ALLEVIATING FUEL POVERTY IN THE EU Investing in home renovation, a sustainable and inclusive solution Oliver Rapf, Executive Director Buildings Performance Institute Europe Dublin, Ireland October 6, 2014

Europe 2020 targets & challenges 2 Europe 2020 targets Reduce by 25% (20 million) the number of Europeans living below national poverty lines. Increase the employment rate of the active population from 69% to 75%. Reduce greenhouse gas emissions by 20%, increase the share of renewables in gross final consumption by 20% and reduce the energy consumption by 20% through improved energy efficiency. Challenges In 2012, 124 million people were at risk of poverty & at least 50 million under fuel poverty. The European population is ageing, increasing the number of vulnerable people. Between the employment rate remained stagnant (68.4%). The primary energy consumption needs to be further reduced by 6.3% to meet the 2020 target.

Could energy efficiency investments be the silver bullet to address all these challenges? Combating fuel poverty by implementing energy efficiency measures would result in:Reduced energy costsHigher indoor thermal comfortAvoided illnessesJob creationBetter social inclusionReduced CO2 emissions 3

Fuel poverty definition Fuel poor people: Need to spend more than 10% of their income on fuel to maintain an adequate level of warmth (UK 1991). Have required fuel costs that are above average (the national median level) and were they to spend that amount, they would be left with a residual income below the official poverty line” (UK 2013). Are unable to afford adequate warmth in a home (Ireland 2007). 4

Fuel poverty in the EU (2012) % of the total population 24.4% of people at risk of poverty Inability to keep home adequately warm 15.1% of the total population 23.5% of people at risk of poverty Living in dwellings with leakages & damp walls 9.7% of the total population 22.1% of people at risk of poverty Arrears on utility bills

Inability to keep home adequately warm in the EU (2012) Source: BPIE, based on Eurostat data min. (0.6%) - 10% 10.1% - 20% 20.1% - 30% 30.1% - max. (46.5%)  Bulgaria (46.5%) and Lithuania (34.1%) are the countries with the highest rates of people who are not able to keep their homes adequately warm, followed by Cyprus (30.7%), Portugal (27%) and Greece (26.1%).  In colder Northern countries the percentages are low: Sweden (1.4%), Finland (1.5%), the Netherlands (2.2%) and Denmark (2.6%). 6

People living in a dwelling with leaking roof, damp wall, floors or foundation in the EU (2012) Source: BPIE, based on Eurostat data min. (6%) - 10% 10.1% - 20% 20.1% - max. (31.5%)  Slovenia (31.5%), Cyprus (30%) and Latvia (28.2%) show the highest percentages.  In Slovakia, Sweden and Finland less than 9% of their population live in homes with these defects. 7

Arrears on utility bills in the EU (2012) Source: BPIE, based on Eurostat data min. (2.2%) - 10% 10.1% - 20% 20.1% - max. (31.8%)  Greece (31.8%), Romania (28.6%) and Bulgaria (28.4%) have the highest percentages of people falling behind on their payments.  In Luxembourg, Germany, Denmark, and the Netherlands the payment of utility bills is a problem for only a small percentage of the total population (≤3.6%). 8

The three fuel poverty indicators in the EU (2012) Bulgaria, Cyprus and Greece have high rates for all three fuel poverty indicators. In Sweden, the Netherlands, Denmark and Luxembourg fuel poverty is not a major problem. 9

Fuel poverty indicators of people at risk of poverty (2012) Source: BPIE, based on Eurostat data 10 Country Arrears on utility bills (%) Inability to keep home adequately warm (%) Dwellings with leakages & damp walls (%) Country Arrears on utility bills (%) Inability to keep home adequately warm (%) Dwellings with leakages & damp walls (%) Bulgaria UK Hungary Estonia Greece Belgium Latvia France Cyprus Czech Rep Slovenia Spain Italy Slovakia Romania Netherlands Lithuania Germany Portugal Denmark Croatia Luxembourg Poland Austria Malta Finland Ireland Sweden

Analysing solutions Solution Cause of fuel poverty Income increase / Income support schemes Low household income Fuel prices regulation / Fuel subsidies High cost of energy Deep energy retrofits in dwellings Low energy efficiency of the property 11

Income increase in the EU - Trend  Mean equivalised net income: +11% ( ). Source: Eurostat 12

Energy cost in the EU – Trend  Electricity prices: +25% ( ).  Gas prices: +37% ( ). Source: Eurostat 13

