How Low-Income Households Can Save Energy Costs

The prices for electricity and heat have risen sharply recently. This puts pressure on low-income households in particular, as they have less financial leeway to deal with the high prices. In many cases, the obvious savings options have already been exhausted. At the same time, worthwhile investments in energy-efficient household appliances, such as a new refrigerator, usually cannot be made without additional financial support. However, support programmes to increase energy efficiency in low-income households should not only focus on purely financial support, but combine the offer with targeted behavioural incentives to achieve the greatest possible success. This is the result of a recent ZEW policy brief by ZEW Mannheim and Heidelberg University, which is based on an empirical analysis of the “Energy-Saving Check”, a joint initiative of the German Caritas Association and the Bundesverband der Energie- und Klimaschutzagenturen.

“An energy policy that seeks to take the circumstances of low-income households into account should enhance its support programmes by including targeted behavioural incentives. This is a central result of our analysis,” says Professor Martin Kesternich, deputy head of ZEW’s Research Department “Environmental and Climate Economics”. An analysis of 37,000 household decisions made within the framework of the “Energy-Saving Check” shows whether and to what extent such support programmes contribute to higher energy efficiency in low-income households. A key element is the replacement of refrigerators – a factor that should not be underestimated, since refrigerators and freezers account for about a quarter of electricity consumption in German households. Switching to an efficient refrigerator is worthwhile because low-income households tend to own older appliances. On average, these consume 494 kWh, more than twice as much electricity as a new appliance with 152 kWh. “An old refrigerator can cause significant permanent costs, especially for low-income households. If they can afford to replace the appliance, the investment will pay off in most cases after only three years,” says Bettina Chlond, an environmental economist at ZEW Mannheim and co-author of the study. At an average electricity price of 28.8 ct/kWh and an average reduction of 342 kWh, a household can save about 98 euros per year by replacing its appliances.