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How Much?

The Cost of Alleviating Fuel Poverty

(funded by Eaga Charitable Trust)

This research found that it will cost £9.2 billion to eliminate fuel poverty in all but the poorest households in England. The cost of the required energy efficiency and renewable energy measures alone, without the effort of finding fuel poor households, raising their incomes or making all homes ‘fuel poverty proof’, is £4.6 billion. The study also found that currently, measures (with the exception of cavity wall insulation) are not being installed at a sufficient rate to meet the Government’s legally binding targets of eradicating fuel poverty in vulnerable homes by 2010 and in all homes by 2016, wherever practically possible. The findings of this research, which was funded by the Eaga Partnership Charitable Trust and completed by ACE, the Centre for Sustainable Energy and Dr Richard Moore, will enable policy makers to better understand and target the work and investment required to achieve national, regional and local targets for fuel poverty.

One of the key policy recommendations arising from this project was the creation of a ministerial cross-departmental task force to deal exclusively with ensuring that the Government meets its statutory fuel poverty targets in the short, medium and long term. In response to this recommendation, Alan Simpson, Labour MP for Nottingham South and Chair of the Parliamentary Warm Homes Group tabled an Early Day Motion on the 10th of June 2008 to this effect. The Motion, as of July 22, has so far attracted signatures of over 134 MPs across all parties.

Aims and Objectives

There are two key questions that are constantly asked by policy makers and energy practitioners. This project aimed to answer these:

  • How much would it cost to deliver affordable warmth and power to all fuel poor households?
  • How much would it cost to raise all properties to a minimum standard of energy efficiency that protects residents from fuel poverty i.e. SAP 65?

Partners

Centre for Sustainable Energy (CSE), Association for the Conservation of Energy (ACE), Dr Richard Moore and the Eaga Partnership Charitable Trust (project funders).

Methodology

The Government Office for the South West (GoSW) recently commissioned CSE to perform a baseline analysis of the work required to achieve government targets for both domestic carbon savings and fuel poverty. CSE, Richard Moore and ACE collaborated to develop a comprehensive model that utilises English Housing Conditions Survey (EHCS) data, ACE’s Fuel Prophet tool (AFP) and the EEC-2 savings matrix. The ‘How Much?’ project further developed and refined this model to quantify the energy efficiency and renewable energy measures required to meet affordable warmth objectives in England for different household types, the cost of these measures and the associated economic benefit to the country. Although the study focused on the measures and improvement costs required to alleviate fuel poverty, a variation of the model was also developed to look at the cost to raise all properties to a minimum standard of energy efficiency that protects residents from fuel poverty i.e. SAP 65.

Headline Findings

Total cost of alleviating fuel poverty

Starting with the central question of ‘How Much?’ it would cost to alleviate fuel poverty in England, the study has shown that an investment of £4.6bn would result in the application of energy-saving measures to 2.5 million (all current fuel poor) households, eliminating fuel poverty in 71% of households and alleviating it significantly in the remaining 29% (see Figure 1 below). However, this cost is based upon perfect targeting of measures and eligibility criteria that enables all genuinely fuel poor households to access measures. These conditions do not match the current delivery of measures to fuel poor households which means the cost of measures is likely to be double that estimated, i.e. £9.2bn.

Figure 1: Households remaining in fuel poverty following installation of measures

Figure 1: Households remaining in fuel poverty following installation of measures

After the implementation of measures, some 29% of households still remain in fuel poverty (see Figure 1 above). This is due to a combination of very low incomes, severe under-occupancy, and/or because of homes where the maximum possible measures still do not lower the fuel costs sufficiently. Additional income of £1.4bn is required to lift these remaining households out of fuel poverty. The total cost of alleviating fuel poverty would therefore be nearer £6bn, assuming perfect targeting of fuel poor households.

Measures required to alleviate fuel poverty

The government is legally committed to eradicating fuel poverty in vulnerable homes by 2010 and in all homes by 2016, wherever practically possible. The study has demonstrated that the current government-funded fuel poverty programmes, Warm Front (WF) and the Energy Efficiency Commitment (EEC; which has now been replaced with the Carbon Emissions Reduction Target or CERT programme) priority group programme aimed at low income households, do not provide the measures required to meet these targets. Specifically, these programmes in practice do not fund measures for ‘hard to treat’ homes or microgeneration technologies, representing a major gap in policy. Failure to meet UK fuel poverty targets appears likely with current provisions, as it is clear that these do not meet the identified need.

Across all households in fuel poverty, £4.6bn supports the installation of 4.8 million measures in 2.5 million homes. As illustrated in Figure 2 below, 66% of all installations are standard measures that generally cost less than £500 each (including low energy lighting, draught proofing, loft insulation and cavity wall insulation). Low energy lighting, draught-proofing, gas condensing boilers, ground source heat pumps, and solar hot water systems are the most common measures, representing over 87% of all measures installed. Solar hot water represents the largest cost for an individual measure, and together with gas condensing boilers and ground source heat pumps contributes to two thirds of the overall cost. However, neither Warm Front nor EEC-2 meaningfully support either solar hot water or ground source heat pumps.

Figure 2: Breakdown of measures installed

Figure 2: Breakdown of measures installed

Raising properties to SAP 65

In order to answer the second key question under ‘Aims and Objectives’ above, the model was adapted to show the cost of raising all fuel poor properties to a SAP of 65. This model had a lower success rate at alleviating fuel poverty than the standard ‘threshold’ model, which focused on alleviating fuel poverty. Under the SAP 65 model, only 58% of households are lifted out of fuel poverty, (compared to 71% under the threshold model) despite costs being 32% higher (£6bn compared to the £4.6bn). However, fuel poverty programmes are more likely to follow this type of energy efficiency targeted model than the specifically fuel poverty targeted threshold model. Thus, the actual alleviation of fuel poverty is likely to prove significantly less successful and more expensive than suggested by the main threshold model results.

Policy Recommendations

As part of launching the ‘How Much?’ report, an event was held to brief key policy makers on the outputs of this and a related study. The event also facilitated a round table discussion on the future policies required to alleviate fuel poverty. A reportage was then drafted that included short-term, medium-term and long-term policy recommendations, based on the findings of this study as well as the round table discussion. The policy recommendations provide advice for policy makers on how existing programmes such as CERT and Warm Front and standards such as the Decent Homes Standard and the Housing, Health and Safety Rating System can be developed in order to maximise their effectiveness in alleviating fuel poverty. These policy recommendations can be found in both the full report and the summary report.

Action to implement one of the key policy recommendations has already been undertaken by Alan Simpson, Labour MP for Nottingham South and Chair of the Parliamentary Warm Homes Group, who has tabled an Early Day Motion calling for a ministerial cross-departmental task force to deal exclusively with ensuring that the Government meets its statutory fuel poverty targets in the short, medium and long term.

Reports

  • Full report
  • Summary report

Press

  • Press release

Links

  • Eaga Partnership Charitable Trust
  • Centre for Sustainable Energy
  • ACE Fuel Prophet
  • Early Day Motion

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