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DEMAND-SIDE RESPONSE

Varied health and financial impacts of time-of-use energy rates across sociodemographic groups raise equity concerns

The elderly and those with disabilities face greater increases in electricity bills and worse health outcomes under some time-of-use electricity rates. This suggests that vulnerable groups should be considered separately in time-of-use rate design, and future rate designs should be tested to ensure that they do not increase hardship.

Messages for Policy

  • Policies are needed to ensure that demand-side response does not increase hardships for vulnerable groups.

  • Different vulnerable groups will have different capacities to respond to rates using price signals, so demand-side measures should be carefully targeted rather than ‘one size fits all’.

  • Potential time-of-use rates should be tested using scientifically rigorous methods before widespread implementation, with separate evaluation of impacts on different groups.

  • People who are elderly, have disabilities and/or are members of minority groups will likely require particular attention in future pilots and policies.

based on L. V. White. & N. D. Sintov Nature Energy https://doi.org/10.1038/s41560-019-0507-y (2019).

The policy problem

Greater shares of renewable power in future electricity grids may introduce challenges for maintaining grid reliability; demand-side response measures offer one tool to maintain reliability while also increasing the share of renewable power. Pricing electricity higher in evenings (such as in ‘time-of-use’ rates) is a common demand-side response measure to encourage households and businesses to shift electricity demand to times when generation from renewable sources is readily available. This strategy may introduce disproportionate hardships for households that already live in energy poverty: they struggle to meet the financial demands of both energy costs and other necessities such as food and medicine. These vulnerable groups have often been afterthoughts in energy policy, and may also be less able to change the timing of their electricity use. If demand-side response risks worsening existing inequities, it is essential to develop policy responses before these measures are rolled out widely.

The findings

Elderly people and those with disabilities had greater bill increases when moved to time-of-use rates (versus staying on existing rates), compared to the equivalent increase seen in their non-vulnerable counterparts assigned to time-of-use rates (Fig. 1). Low-income and Hispanic households had lower bill increases compared to non-vulnerable counterparts. Hispanic households and those with disabilities experienced worse health outcomes on time-of-use rates, while households with young children experienced better health outcomes. Otherwise, no health and bill differences were observed between vulnerable and non-vulnerable groups. These results suggest that time-of-use rates may increase hardships faced by some groups already more likely to face energy poverty, but impacts vary by sociodemographic group and rate design. This study was conducted during the summer in the south-western United States, and we expect these results to extend to similar contexts — hot climates during summer. Findings may not generalize to different rate designs or climate conditions.

Fig. 1: Comparison of bill increases faced by vulnerable groups and their non-vulnerable counterparts.
figure1

af, Mean change in mean monthly summer bills (pilot minus baseline) for control and two different time-of-use rate designs (TOU1 and TOU2), for each vulnerability indicator: low income (a), elderly (b), young children (c), disability (d), Hispanic (e) and African American (f). Bills increased more for some vulnerable groups (filled bars) compared to non-vulnerable counterparts (unfilled bars). Solid boxes denote a statistically significant greater increase in bills for vulnerable versus non-vulnerable groups; dashed boxes denote a statistically significant smaller increase in bills for vulnerable versus non-vulnerable groups. Error bars represent standard error.

The study

Data are from a south-western United States utility pilot. We examine two time-of-use rates trialled in the pilot: TOU1 on-peak ran 14:00–20:00 on weekdays (0.3451 US dollars per kWh) and TOU2 on-peak ran 17:00–20:00 on weekdays (0.5326 US dollars per kWh). Households opted in to the pilot and were randomly assigned to either TOU1, TOU2 or the control group (stayed on existing rate). All participants completed a survey after time-of-use rates had been active for several months. We tested for differences in bills during the pilot versus the two years before it, whether this difference was greater for participants on time-of-use versus control, and whether vulnerable households on time-of-use compared to control experienced greater increases in bills than the increase experienced by non-vulnerable households on time-of-use versus control. The survey only occurred once, so we cannot compare before–after differences in reported health. We tested whether assignment of each group to time-of-use correlated with higher likelihood of needing medical attention for heat-related illness.

References

Further Reading

  1. Middlemiss, L. & Gillard, R. Fuel poverty from the bottom-up: characterising household energy vulnerability through the lived experience of the fuel poor. Energy Res. Soc. Sci. 6, 146–154 (2015). This work details hardships faced by vulnerable groups related to energy costs.

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  2. Walker, G. & Day, R. Fuel poverty as injustice: integrating distribution, recognition and procedure in the struggle for affordable warmth. Energy Policy 49, 69–75 (2012). This work provides additional detail on variation in hardships faced by different vulnerable groups.

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  3. Anderson, W., White, V. & Finney, A. ‘You Just Have to Get By’: Coping with Low Incomes and Cold Homes (Centre of Sustainable Energy, 2010). This work describes hardship-inducing responses of low-income households facing unaffordable energy costs.

  4. Hernández, D. Understanding ‘energy insecurity’ and why it matters to health. Soc. Sci. Med. 167, 1–10 (2016). This work describes the health impacts associated with unaffordable energy costs.

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  5. White, L. V. & Sintov, N. D. Inaccurate consumer perceptions of monetary savings in a demand-side response programme predict programme acceptance. Nat. Energy 3, 1101–1108 (2018). This work describes the inaccuracy of household assessment of energy bill savings on demand-side response rates compared to other available rates.

    Article  Google Scholar 

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Acknowledgements

The authors declare no funding associated with this study.

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Correspondence to Lee V. White.

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White, L.V., Sintov, N.D. Varied health and financial impacts of time-of-use energy rates across sociodemographic groups raise equity concerns. Nat Energy 5, 16–17 (2020). https://doi.org/10.1038/s41560-019-0515-y

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