Unit consumption per dwelling in the EU - Trend  Energy consumption in dwellings: -8.5% ( ). Source: ODYSSEE – MURE 14

Trends - Conclusions Energy prices have significantly increased The household net income has not grown at the same pace Energy consumption per dwelling has only slightly decreased Europe is moving deeper into fuel poverty 15

Energy price regulation & direct financial support to fuel poor people 16 Are strongly dependent on many economic factors Need continuous and even increased funding from the public budgets Do not generate added value or economic growth

Deep energy retrofits in fuel poor homes Source: IEA, Reduced unwanted mobility Higher property values Fewer energy subsidies Reduced energy infrastructure costs Reduced emissions Improved human health Local employment Improved community appearance Local spending The only sustainable way to address the cause of fuel poverty

Budget allocation to fuel poverty measures  In UK from the “winter fuel payments”, the main income support programme only 12% of the recipients are thought to be fuel poor.  In Greece €650 million were allocated to oil subsidies and €548 million to the main programme supporting energy efficiency improvements in households ( ).  In Ireland in 2013, the one week extension of the Fuel Allowance (€20/week) season cost €8 million!  Even though energy efficiency measures have proven to be the most sustainable solution to the fuel poverty problem they receive lower funding compared to income and fuel price support schemes. Source: “National fuel poverty budgets”, Association for the Conservation of Energy 18 UK

Energy efficiency programmes for fuel poor households 19 Name Warm Front Scheme Kirklees Warm Zones Warmer Homes Scheme Renovation Programme of 800,000 Social Housing Dwellings ERDF Thermal Renovation of Block of Flats for Low Income Families Buildings Renovation Programme through the Jessica Holding Fund CountryUK IrelandFranceRomaniaLithuania Duration ongoing (Expected results) 2009-ongoing (Expected results) Investment£2.84 billion £24.30 million€82 million€233.7 million€304 million€227 million Number of benefited households 2,324,50070,64595,00058,80065, multi-apartment buildings (by 2015) Social benefits  Decreased levels of anxiety & depression  Reduced number of winter deaths  Positive impacts in mental health £248.8 million net social benefit (job creation, house value, savings to National Health Service) Improvements in health problems (heart attacks, arthritis, headaches, mental disability) 7,225 additional jobs 5,000 jobs are estimated to be created and maintained  Improved thermal comfort levels  Higher percentage of people involved in community activities  Improved quality of life

Conclusions Between 50 and 125 million people, cannot afford having a comfortable indoor environment. Many MS recognise the fuel poverty problem, even though there is no single definition. Social tariffs and heating subsidies address only partially the problem. Energy efficiency improvements are sustainable solutions that address the problem at its roots. 20

Policy recommendations (1) 21 Dedicated national programmes addressing the fuel poverty problem The national plan to stimulate investments in building renovation, as required by Article 4 of the EED, should include national programmes addressing low-income and fuel poor people. Under the EED Art 7, energy efficiency obligation schemes may be introduced with dedicated components addressing fuel poor and vulnerable consumers.

Policy recommendations (2) 22 Top priority at national levels, shifting price control mechanisms and fuel subsidies to more active and effective public expenditure on renovation measures Shifting public budgets from energy subsidies to renovation programmes in a careful stepwise approach will result in a far greater and lasting benefit to families in fuel poverty, while at the same time generating a range of societal benefits.

Policy recommendations (3) 23 A higher allocation of EU Funds to renovation programmes targeting fuel poor, low-income and vulnerable categories of people The EU Cohesion Funds have a higher (compared to period) share allocated to energy renovation of buildings. Due to the similarity between less developed regions addressed by the EU Funds and regions with most vulnerable and fuel poor households, there is a great opportunity to design national dedicated programmes to renovate these homes by using EU Funds.

Policy recommendations (4) 24 Need for a long-term strategy for fuel poverty alleviation in the EU Long-term policy predictability is needed due to the size of the problem and its importance in reaching the EU socio-economic, energy and climate goals. The introduction of an EU-wide energy saving target for 2030 including binding measures on improving the energy performance of the EU building stock will trigger predictable and coherent actions and release investments addressing fuel poverty.

Policy recommendations (5) 25 Improvement of statistical data collection by providing more evidence on the scale and impact of fuel poverty in the EU There is a need to have more linkage between data provided by Eurostat and National Statistics Institutes in order to better identify the relationship between housing conditions, fuel poverty and other drivers of people’s vulnerability on energy issues.