The home decarbonization trade has an equity problem. Broadly speaking, a lot of publicly subsidized programs aimed at electrifying and decarbonizing people’s homes, whether through the Inflation Reduction Act or more downstream at the state or local level, are overwhelmingly utilized by single-family homeowners. That’s all well and good. But what happens when such programs try to make a dent in residential markets that are predominantly rental?

“People who rent their homes often deal with older buildings, leaky piping, and poor ventilation,” writes Rebecca Leber in Vox. “The IRA’s attempt to get fossil fuels out of the home would benefit them significantly. But renters could be the last to see the benefits.”

On top of that, any mechanical or efficiency upgrades like a heat pump water heater or new windows are decisions left to building owners, not tenants. Granted, the Department of Energy isn’t devoid of useful DIY tips for renters, and it is telling that on the DOE’s info page for the IRA’s Home Energy Rebate Program, neither owners nor renters are paid deference. But to Leber’s point, the potential return on investment for certain home efficiency upgrades can be a tough sell for renters, especially when the upfront costs are burdensome.

A pilot program for all

In a worthwhile attempt to bridge the gap, last July Massachusetts-based sustainability consultancy CET (Center for EcoTechnology) partnered with utility company Ipswich Electric Light Department to launch a pilot program for the town of Ipswich, MA, called Reinvest Ipswich. Reinvest Ipswich qualifies as an Inclusive Utility Investment (IUI), the first program of its kind in the Commonwealth. Reinvest Ipswich’s stated purpose is “to make residential electrification accessible by eliminating the financial barriers that often prevent residents from adopting energy-efficient technologies.”

According to Ashley Muspratt, CET’s CEO, her company had been working with Ipswich’s community-owned utility starting in 2021 on rolling out a whole-home decarbonization program. “It was going well,” she says, “but when the utility took a look at the people who were participating in the program,” which included home energy assessments and submitting rebate applications for services rendered, Ipswich Electric Light crunched the data and saw that it was mostly homeowners. “And that vast majority of homes were greater than the area median home value.” (The median home sale price in Ipswich in September 2024 was $715,000, according to Rocket Homes.)

“So, they inferred that it was mostly people of means,” Muspratt continues. “And yet, the town has a very large renter population, and a large population of low-income and energy-burdened households. They approached us and asked: ‘What does a program that actually serves this customer base look like?’”

The IUI pilot program that emerged was small to start. With a modest capital ceiling of $100,000, CET and Ipswich Electric Light targeted a handful of homes that met different criteria, specifically multi-family rental properties, low-income households, and homeowners using oil or natural gas. Diversifying its outreach made for a compelling proving ground, so went the theory. In the end, however, the pilot program was carried out in three single-family homes heated with oil.

What accessibility looks like

Housing is becoming less affordable for Ipswich residents, according to the town’s 2021-2024 Housing Production Plan. While a majority of the town’s housing stock is single-family homes, a relatively higher percentage (33%) of adults aged 65 and older are renters, when compared to the rest of the state. And while limiting Ipswich’s pilot program to single-family homes wasn’t ideal, given IUI’s broader aspirations, this approach was simply faster and more direct. Add to which, the numbers are compelling.

With costs for efficiency and clean energy upgrades for each of three homes averaging $35,370, customers’ average upfront costs came to just $6,217. That amounts to an 84% discount on parts and labor, and a resulting 20% savings on energy bills.

This works by the utility recovering its investment over time through energy bill savings with a “tariffed” charge to the customer on their monthly bill. That tariff applies to existing and future customers because the efficiency upgrades are considered part of the services at that metered location.

Muspratt says that when CET began to explore the feasibility of introducing IUI to Ipswich and financing these projects, they paired their analyses with a mandate of “ensuring that [we] keep customers whole and either save them money or keep costs neutral.”

For good measure, CET also secured funding from the Massachusetts Clean Energy Center to conduct a multi-phase feasibility study, with the help of various consultancies and legal counsel. The phases included cost-benefit analyses of specific efficiency upgrades, a customer survey, and a business case analysis. “We got positive results from all of that,” she says.

