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What Role Do Household Incomes Play in the Full Cost of Electricity?

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Electricity is something many of us take for granted. Flip a switch and lights come on, air-conditioning fires up, and computers hum. But how much will new energy cost relative to the income of the people who will consume it? It’s not something most of us in the United States think about as we flip that switch, but it is something we need to understand as we build next-generation power plants and the grid to move that electricity to demand centers.

As part of The Full Cost of Electricity project of the University of Texas at Austin Energy Institute, we wanted to ensure that public and policy discussions had baseline information. So we asked a few simple questions: “How much are households paying for household energy overall? How much of this cost is for electricity? How does this cost compare to incomes?” To answer these questions, we used the data acquired by the U.S. Energy Information Administration, via its Residential Energy Consumption Survey, for the state of Texas [PDF].

Besides being our home, Texas is a microcosm: We have rural and urban areas, flat and hilly country, desertlike areas and coastline.

Here’s what we found:

  • Twenty-two percent of Texas households are energy burdened, spending more than 8 percent of income on household energy, and 16 percent of households spend more than 10 percent
  • The vast majority of the cost of household energy is for electricity
  • Fifteen percent of Texas households spend more than 8 percent of household income on electricity alone, and 11 percent spend more than 10 percent
  • Higher incomes translate to higher household electricity consumption, but there are important differences between urban and rural households
  • Other than income, there are several demographic variables that explain whether or not a household spends more than 8 percent on energy. For example, a household where someone is at home during the work day is more likely to be energy burdened

For the details, read the full white paper, “Household Energy Costs for Texans” [PDF] on the Energy Institute’s page for The Full Cost of Electricity.

Carey W. King is the assistant director and a research scientist with the University of Texas Energy Institute.



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