Consumer Futures commissioned ACE Research to model the cost and impact of introducing ambitious new fuel poverty targets. This new report presents the results of the research, as introduced by William Baker, Head of Fuel Poverty Policy at Consumer Futures, below.
In the context of a growing political debate regarding the best way to cut energy bills, this briefing shows that a family could be wasting around 41% of their gas every year if they live in a typical fuel poor home, due to a low standard of energy efficiency. They could save 41% of their gas costs each year by installing energy efficiency measures. There are over 6.7 million homes in England (one in three) which have very poor levels of energy efficiency, representing an E, F or G rating on an Energy Performance Certificate. In England, 1.41 million fuel poor homes (more than half) fall into this category.
If a family turn their heating on at the start of October, then that 41% saving is the equivalent of all their gas costs from the 14th of February until the next October. If they installed efficiency measures, it would be like having free heating and hot water from the 14th of February onwards. We could say that everything they spend on gas after that date is wasted money – so the 14th of February is ‘Burning Cash Day’.
The savings from energy efficiency vary between different homes, so every home has its own Burning Cash Day. Even in a home which has an average level of energy efficiency (including at least some loft and cavity wall insulation) the family could still save 25% of their gas bill, through additional measures. This means that Burning Cash Day for this typical home is the 22nd of March.
The Energy Bill Revolution campaign is calling for major Government investment to provide energy efficiency measures for free for people in fuel poverty, and to provide subsidies for everyone else. It is proposed that this is paid for by recycling revenues from two carbon taxes that are paid by consumers – the European Emissions Trading Scheme and the Carbon Price Floor. Over the next 15 years the Government will raise an average of £4 billion every year in carbon taxes; this is enough revenue to insulate to a high degree an average of 600,000 fuel poor homes every year. In time, every household could benefit, and see major reductions in their energy bills.
In early 2013, ACE Research and the Energy Bill Revolution published a fact-file on families and fuel poverty. This new briefing serves to update last year’s headline figures for the number of households, people, families, and children in fuel poverty to 2014. It does so for the UK, as well as for the devolved nations where appropriate.
There are now two high-level fuel poverty definitions in use in the UK. The original definition, that of a household having to spend over 10% of its disposable income to pay for adequate energy services, has (with minor variations) been retained in Northern Ireland, Scotland and Wales. Although the Department of Energy and Climate Change still report fuel poverty in England against this definition, it has now formally adopted a new definition of fuel poverty in England, based on the recommendations of the Hills Review into the measurement of fuel poverty.
This briefing provides estimates for the level of fuel poverty (under the original definition) at the start of 2014 for the UK and its nations. In addition, it provides an estimate for fuel poverty under the new definition in England. The following factors make a 2014 update on last year’s estimates pertinent:
- Energy suppliers announced significant price rises at the end of 2013. Some of these price rises have been claimed by suppliers to be smaller than they otherwise would have been, as they have pre-empted Government reductions to ‘green levies’. Government proposals for reducing levies were made subsequent to the price rises at the end of 2013;
- The rate at which energy bill-reducing measures are being delivered slowed down considerably in 2013 compared to previous years;
- And average real earnings have remained largely flat
Energy prices, energy performance of housing and incomes are the three factors that together determine the level, depth, and nature of fuel poverty, whichever definition is used. The estimates in this briefing compare the state of fuel poverty now to that of 12 months ago, and to 2011, the year for which the latest official estimates of fuel poverty are available.
ACE Research, in partnership with Joanne Wade, was commissioned by the European Council for an Energy Efficient Economy (eceee) and the French Environment and Energy Management Agency (ADEME) to identify and review a wide range of energy efficiency finance schemes from around the world for the World Energy Council (WEC). The research is part of a suite which informed 2013′s World Energy Congress in Daegu, South Korea, this October.
By clicking on ‘Continue reading’, you can see an overview of what we addressed in the review. And here you can download a summary report with recommendations and detailed full report including national case studies.
Every year in September/October, the Department of Energy and Climate Change issues its latest CO2 emissions projections. Presently, these project emissions forward to 2030. This tool compares the savings projected to come from policies which reduce CO2 emissions in the electricity generation sector, as well as policies which reduce emissions in the end-use sectors (agriculture and waste; commercial and public services; industry; residential; transport). Please note that this tool is not intended for use on its own. It should be used in conjunction with the reports and annexes published alonside each year’s UEP that is compared in this tool (2011, 2012 and 2013). Links to these resources are provided in the downloadable tool, including instructions on how to use it. What this tool enables you to do swiftly is to pinpoint differences between UEPs and more easily find the assumptions underlying any changes in the accompanying UEP resources.
- Download ACE Research’s Updated Emissions Projections comparison tool (requires Excel 2010 or later)
ACE Research presented two papers at the European Council for an Energy Efficient Economy‘s biennial Summer Study a fortnight ago. One investigates the energy efficiency implications of an ageing population in the context of constricted housing supply. The other examines the history of the Green Deal’s development to date. Continue reading to find the abstracts, along with links to the full papers and their presentations.
The Green Deal finance mechanism is designed to enable households and small businesses to install energy efficiency improvements at no up-front cost. The capital is granted so long as the repayments (for which the utility bill payer, not the building owner, is liable) do not exceed the value of the predicted energy savings. Completely new to any European country, it has been described as a “no-brainer”, a “game-changer”, a “massive economic and job opportunity which could help Britain’s economy turn the corner” and “the biggest home energy efficiency drive since the Second World War” (Secretary of State Chris Huhne, 2010–2011; Minister of State Greg Barker, 2011).
The Green Deal was launched on October 1, 2012 – and despite it being the Government’s flagship green policy, the responsible Department of Energy and Climate Change did not even issue a press release on that day. What happened? This small incident is just the tip of an iceberg of a sometimes tumultuous but always fascinating process of policy development. From its inception as a political manifesto commitment in early 2010, the Green Deal’s evolution has seen ministers announcing very high ambitions, contrasted with official predictions of very low take-up; press coverage ranging from good to bad to ugly; and stakeholders (often simultaneously) alienated and more heavily engaged than ever before: all framed by the still considerable uncertainty about this new policy mechanism.
The dichotomies alluded to above provide the focal point and aim for this paper: to convey a multi-faceted history of the still young Green Deal. This paper reviews its intellectual, political, cultural (media), and stakeholder (involvement) history – by drawing on policy papers, speeches, press articles, meeting notes and stakeholders themselves – to paint a vivid picture of policy development in practice and draw out conclusions for policy-makers and others who might consider embarking into similarly uncharted policy waters.
This paper explores the housing crisis currently faced by the UK; housing space has become increasingly unaffordable for many households, with the shortage of supply being exacerbated by a recent decline in the number of new properties being built. The paper looks in detail at the potential to increase housing space in the market by encouraging downsizing amongst retired households. Firstly the current housing situation in the UK is considered and the trends in demographics and the housing choices of older people are considered to determine the influence this has had on the current situation. The paper looks at current trends in downsizing and assesses the potential for older people to move to a smaller property dependent on age and economic grouping.
By moving different occupants from one property to another, overall energy consumption across the housing stock may be influenced as well as the rate of energy efficiency retrofit. Downsizing will also release housing space into the market, reducing the amount of new housing space that needs to be built. A broad analysis of these effects is conducted to assess the energy efficiency implication downsizing may have.
Finally the paper reviews the policies that currently exist in the UK to improve housing conditions for our ageing population and sensitively encourage more households to downsize. Additional policy options are considered and opportunities for energy efficiency policy to work alongside social and housing policy are identified.
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.
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:
Download ACE’s response to the DECC consultation here:
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.