Energy Inequality and the Just Transition: How can we make the benefits of clean energy accessible to everyone? | Berkeley Energy & Resources Collaborative

November 7, 2024

Written by Ricardo Kumelys (MBA '25); Edited by Remy Freire (MBA/MEng '25)

Introduction

As global temperatures continue to rise and renewable energy costs plummet, the transition to clean energy has become both an environmental imperative and an economic opportunity. Solar panel costs have fallen over 80% since 2010, and wind turbines saw a price reduction of ~25% between 2012 and 2020 (though ongoing logistic challenges have pushed costs back near 2012 levels).^1,2 Yet beneath these promising trends lies a complex reality: the benefits of this energy revolution are not reaching everyone equally. Across the United States, 1 in 7 families lives in "energy poverty", meaning that energy costs comprise a disproportionate share of these households’ incomes, and the clean energy transition has often left behind those who could benefit the most from lower energy bills and a healthier environment.³

Both utility-scale and residential/commercial costs for solar systems have fallen dramatically across the past decade.⁴

This disparity in access to clean energy perpetuates existing social and economic inequalities. As we'll explore, the intersection of affordability, government incentives, and environmental justice reveals how our current approach to clean energy deployment often overlooks or underserves vulnerable communities, and how some initiatives have managed to buck this trend and make meaningful strides toward including these communities in the clean energy transitionPolicy experts refer to the framework for an energy transition that benefits all members of society relatively equally as the “just transition”.

While the term “inequality” has many different connotations, here we’ll focus on socioeconomics in the US specifically, where significant large-scale renewables projects and smaller-scale generation is located, with an eye toward who actually benefits from these new energy sources.

Inequities in the clean energy transition

One of the most notable examples of clean energy policy that has struggled with equitable outcomes is the US federal solar Investment Tax Credit (ITC). While successful in increasing solar adoption, it illustrates how well-intentioned policies can reinforce existing inequalities. The program is targeted at residential consumers installing behind-the-meter rooftop solar panels, offering a 30% tax credit for solar installation costs.⁵ However, this structure inherently favors higher-income households. Low-income households often do not have the tax liability to take full advantage of the credit, nor resources for the upfront investment required for solar panels, and in 2019, only 21% of residential solar installations were purchased by low- and moderate-income households (who represent 43% of the population).⁶ The implicit requirements of the program mean that millions of Americans are effectively excluded from participation.

The challenges of equitable access are also visible in the Navajo Nation, where energy poverty remains a significant issue. Among the Nation, 13,000 families still lack access to electricity, a remarkable and sad fact that owes its roots to both historical underinvestment in infrastructure and the absence of meaningful compensation for local communities as the region gradually closed its coal mines.^7,8 Today, despite receiving over 270 days of sunshine annually and being surrounded by large-scale energy projects, many Navajo households still lack access to electricity, a basic resource in the vast majority of the country.⁹ In a recent interview for ABC News, the founder of Navajo Power explained "You have massive transmission lines running across a vast landscape, houses living underneath, that are still using generators and kerosene lamps even today”.¹⁰ While renewable energy projects have sprung up around the Navajo Nation, much of the power they generate is exported to far-away urban areas, leaving local residents without the direct benefits of clean energy.¹¹

Without access to an electric grid, some members of the Navajo and Hopi tribes have turned to installing their own solar systems.¹²

Potential equitable solutions

Some programs have been more deliberate in their efforts to address barriers that can prevent low-income communities from participating in the energy transition. The California Single-Family Affordable Solar Homes (SASH) was a program within the California Solar Initiative (CSI) that aimed to bring solar power to low-income homeowners by providing significant rebates.¹³ Such upfront expenses have traditionally made solar unaffordable for these households, and by reducing them, the program helped over 10,000 homeowners install solar panels and reduce their energy bills.¹⁴ The program also aimed to support local workforce development by providing skills training and enabling these same job trainees to participate in the installations.¹⁵ The program ended in 2022 after its funding was exhausted, though California has since transitioned to related programs, such as Solar on Multifamily Affordable Housing (SOMAH) and the California Low-Income Weatherization Program (LIWP).

The LIWP has successfully promoted the installation of solar panels and energy efficiency upgrades for disadvantaged communities, reducing both energy consumption and electricity bills for families covered by the program.¹⁶ Since its launch, the program has benefited over 15,000 households across California, 4,000 of which have installed their solar at no-cost.¹⁷ All of these efforts, of course, come with the added externality of contributing to the state’s ambitious climate goals. Unfortunately, LIWP has limited funding, reducing its ability to reach every eligible household.

Beyond California, New Mexico’s Community Solar Act demonstrates another model for integrating equity into state-wide clean energy policies. Approved in 2021 and upheld by the state’s Supreme Court in 2024, the act requires that at least 30% of all community solar projects serve low-income households.^18,19 The objective is to ensure that community solar projects benefit those who need it the most. Groups related to the project also acknowledge that achieving this 30% target in practice requires ongoing engagement from community groups and local governmental organizations

Lessons learned

There are valuable lessons that can be learned from these examples if we want to work toward a more equitable, or just, energy transition. In policy and program design, some possibilities are to prioritize rebates instead of tax credits, create income-based incentives, and institute mandatory equity requirements for energy transition projects. Additionally, community engagement is a critical aspect of programs that prioritize equity; this includes having early and meaningful consultation with affected communities, allocating funding to support the development of local workforces, and incentivizing community ownership models.

Conclusion

The transition to renewable energy is a major global challenge, and is essential in the fight against climate change; it is important to recognize its role as a force that can either perpetuate long-standing inequities, or address them in a meaningful way (especially when it comes to energy access in low-income communities).

By examining historical examples of projects that have failed to prioritize equity alongside those that have made meaningful progress, and by building a deeper understanding of the challenges the just transition facestoday, we can learn valuable lessons about how to build a more inclusive clean energy future.

Sources

¹https://ourworldindata.org/data-insights/solar-panel-prices-have-fallen-...

²https://www.canarymedia.com/articles/wind/chart-wind-turbine-prices-surg...

³https://rmi.org/1-in-7-families-live-in-energy-poverty-states-can-ease-t...

⁴https://aleasoft.com/drop-lcoe-renewable-energies-past-decade-drives-ene...

⁵https://www.energy.gov/eere/solar/homeowners-guide-federal-tax-credit-so...

⁶https://rmi.org/congress-cannot-ignore-residential-solar-tax-credit-ineq...

⁷https://www.ourenergypolicy.org/resources/electricity-across-the-navajo-...

⁸https://www.npr.org/2022/12/29/1145952413/transitioning-away-from-coal-l...

⁹https://www.fhwa.dot.gov/ipd/project_profiles/az_navajo_nation_kayenta_s...

¹⁰https://abcnews.go.com/US/navajo-power-seeks-rectify-energy-injustice-de...

¹¹https://www.energy.gov/indianenergy/articles/memorandum-understanding-su...