Cash transfers & energy equity: Causal evidence from California's experience

Abstract

The energy transition runs the risk of creating higher energy prices and lower affordability for low-income consumers when income-qualified financial assistance is not expanded. This critical issue is addressed within the context of California's grid decarbonization efforts. Drawing data from areas with significant renewable energy adoption, the study investigates the impact of financial support on residential electricity consumption among low-income households. Leveraging the unique economic circumstances of the pandemic, the research examines whether additional financial resources affect energy consumption patterns across income groups, offering causal estimates of disparities in meeting energy needs. Using a comprehensive dataset encompassing energy usage, socioeconomic indicators, unemployment records, and weather data, an extended difference-in-difference (DID) model assesses changes in electricity consumption among low-income households receiving substantial government aid compared to other income groups. Our findings reveal that additional financial resources provided to low-income households during the pandemic led to a more than 30 % increase in their electricity consumption compared to other income groups. The study also underscores the effectiveness of rate programs and low-income energy aid initiatives in aiding this demographic. These insights offer policy implications for addressing energy insecurity during the clean energy transition.