Fuel poverty is a major social crisis in the UK. There are over five million households in fuel poverty needing to spend more than 10% of their income on energy in order to keep warm. This number will increase significantly if gas prices rise as the Government expects.

This fact-file compares fuel poverty and energy efficiency in the UK to 15 other European countries with comparable levels of prosperity and heating need. It ranks these countries against six key indicators for which consistent and recent European data are available to assess the energy efficiency of the UK’s homes. The UK is ranked lowest for energy (or fuel) poverty out of 13 western European countries and near the bottom of the other league tables on affordability of space heating (14 out of 15), share of household expenditure spent on energy (11 out of 13), homes in poor state of repair (11 out of 15), thermal performance (6 out of 8), and the gap between current thermal performance and what the optimal level of insulation should be in each country (7 out of 8). Overall, no other country of the 16 assessed performs as poorly as the UK across the range of indicators.

The UK ranks so low despite the fact that it has amongst the lowest gas and electricity prices in Europe and relatively high household incomes compared to the other countries. And yet it has the highest rate of fuel poverty and amongst the highest rate of excess winter deaths. In this context, the poor energy efficiency of our housing stock emerges as the main cause of these problems. David Cameron recently pledged that he wanted the UK to become “the most energy efficient country in Europe”. This ambition is all the more laudable and appropriate because this fact-file finds that presently, the UK can only be characterised as the ‘cold man of Europe’.

The Energy Bill Revolution is calling for the carbon tax every household pays via their bills to be used to make UK homes highly energy efficient, prioritising the homes of the fuel poor. There is enough carbon tax revenue to fulfil the Prime Minister’s ambition. It is enough to end fuel poverty and significantly reduce carbon emissions. It is also one of the best ways to generate growth and jobs in the UK economy.

You can download the fact-file here, and we encourage you to share your views on it. You can also head over to the Energy Bill Revolution website to read the accompanying press release from the EBR and Age UK.

It is widely recognised that fuel poverty has severe effects on some of the most vulnerable people in society. However, while attention has focussed on older people in fuel poverty, families and children have been relatively neglected.

Channel 4 © 2013

Until now, the scale of the problem for families has been poorly understood. Some evidence comes from a Barnardo’s survey in which over 90 per cent of their staff said they worked with families in fuel debt. To pay their energy bills, many families were cutting back on essentials such as heating and food.

It is clear that fuel poverty can have severe and life-long effects on children. Studies show that long-term exposure to a cold home can affect weight gain in babies and young children, increase hospital admission rates for children and increase the severity and frequency of asthmatic symptoms. Children in cold homes are more than twice as likely to suffer from breathing problems, and those in damp and mouldy homes are up to three times more likely to suffer from coughing, wheezing and respiratory illness, compared to those with warm, dry homes.

What’s more, struggling with high energy bills can impact adversely on the mental health of family members. Fuel poverty may even affect children’s education, if health problems keep them off school, or a cold home means there is no warm, separate room to do their homework.

It is vital that we understand the problem of fuel poverty for parents and children, and that future policies provide the support that these vulnerable families urgently need. This fact-file, prepared with the support of the Energy Bill Revolution, Barnado’s and Save the Children, provides a snapshot of families and (dependent) children in fuel poverty at the start of this year. It provides high-level estimates for the UK, England and the Devolved Nations. It then goes on to explore the nature and composition of fuel poverty amongst families and children, specifically in England. The fact-file and other resources can be downloaded below.

• Fact-file: Families and fuel poverty
• Energy Bill Revolution video on the subject: ‘Growing up cold: the impacts of cold homes on children’ (below)

• Selected coverage from February 27 and 28:
  • The Guardian: Fury at Centrica’s £2.7bn dash for cash
  • Channel 4 News: Number of children in fuel poverty rises to 1.6 million
  • Daily Express: Millions of children facing fuel poverty
  • Evening Standard: 1.6 million children living in fuel poverty
  • Huffington Post: British Gas profits rise to £606m as more children condemned to fuel poverty

Improving the Hills approach to measuring fuel poverty

In March 2011, Professor John Hills was appointed to lead a review of the Government’s fuel poverty definition and target. The final report, published in March 2012, found that there were significant flaws in the way fuel poverty was measured.Professor Hills proposed an alternative approach, which defined a fuel poor household as one with a low income and facing high costs.  ACE Research has engaged extensively with the Hills fuel poverty review in recognition of its profound implications for low income consumers, Government fuel poverty policy and wider energy and welfare policies.

DECC propose to adopt the Hills approach as the Government’s new definition of fuel poverty, and ran a consultation on this from September to November 2012.  ACE’s response to this consultation can be accessed here.

