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Energy Poverty and Sustainable Energy

December 2010

Why Energy Poverty in EU Policies?
In an increasing number of EU countries, it is recognised that a part of the population has a hard time paying energy bills and faces the risk of being disconnected from its energy supply. As an example, there is new evidence that as many as 10% of Spaniards have this problem. While for some people it is simply a problem attributable to poverty, for others it is as much a question of high energy bills because of inefficient houses, equipment, etc. With the current increases of the energy prices, the number of people affected from the energy poverty is growing in the EU.

With increasing recognition of energy-poverty problems, a growing number of politicians and stakeholders has promoted the concept of integrating energy-poverty considerations into relevant EU policies. The recent electric- and gas-market directives require the countries to limit disconnection of vulnerable consumers, but the real solution must be to bring daily energy costs within the realistic reach of consumers’ ability to pay, for instance with energy efficiency that can reduce their energy bills. Support is often better used to increase energy efficiency of vulnerable consumers than to support them directly to pay energy bills, but the energy efficiency has to be implemented before consumers are about to be disconnected.

EU policies are regulating energy use in the EU countries with a number of measures, including directives and support mechanisms. If these measures are made and implemented with an eye on energy poverty, they can help the EU countries to reduce the energy poverty problems and the related suffering.

INFORSE-Europe has already worked on proposals for integration of energy poverty into use of EU legislation. (Read INFORSE-Europe's views in 2009). On this page, INFORSE-Europe's ideas are presented in their status by the end of 2010. Comments are welcome, as we will develop proposals further as policies and ideas develop.

Non-disconnections, Proposals for EU Internal Energy Markets
In 2009, the directives for the internal electricity and gas market directives were changed
(2009/72/EC and 2009/73/EC), and they now include the following sentences:

“Member States shall define a concept of vulnerable customers which may refer to energy poverty and, inter alia, to the prohibition of disconnection of such customers in critical times".

The requirement to refrain from disconnection is one way of addressing the energy poverty problem, but it is a very short-term solution. Such requirements (though not mandated by the EU) has in the past lead to problems with long-term non-payment in Central Europe, in turn deteriorating the economy of the power supplier, and lack of action of the nonpayers.
The requirement not to disconnect vulnerable costumers must be combined with:

  • programs to increase energy efficiency,
  • social support, for the most vulnerable, so they can pay bills
  • other measures, maybe a "lifeline-tariffs" by which a basic level of consumption is charged a lower price.
  • The energy price increases can be limited, aiming at heat prices below gas prices. This can be done by changing heat supply from gas boilers to CHP or local biomass combustion.

Specifically, INFORSE-Europe recommends that in the implementation of the revised electricity and gas market directives that were adopted in 2009, the EU countries include the following:

  • Make support available for increased energy efficiency in households that are in risk of
    being unable to pay their energy bills. This could be households that have energy bills
    (electricity, gas and heating expenses combined) above 10% of disposable income. Highest priority should be given to the most vulnerable households, which is those containing children, or those who are elderly, sick or disabled. The support should enable the households to reduce their energy bills to affordable levels. In case part of the support is given as loans, the combined repayment of loan, interest of loans, and forecast for remaining energy bills should be significantly lower than previous energy bills, and preferably not exceed 10% of disposable income.
  • Assist households in risk of being unable to pay energy bills with free advice that is easily
    available with energy advisers that can help the households to reduce energy bills, with or
    without public support.
  • Provide social support for vulnerable households should be scaled with changing energy
    prices.
  • Combine social support for households in energy poverty (spending more than 10% of income for electricity and heating bills) with support for increased energy efficiency.
  • As part of above proposals provide "pay-as-you-save" (PAYS) programmes with loans where payments for an energy efficiency improvement are directly taken from the energy savings, i.e. at no direct cost to the households.
    Invite households that default from energy payments for electricity and heating, to make a plan for reduction of energy costs and payments of energy bills to avoid disconnection.
  • Invite heat suppliers with extraordinarily high heating costs (can be defined as costs above consumer tariffs for natural gas, or by a national indicator for heating costs) to plan for reduction of heat supply tariffs, with use of structural funds and loan guarantees as appropriate. The plan can include increase of energy efficiency of heat network and heating stations, changing of fuels, and introduction of combined heat and power. It can also include changing of heat network structure, to avoid too long transmission lines, but interconnect nearby heat supply to increase efficiency in supply.
  • Consider tariff regulation to reduce fixed payment elements and remove payment structures where the first units of the consumption are charged at a higher (sometimes much higher) rate than subsequent units. These tariff structures harm the poorer, smaller consumers.
  • Eventually introduce a "lifeline tariff", where a basic energy consumption is charged less than the following, larger part of the energy consumption.

