Fuel Poverty

Structure of the Presentation Background: What is fuel poverty? Issues to consider when measuring fuel poverty. Ways to measure fuel poverty. Initial suggestions for the manual. An example of how we measure fuel poverty in England.

What is Fuel Poverty? Fuel poverty is a broad relative concept concerning the ability of households to afford customary levels of warmth. The phenomenon of FP was first identified in Britain in the 1970s. In the UK FP is not about absolute access to power, as it may be in developing countries. The current definition of fuel poverty in England is: A household is defined as being in fuel poverty if it needs to spend more than 10% of its income to achieve an adequate level of warmth.

Issues to Consider: Should fuel poverty just focus on fuel for heating or cover electricity use as well – if so all or some? Should cooling be included (particularly in hot countries)? Household fuel only or fuel for transport? Are there specific issues for rural areas? What about large countries- particularly those with big variations in temperature across the country. How to assess under- heating (or home too warm) Wide range of issues on income (after housing costs, equivalised etc)

How can you Measure Fuel Poverty? There are various ways you could measure fuel poverty. These include: 1.An Expenditure Survey 2.Small Scale Survey (for example, small scale English Housing Survey) 3.A Large Scale Household Survey (DECC’s approach) 4.Energy Consumption data

Strengths and Weaknesses of Approaches Expenditure Survey: - is likely to contain information on household income, expenditure on fuels, household type and some property information, BUT - based on actual spend, not required spend (so won’t identify people under/over spending) and limited property/dwelling characteristics. Small Scale Survey: - if setting up, can ensure collects required key information, cheaper than large scale survey, BUT - may not be nationally representative, will have gaps, unlikley to capture income Large Scale Household Survey: - can tailor survey to collect the information required, such as detailed information on the dwelling type and household characteristics, BUT - expensive, time lags in receiving information and more burdensome on participants. Energy Consumption data: - potentially full coverage, or large scale coverage of the population; BUT, - data not collected for this purpose and won’t be ‘cleaned’. Will only include what people are actually using, won’t identify where people are under/over heating their homes. Limited information on characteristics of the housing.

Proposed initial suggestion Could all countries measure on a simple basis? For example: - the average spending of the three lowest income deciles compared to a) the overall average b) the top income deciles. Alternatively; Average energy use by household types Average energy use compared to modelled energy use, by household type Other common approaches? However, serious complications in comparison between countries

How we Calculate Fuel Poverty in England The FP Ratio = Modelled Fuel Costs Modelled Fuel costs are calculated as: required energy consumption * energy price Based on modelled fuel costs, not actual fuel costs. The model uses a variety of characteristics from the English Housing Survey (EHS) to estimate fuel costs. These include: fuel mix, household composition, heating requirements, dwelling insulation and dwelling type and size. It produces an estimate for four key areas: space heating, water heating, lights and appliances and cooking. Income

Modelling FP in England (cont’d) The current measure does not include other fuel requirements, such as cooling (limited use in UK) or fuel for transport. Energy prices come from DECC’s survey of energy companies. The EHS collects data on household costs and household income, which also feeds into the measure.

Strengths and Weaknesses of the Current Definition Strengths Needs-basedSensitive to three key drivers - Modelled assessment of fuel needs- Income - Doesn’t count being cold as success- Energy Efficiency - Prices Weaknesses Fixed thresholdOver-sensitive - No clear rationale- Is unduly dominated by prices - No longer current- Technical issues also have big impact (e.g. low reported incomes and temperature standards) Ratio Numerator / denominator problemUnreliable - Misreports trends - Distorts policy choices

A Potential New Indicator: What does it cover? Under this indicator, a fuel poor household is one that: - faces higher than typical costs; and - were it to spend that amount, would fall below the poverty line

The Fuel Poverty Gap -The number of households with low incomes and high costs (LIHC) represents the extent of fuel poverty - The difference between the energy costs of a household and the energy costs needed to take it out of the LIHC quadrant is the fuel poverty gap. This represents the depth of fuel poverty Fuel poverty gap

Comparison of the two indicators