Evaluating impact of energy efficiency on fuel poverty William Baker, Consumer Focus

Understanding fuel poverty Emergence of ‘energy poverty’ in EU –single liberalised market –accession of former Soviet Union states –rising energy prices, cost of addressing climate change Tackling energy poverty –2009 gas & electricity Directives: –MSs: national action plans to tackle ‘energy poverty ’ Defining energy/fuel poverty –only UK & Ireland have definition –EESC: EU should adopt common definition of energy poverty

What is fuel poverty? Drivers –differ across EU: welfare, liberalisation, housing quality, climate –UK: energy inefficiency, high fuel prices, low income UK definition: A household that needs to spend 10% of more of its income on fuel to secure adequate warmth and meet other energy needs –adequate warmth: 21 o in living room, 18 o in other rooms (WHO) Measuring fuel poverty in Europe –EU-SILC?: ‘h/hds unable to keep home warm’, –‘utility bill arrears’, ‘leaks, damp or rot in home’ 3

Energy poverty in Europe Source: Thomson (2011), Qualifying and quantifying fuel poverty across the EU EPEE (2009): 50m – 125m energy poor in Europe

UK fuel poverty policy 2000 Warm Homes & Conservation Act –eliminate fuel poverty in England by 2016 –similar targets for Scotland, Wales & Northern Ireland 2001 Fuel Poverty Strategy: tackle 3 causes of FP Emphasis on energy efficiency –Warm Front grants for benefit recipients in private housing –Decent Homes programme for social housing –supplier obligation for ‘priority group’ consumers Also income and prices, e.g. –Cold Weather Payments, Winter Fuel Payments, Warm Home Discount

Measuring progress Annual English Housing Survey –housing: thermal performance, heating system etc –household: income, number of people, tenancy etc Annual fuel poverty progress report –key indicator = number of households in fuel poverty –binary indicator: either in or out of fuel poverty Individual FP programmes, e.g. Warm Front –numbers helped, SAP improvement measured –impact on fuel poverty not measured

UK fuel poverty trends Source: DECC (2011), Consumer Focus (2012) and Camco (2012) 2011 & 2012= projections

Evaluating impact of schemes: issues Propensity (‘hit rate’) versus coverage –75% of those eligible for Warm Front are not FP (NAO, 2009) –2011 Warm Front changes: stricter eligibility criteria –high propensity: 77% of eligible group are fuel poor –BUT poor coverage: 100,000 over 2 years = 2.5% of total –trade off between propensity and coverage Fuel poverty severity –11% 9% = success, yet small intervention –30% 11% = failure, yet major intervention No systematic assessment of impact on cold homes, health, fuel under-spend, disposable income

Evaluation of Warm Zone pilots (2001-5) Five area-based pilots to tackle fuel poverty Evaluation tools used –no. and % removed from fuel poverty –propensity and coverage –distance travelled: fuel poverty gap = ∑ 1 to n (current FPI – 9.9%) total=no. of FPI % points to remove all h/hds from FP –additionality: impact over and above BAU (national trend) –output/£1000 invested (cost effectiveness) –progress at different stages of delivery

Progress at each stage of WZ delivery Source: CSE & NEA (2005), Warm Zones external evaluation

Hills Interim Fuel Poverty Review 2011 Critique of fuel poverty definition –fixed 10% threshold: not current, little evidence –ratio: numerator/denominator problem –income not measured according to IN standards New proposed definition of fuel poverty: A household that faces higher than typical costs; and were it to spend that amount, would fall below the poverty line –FP = those below ‘low income’ and ‘high required fuel cost’ thresholds –new ‘fuel poverty gap’ indicator also proposed –definition can’t be used in other EU countries

See Figures 7.2 and 7.3in report Hill’s ‘low income/high costs’ indicator We are consulting on how to set the thresholds. Fuel poor: Income < t/hold / high energy costs Source: Hills (2011), Fuel poverty and its measurement

Comparing indicators Number of households (millions) Fuel poverty gap (£ billion) Source: Hills (2011), Fuel poverty and its measurement

New approaches to assessing fuel poverty ‘ Fuel poverty proofing’ –EE standards sufficiently high to ensure no occupant lives in FP –set SAP/EPC target for retrofitting homes to –scale of intervention determined by starting point of home Optimising interventions: –optimal combination of EE, income & fuel price interventions –biggest ‘bang for bucks’ for given level of expenditure Optimising outcomes –health, quality of life & health expenditure –carbon reduction –increased disposable income due to reduced bills –economic benefits

Fuel poverty proofing Consumer Focus: ‘Raising the SAP’ (2010) –fuel poor homes improved to EPC B (new homes standard) –83% of fuel poor removed from fuel poverty –protection against future price rises Camco: Energy Bill Revolution (2012) –recycle ETS auction proceeds into EE programme –target EPC B standard for 9.1m fuel poor h/hds –87% removed from fuel poverty –average bill saving: £310pa –30k-50k direct jobs; 120k-200k indirect jobs (4 x Govt plans) –carbon saving 4 x higher than Govt plans

Consumer Focus t Fleetbank House, f Salisbury Square London EC4Y 8JX