This winter, it's about to get a lot more expensive for most Americans to heat their homes. The price of natural gas, which heats about half of all U.S. homes, has nearly doubled in the past year. And households that heat with propane could spend up to 94% more on their energy bills than they did a year ago, according to the U.S. Energy Information Administration.
American consumers must cope with this price shock at the exact moment we are already reeling from the largest consumer price increase in 30 years.
Unfortunately, there's not much anyone can do about this in the short term.
American presidents have very limited tools to confront energy price spikes, especially in home heating. Like other systems in our homes and buildings, home heating requires a large upfront investment and can have a 15- to 25-year life cycle, depending on the equipment. Faced with a price spike, it is often easier to trade in a gas-guzzling car than change out an existing heating system.
Instead, what presidents can do in the short term is support programs that help people pay skyrocketing bills. Recently, the Biden administration authorized an early release of funding for the Low Income Home Energy Assistance Program, or LIHEAP, which received $4.5 billion in the American Rescue Plan Act. This money helps the most vulnerable pay their heating bills. States may also utilize some LIHEAP funding for weatherization, a longer-term strategy for reducing energy costs. President Biden may also drive down prices by releasing inventory from the Strategic Petroleum Reserve and the Northeast Home Heating Oil Reserve, a step several Northeastern senators are urging him to consider.
However, releasing LIHEAP funding is still likely to leave many households without adequate support. The National Energy Assistance Directors' Association already anticipates needing an additional $5 billion to support the projected 9.4 million households that will seek heating bill assistance this winter. LIHEAP funds also won't help Americans who live just above the income threshold for this assistance. Releasing more fossil fuels from strategic reserves to drive down prices is similarly a short-term measure, and one that will only make climate change worse in the longer term.
There is a good long-term fix: Converting to clean energy will both protect American households from price instability and help the planet.
While the current price spike can be attributed to supply disruptions caused by the coronavirus pandemic, over the past two decades, the price of oil has fluctuated wildly, driven by everything from Enron to hurricanes. But the price of electricity has remained largely stable over the past decade, especially in the Northeast, and homeowners can take advantage of that fact by insulating their homes and switching to efficient electric heat pumps. Heat pumps can save $500 a year in energy costs, and proper insulation ensures that the heat families pay for stays indoors where it belongs. This combination of weatherization plus heat pumps provides much needed stability amid massive fluctuations in the cost of propane and fuel oil.
We already have a proven mechanism to deploy these solutions. Energy efficiency program providers operate in nearly every state. These programs offer expert guidance that helps families save money on their energy bills. Despite existing expertise, however, there is no getting around the fact that it takes time to train workers in weatherization and heat pump installation. On top of that, there is no fast way to upgrade and insulate the millions of homes currently heating with fossil fuels. This is the right approach, but it will take time.
Unfortunately, taking a slow-and-steady approach during an energy crisis is often a tough sell. Just ask former president Jimmy Carter. That fact doesn't make these policies any less effective, but it may make them harder to implement. And getting the transition right this time around takes on added urgency, given that U.S. buildings account for 40% of all energy-related greenhouse gas emissions.
My nonprofit organization's work designing and administering programs to decarbonize America's energy system has taught me firsthand that increasing uptake of clean energy requires supply chain support, outreach, education, financing and direct subsidies. Heat pumps, for example, can pay for themselves in reduced energy bills. But the initial $4,000 to 6,000 installation cost places them out of reach for many Americans. In Vermont, where we administer the Efficiency Vermont program, groundbreaking legislation and innovative partnerships with electric utilities allowed us to offer incentives to overcome this initial cost barrier, generating a 2,000% increase in heat pump installations from 2015 to 2020.
Subsidies also help create jobs and train the next-generation clean-energy workforce — because they boost the market for clean technology. The nation's existing efficiency programs support 2.1 million jobs but face the same labor shortages currently plaguing many industries. The pending influx of federal funding can help train more workers and diversify the construction industry. In the District of Columbia, where we operate the D.C. Sustainable Energy Utility, our workforce development program provides paid on-the-job training and job placement assistance to unemployed and underemployed residents — helping 90 graduates build new skills and start new careers over the past five years.
Programs like these depend on funding, which, thankfully, is on its way. The recently passed federal infrastructure bill includes $3.5 billion for the Weatherization Assistance Program, which will reduce energy costs for low-income households. It also includes $550 million for the Energy Efficiency and Conservation Block Grant Program. States and local governments can potentially use these block grants for heat pumps and other home upgrades that will not only save energy dollars now, but will also protect Americans from future price shocks.
Biden's larger Build Back Better agenda includes significant additional funding for home energy upgrades through the Hope for Homes Program and the High Efficiency Electric Home Rebate Program, which provide financial support for heat pumps and tax incentives, among other investments.
Unfortunately, these longer-term policy commitments won't address the immediate experience of families opening a heating bill this winter that may be 94% higher than last year. And even if this new federal funding could be distributed to states tomorrow, a tight labor market and global supply chain constraints would still slow progress.
What this says to me is that we must help families who are struggling today while simultaneously building the clean and equitable energy system of the future. The time is now to make smart investments in our homes: Adding insulation and heat pumps today can ensure that this is the last home heating price spike Americans need to weather.
Rebecca Foster is the chief executive of VEIC, a nonprofit that designs and administers energy efficiency and decarbonization programs in 25 states and provinces across North America.