Evaluating 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’

4. Energy poverty in Europe Source: Thomson (2011), Qualifying and quantifying fuel poverty across the EU • EPEE (2009): 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

7. UK fuel poverty trends 2011 & 2012= projections Source: DECC (2011), Consumer Focus (2012) and Camco (2012)

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 = ∑1ton (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 Source: CSE & NEA (2005), Warm Zones external evaluation

11. Hills Interim Fuel Poverty Review 2011 • 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 < t/hold / high energy costs We are consulting on how to set the thresholds. Source: Hills (2011), Fuel poverty and its measurement

13. Comparing indicators Number of households (millions) Fuel poverty gap (£ billion) Source: Hills (2011), Fuel poverty and its measurement

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 7900Fleetbank House, f 020 7799 7901Salisbury Square contact@consumerfocus.org.uk London www.consumerfocus.org.ukEC4Y 8JX