordability
Decarbonizing our buildings or switching fossil fuel (gas and propane) powered appliances with efficient, electric appliances will also be critical to meeting Michigan’s climate and affordability goals and more.
Efficient, electric technologies such as heat pumps are high-impact energy efficiency measures that can help cut energy bills and emissions, while delivering important co-benefits such as improved indoor air quality and cooling for households that previously lacked it. Ducted air source heat pumps, in particular, can cut energy use by 50 percent compared to electric resistance/baseboard heating systems and are three to five times more efficient than their gas furnace counterparts. Homes and businesses that switch to all-electric appliances further eliminate the cost of paying for gas infrastructure leading to even greater cost-savings than for those that partially electrify.
DTE, Consumers Energy, and UPPCO have all rolled out heat pump pilot programs ranging from upgrading electric resistance heat in existing households, to all-electric new construction, to switching out propane furnaces with efficient, electric air source heat pumps in Michigan’s Upper Peninsula. These pilots have performed well in implementation, and advocates are proposing to scale them in the coming years. Contactor recruitment, education, and outreach programs have also been pursued in utility pilots to educate and familiarize Michigan contractors with the latest generation of heat pump systems. This is critically important as the more contractors become familiar with these systems the more quickly they can scale.
While this is positive progress, ambitious targets for statewide adoption of efficient, electric technologies such as heat pumps are needed to scale this effort and ensure these technologies are available to all Michiganders. Households with the highest energy burden, in particular, will need to be at the forefront of these efforts to ensure consumers can leverage the point-of-sale rebates and tax credits for efficient, electric technologies available as part of the Inflation Reduction Act.
More Work to be Done
Michigan has been making progress to leverage energy efficiency as a tool for energy affordability, but there is much more work to be done. Of note, it will be critical to center equity and justice throughout all of these efforts, including ensuring that the most energy-burdened communities are leading the solutions and receiving significant benefits from energy efficiency programs to see improved affordability.
Restorative justice is also essential to undo and account for past harms in Michigan’s low-income communities and communities of color, who have historically and intentionally been deprived of their fair share of benefits from energy efficiency for so long. Michigan needs stronger metrics, tracking, and goals focused on affordability and justice, and should look to leverage new frameworks and resources, like those recently published by the Energy Equity Project.
Finally, there must be a focus on weaving together affordability programs, especially with new federal dollars to be leveraged, to ensure communities and families can easily and justly receive the multiple programs and tools to help improve their long-term affordability, including a key one – energy efficiency.
If you would like to learn more about Energy Efficiency Day or join as a supporter, check out the Energy Efficiency Day website.