Consumer Focus also commissioned ACE Research to further investigate the Hills proposals and to put forward alternative suggestions. The result was a report entitled “Improving the Hills approach to measuring fuel poverty”.  In this research we follow the overall Hills framework but propose improvements that better reflect the ability or otherwise of low income households to afford their energy services.

The research concludes that Professor Hills has made a valuable contribution to our understanding of fuel poverty by:

• Reasserting the importance of fuel poverty as a serious and urgent problem that is distinct from general poverty.
• Recognising the serious impact of fuel poverty and cold homes on physical and mental health, well-being and premature mortality.
• Confirming the central role of capital investment in energy efficiency as the long term sustainable solution to fuel poverty and the need to complement such investment with fuel price, tariff and income measures.
• Re-defining ‘low income’ within the fuel poverty equation such that the definition is now consistent with other poverty definitions and recognises the logic of excluding fuel costs.
• Recommending a new indicator (the ‘gap indicator’) that measures the severity of fuel poverty, as well as the number of households in fuel poverty. We have made use of a gap indicator, based on the current definition, in a number of our reports and submissions to Government in the past.

However, we have serious concerns about Hills’ proposed definition of high energy costs, both with respect to its failure to reflect fuel affordability and with respect to the fact that it makes ‘it almost impossible to literally eradicate fuel poverty’. Indeed the Government recognises this feature of the Hills definition itself and is considering changing legislation to reflect the proposed change.

In the report, we put forward practical proposals for addressing these flaws, focussing on technical improvements to the Hills approach, and showing how these improvements could improve targeting. We believe that these proposals develop the Hills approach considerably and provide us with an indicator far better suited to capturing the reality of fuel poverty.  The research also provides an extensive analysis of fuel poverty and its relationship to vulnerability, cold homes, household characteristics and many other consumer circumstances.

Download the full report here:

Improving the Hills approach to measuring fuel poverty

Download ACE’s response to the DECC consultation here:

Fuel Poverty Consultation Response

Two reports for Consumer Focus on the impact of environmental and social policies on consumer bills

As part of Consumer Focus’s “Who Pays?” programme, ACE Research was commissioned to produce two reports about the impact of environmental and social policies on consumers’ bills.

With energy prices rising, fuel poverty becoming more widespread, and households struggling to afford their energy bills, some have sought to blame energy and climate change policies that often result in a direct or indirect levy upon energy bills. A lack of transparency over the magnitude and distributional impact of these costs has made it difficult for stakeholders to make considered judgements.

Government and the Committee on Climate Change have responded by publishing assessments of the impact policies currently have on energy bills, and the likely impacts by 2020.  Such assessments depend upon a range of assumptions. Using a combination of housing stock and household models, the report entitled “Impact of future energy policy on consumer bills” presents evidence on the potential range of energy bills under different assumptions, the structure of the costs that are passed through to consumers, and explores the distributional impacts of bills in 2020.

The principle of recovering the costs associated with UK environmental and social policies via consumer energy bills or taxes is not a new one.  The report entitled “Past and future trends in environmental and social levies” seeks to quantify the historical costs and average cost per household associated with such policies from 1990 to 2010 (see Figure 1), and forecast future costs from 2010 to 2020.  In light of the controversy around the Government’s proposal to reduce the support for small scale renewable electricity (Feed-in Tariff rate for photovoltaics), this paper also explores the cost implications of two different tariff scenarios investigated by Government.

Government slashes support for fuel poor

The Government has significantly reduced the financial support it gives the fuel poor, according to a new report released today.

The ACE report is the first time the Government’s fuel poverty budget has been analysed in depth by experts outside Government. It finds that the money received by the fuel poor in England has been cut by 26% between 2009 and 2013, taking into account all the Government’s new policies.

It also finds that the budget for energy efficiency measures for the fuel poor in England has been cut by 44%. This has raised particular concern because energy efficiency improvements are considered the best long term solution to end fuel poverty. ACE estimates that the number of energy efficiency measures being installed in the homes of the fuel poor in England will fall from 150,000 in 2009 to 100,000 in 2013.

The report was commissioned by the Energy Bill Revolution campaign, the biggest fuel poverty alliance ever formed in the UK. It is made up of over 100 leading charities, consumer groups, businesses and unions calling for carbon tax revenue to be used to make the homes of the fuel poor super energy efficient.

The campaign calculates that there is enough carbon revenue to end fuel poverty and in time help make every UK home highly energy efficient. The Government will raise over £2 billion in carbon tax revenue in 2013 with consumers each paying an average of £25 on their electricity bill. By 2020 the Government will raise £4 billion in carbon tax with consumers paying an average of £54.