CET had the data they needed but proceeded with caution. As Muspratt recalls it, their thinking was to complete only a few homes to “work out the hiccups” before offering the IUI program to all of Ipswich’s customers, regardless of their housing status or household income. “We know that when we go to scale, there’s going to be huge demand,” Muspratt says. “We just wanted to make sure we had a smooth operating program, start to finish.”

Success with consumer owned utilities

Inclusive Utility Investments are hardly unique to Ipswich. Once referred to as “tariffed-on-bill” financing, the moniker was recently changed with the help of the EPA to better convey the consumer protections built into these programs. As of last August, there are currently 20 IUI programs or pilot activity spread across 13 U.S. states, from California to New Hampshire, and a border-to-border cluster across the lower Midwest and southern region.

Most IUI programs use the Energy Efficiency Institute’s trademarked Pay As You Save (PAYS) system, which enables utilities to invest in renewables and efficiency upgrades on behalf of their customers and recover all costs via customer billing over time. PAYS systems also include consumer protections like requiring that home upgrades and associated monthly bills not include new debt or liens. (The “tariff” part of tariffed on-bill refers to the terms of cost recovery for a utility investment; customers are obliged to pay what’s owed, but the investment does not constitute a loan.)

Additionally, most IUIs are sponsored by consumer owned utilities (COUs), community co-operatives, or municipal light plants. One key benefit of working with COUs versus larger investor-owned providers is they typically issue bonds to finance the programs. This translates to far lower interest rates for consumers (Reinvest Ipswich plans to offer 0% interest), much longer payback periods, and greater flexibility on the part of the utility that’s sponsoring it. No one’s getting rich because no one’s getting gouged, and ideally, everyone is being made whole.

Even though a small percentage of IUIs have been around for a decade or longer, they have largely flown under the radar, and the biggest chunk of them were adopted in 2020 or later. The mechanism’s growth is modest, but exponential nonetheless. So, when Ipswich Electric Light Department approached CET and inquired as to how they could reach a larger customer base while deploying home decarbonization efforts equitably, Muspratt went in search of answers. By her telling, she “stumbled upon” the EPA’s resource page for IUIs and knew instantly that her search was done. “It’s almost too good to be true. I read all kind of data of where IUIs have been employed, and it had worked! It’s a win-win for the utilities and customers.”

Scaling up

While renters and lower-income households were the focal point of this effort in Ipswich, it is worth noting that Inclusive Utility Investments are by design open to everyone. They are neither income driven nor dependent on a consumer’s FICO score. And they can be administered by utility providers, local governments, housing finance authorities, or even third parties. The means and flexibility to implement such programs at scale are in their DNA. Still, why they haven’t taken hold in more markets in their nearly two decades of existence isn’t a terrible mystery. As opposed to quick returns, long-term investments are always a tough sell.

So what’s changed? For starters, now more than any other time, consumer incentive programs in the form of rebates and tax credits for renewables and home efficiency upgrades, as well as consumer protections built into green banks and other lending programs with conditions favorable to a garden variety home equity loan, have become ubiquitous. They exist at the federal and state level, and depending on where you live, one’s local county, town government, or utility provider may offer similar incentives as well. All this has nurtured economic conditions that are far more hospitable to something like Inclusive Utility Investments.

As for Reinvest Ipswich, its ability to go to scale hinges on capital funding from the U.S. Department of Agriculture, which Muspratt fully expects to come through “in a matter of weeks.” Ipswich benefits from being a smaller community, she says (population: 13,785 as of 2020 census). This enabled the town to qualify for a loan from the USDA’s Rural Utilities Service, which was approved last September. This also makes Ipswich an outlier compared to larger cities with sizable constituent bases composed of renters and energy burdened households.

Clearly, financing IUIs is “the tricky part,” Muspratt says, and there is no one-size-fits-all solution. But she remains optimistic. “We’re hoping that we’ll have two or three more utilities launch programs in the next six to twelve months. Once we have results coming in from this new cohort of municipal utilities in Massachusetts, I think getting to the next threshold of scale will be a lot easier.”

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