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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: 21o in living room, 18o 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




• EPEE: 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
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
Hills Fuel Poverty Review 2012

• 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
Hill’s ‘low income/high costs’ indicator




                                  See Figures
                                  7.2 and 7.3in
                                  report
                 Fuel poor:
                 Income <         We are
                 t/hold /         consulting
                 high energy
                 costs
                                  on how to set
                                  the
                                  thresholds.
Comparing indicators

 6                                                                                                                 1.4
       Number of                      Fuel poor households (millions) current indicator          Fuel poverty
       households                                                                                gap (£ billion)
        (millions)
                                      Fuel poor households (millions) Low income - high                            1.2
 5                                    costs indicator
                                      Fuel poverty gap (£ billion) Low income - high
                                      costs indicator (real terms, 2009 prices)                                    1.0
 4


                                                                                                                   0.8

 3

                                                                                                                   0.6


 2
                                                                                                                   0.4



 1
                                                                                                                   0.2




 0                                                                                                                 0.0
     1996   1997     1998   1999   2000   2001   2002    2003   2004    2005    2006      2007     2008     2009
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
william.baker@consumerfocus.org.uk



Consumer Focus     t 020 7799 7900
Fleetbank House,   f 020 7799 7901
Salisbury Square   contact@consumerfocus.org.uk
London             www.consumerfocus.org.uk
EC4Y 8JX

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Evaluating the Impact of Energy Efficiency on Fuel Poverty

  • 1. Evaluating impact of energy efficiency on fuel poverty William Baker, Consumer Focus
  • 2. 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
  • 3. 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: 21o in living room, 18o 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
  • 4. Energy poverty in Europe • EPEE: 50m – 125m energy poor in Europe
  • 5. 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
  • 6. 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
  • 8. 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
  • 9. 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
  • 10. Progress at each stage of WZ delivery
  • 11. Hills Fuel Poverty Review 2012 • 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
  • 12. Hill’s ‘low income/high costs’ indicator See Figures 7.2 and 7.3in report Fuel poor: Income < We are t/hold / consulting high energy costs on how to set the thresholds.
  • 13. Comparing indicators 6 1.4 Number of Fuel poor households (millions) current indicator Fuel poverty households gap (£ billion) (millions) Fuel poor households (millions) Low income - high 1.2 5 costs indicator Fuel poverty gap (£ billion) Low income - high costs indicator (real terms, 2009 prices) 1.0 4 0.8 3 0.6 2 0.4 1 0.2 0 0.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
  • 14. 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
  • 15. 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
  • 16. william.baker@consumerfocus.org.uk Consumer Focus t 020 7799 7900 Fleetbank House, f 020 7799 7901 Salisbury Square contact@consumerfocus.org.uk London www.consumerfocus.org.uk EC4Y 8JX