Ed Matthew, Director of the Energy Bill Revolution alliance campaign said:

“The fuel poor face a triple whammy. The fuel poverty budget has been slashed, the entire cost of new low carbon power has been put on household energy bills whilst Chancellor Osborne has pocketed every penny of carbon tax. This is despite the fact there is enough carbon tax revenue to end fuel poverty forever. That is a toxic combination which will bring untold misery to millions of households across the UK.”

Jenny Holland, Head of Parliamentary Team at ACE said:

“Instead of tackling the blight of fuel poverty, the Government has spent far too long twiddling its thumbs: two and a half years reviewing how fuel poverty is defined while at the same time drastically eroding budgets to tackle the problem. The Government must now urgently recycle carbon tax to make the homes of the fuel poor highly energy efficient. No household should have to choose between heating and eating. It’s time to end this national scandal.”

ACE and EBR (2012 11) Reduced fuel poverty budgets in England briefing 

The draft Energy Bill published by the Government this year sets out the agenda for Electricity Market Reform so far. The aim of reform is to incentivise investment in an electricity system that is sustainable, secure and affordable. This briefing concisely explains:

• The Electricity Market Reform package’s proposals and rationale;
• The crucial role the demand side can play in meeting its aim at least cost;
• The rapidly evolving thinking about the policy mechanisms that can ‘level the playing field’ and allow the demand side to reach its full potential within Reform package
• And thus why it is ACE and other NGOs are working hard with the Government to ensure the Energy Bill enables this (which it does not currently do)

A huge thank you goes to Tom Watson, intern at ACE in September/October this year, for preparing a briefing which translates a very complex and important subject into plain English.

Download the briefing: Electricity Market Reform and the Demand Side

Next year marks a sea-change in the way energy efficiency measures are delivered in Britain, with the Carbon Emissions Reduction Target, the Community Energy Saving Programme and Warm Front coming to an end, and the Green Deal and Energy Company Obligation (ECO) framework commencing.

Using the Government’s Impact Assessment of the framework as its starting point, this briefing paper outlines the short term employment and economic implications of the transition as it currently stands, encompassing job and Government revenue losses that stand to be made in the interim, particularly in 2013. The paper further outlines how, given the overall ambition for the Green Deal and ECO in the medium term, such losses in the interim need not become a reality by making a few simple adjustments entirely in keeping with the spirit of the new framework.

• ACE briefing
• Final Impact Assessment of the Green Deal and ECO framework

Framing a sustainable transition to the Green Deal and the Energy Company Obligation

The ACE Research Team is today publishing its report on the implications of the transition from CERT to Green Deal and the new Energy Company Obligation after 2012 – to coincide with the deadline to the Government’s Green Deal consultation.

The ‘Dead CERT’ project’s focus is on the main contributors to the Carbon Emissions Reduction Target: cavity wall and loft insulation. Its aim is to understand the implications of the move from CERT to Green Deal and ECO for the markets for these measures, and to make recommendations to support a well-managed transition which ensures carbon budgets, fuel poverty targets, and the wider ambitions for the Green Deal can be met.

A report for eaga CT assessing the way that the costs of ECO could be met by households in order to minimise the impact on fuel poverty

The forthcoming Energy Company Obligation aims to underpin the Green Deal, support the improvement of hard-to-treat homes, and assist in the eradication of fuel poverty. As with previous supplier obligations, the costs will be met through consumer bills. How to ensure that these costs do not exacerbate the problems the policy will attempt to address?

This report puts forward the options available to policy makers to ensure that the Energy Company Obligation (ECO) is funded as equitably as possible. It considers a range of factors but focuses on the impact of the policy upon low income households as a whole, and those low income households with above-average energy consumption.

A report for Consumer Focus investigating the issues and barriers around the delivery of solid wall insulation

The Government anticipates that ECO, working alongside the Green Deal Finance mechanism, will play an important role in transforming the emerging solid wall insulation industry – the next major challenge for improving our housing stock. It also anticipates that social housing will be at the vanguard of such a transformation. However, large scale installation of solid wall insulation carries many challenges. It is expensive, disruptive to consumers and entails major logistical effort. But it also has the potential to dramatically reduce the fuel costs of low-income consumers, many of whom live in solid wall housing, as well as improve health and well-being.

Consumer Focus therefore commissioned the Association for the Conservation of Energy to investigate the issues and barriers that will need addressing if the solid wall insulation industry is to take off. Is social housing able to carry out the role the Government expects of the sector? What support does it require? Can social housing stimulate wider delivery of solid wall insulation in surrounding private tenure areas?

This report presents the findings of research into the experience of delivering SWI to date, based on interviews with stakeholders and a review of SWI schemes and trials. It highlights a range of issues that will need addressing if SWI installation is to take off.

• Executive Summary
• Full Research Report