The Infrastructure Effect: Home electrification helps vulnerable groups

This post is part of a series exploring the impacts of federal investments in home electrification, transportation, supply chains, and climate resilience.

Federal funding for home electrification and energy efficiency upgrades helps to reduce emissions and home energy bills for low-income and vulnerable groups, research from Carnegie Mellon University shows.

These groups frequently face disproportionately high energy bills that climate change can worsen. 

One Carnegie Mellon study found that Inflation Reduction Act (IRA) rebates for home electrification make it easier for low- and middle-income households to afford cleaner and more energy efficient homes. These families often live in older, less energy efficient housing, and may not be able to afford electrified upgrades such as heat pumps for heating and air conditioning. 

The IRA rebates are meant to reduce the upfront costs of residential energy efficiency retrofits, funding up to 100% of the project cost for low-income households and up to 50% of the cost for moderate-income households.

The Carnegie Mellon researchers assessed if households would have the potential to save on energy costs with electrified appliances, or a household’s “adoption potential” for cleaner technologies. They found that with IRA rebates, the adoption potential of low-to-moderate income households more than doubled for heat pumps, heat pump water heaters, and electric cooking ranges and more than tripled for heat pump clothes dryers relative to pre-IRA adoption potential. Removal of these IRA provisions would reduce the number of households that could cost-effectively save money on their energy bills with these technologies.

A separate study looks at how increasing temperatures due to climate change will affect residential air conditioning use among vulnerable groups, and how improving AC efficiency can reduce consumption and therefore energy bills.

When these households’ monthly electricity bill increases, without equivalent increases in monthly budgets or a reduction in other expenditures (e.g., food, transportation, and utilities), they are at risk of disconnection. Approximately 27% of Americans in 2020 said they are unable to adequately meet their basic household energy needs.

The study found that improving AC efficiency reduces cooling consumption by up to 70% for vulnerable groups. But it notes that vulnerable groups may still face unaffordable electricity bills after adopting efficient AC units, under different future warming scenarios. 

The IRA provides a 30% tax credit for home improvements that save energy, including the installation of water heaters and HVAC systems. In 2023, 2.3 million families claimed more than $2 billion from the tax credit for energy efficient home improvements. Families saved an average of $882 on their taxes and lowered their energy bills by an average of $130 in the first year, according to an analysis by the American Council for an Energy-Efficient Economy (ACEE).

The CMU research suggests that additional infrastructure improvements, such as lower electricity prices from low-cost generation, and policy support including weatherization and energy assistance are needed to ensure that vulnerable groups have adequate resources to meet their cooling needs. It points to the federal assistance programs in the IRA, and also the Weatherization Assistance Program (WAP) and the Low-Income Home Energy Affordability Program (LIHEAP) as important sources of support for securing capital for efficiency upgrades.

Taken together, CMU research shows the IRA provisions help reduce emissions and lower energy bills for the most vulnerable Americans.