William Baker Consumer Focus 14 March 2012

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

7. UK fuel poverty trends

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