The EU countries have to implement the revised Directives until April 2011. The implentation should include how to deal with the protection of vulnarable costumers.

Proposals for EU Funding - Structural Funds
EU funding, in particular structural funding have increased reliance on fossil fuels with support, among others, for road building and expansion og gas networks. Support to increase energy poverty with improvements of buildings have been limited to first 3% and now 4% of the structural funds. Structural funding in all Central European countries have followed this pattern, but it is not just a question of EU policies, the current low support for energy efficiency and renewable energy is just as much a result of national priorities.

Future structural funding must have reduction of fossil fuel use and reduction of energy poverty as major objecties. This must lead to that a substantial part of the funding be used to reduce energy bills by improving energy efficiency and changing supply to more local energy sources including biomass, solar, and, where available, geothermal energy. Households in energy poverty must be prioritised in these structural funds. The upper limit of 4 % of structural funds for energy efficiency must be removed.

In the current round of structural funds, project to reduce energy poverty with energy efficiency and renewable energy must be given priority in allocation of the remaining funding.

In the coming financial period from 2014, a substantial part of the structural funding must addres energy poverty with energy efficiency and renewable energy so the poorer poeple increasingly get sheltered from energy prices crisis that we can expect to become more common in the future.

To maintain a focus on household energy use, and thereby on energy poverty, the EU Commission should give guidelines for structural funds to the national governments to support individual housing projects, for instance via energy efficiency finding for housing with a priority on reducing energy poverty with energy efficiency. There is a large potential here, given the low energy efficiency level in many houses in Central Europe as energy efficiency in buildings was not a priority of the past decades due to state policies of providing cheap energy, well below market prices.


Other Policies
Energy poverty can be integrated in other policies and support schemes.

In the UK energy poverty has been addressed over the last 10-15 years by the UK Government that has delivered large scale insulation programmes aimed at tackling fuel poverty (often called "affordable warmth"). Most programmes are usually funded nationally by mandatory funding by the utility companies at approx £1-£2 billion per year with the costs of the programme
added to all consumers' energy bills. The latest programme is called the Carbon Emissions Reduction Target (CERT) and provides free loft and cavity wall insulation to everyone over 70 and to families on low incomes. In addition all other householders can have discounted insulation which provides a payback on the capital cost over approx 3 years. Also utility companies distribute very low cost energy saving compact florescent lights through supermarkets and shops (approx £0.20 each, or 25 euro cents each).

The utility companies then meet their reduction requirements to the "Carbon Emissions Reduction Targets" in this way.

With the update of the the EU energy efficiency action plans, now planned for 2011, requirements for utilities to address energy poverty with energy efficiency, could be integrated in the new plans.

Read Articles & Books on energy poverty in the UK:
The cold claims lives while energy companies get rich. Successive governments have allowed Britain's privatised, liberalised utility companies to get away with murder.
by George Monbiot, 27 December 2010. Read it in Guardian.
- Cold-Hearted. The level of excess winter deaths in the UK is higher than Siberia’s. This is why.
Same article with references at Monbiot.

Fixing Fuel Poverty, Challenges and Solutions.
by Brenda Boardman, Emeritus Fellow at ECI, University of Oxford.
January 2010. Published by Earthscan.
The book includes comprehensive survey of figures and tables and evaluation of the UK Warm Homes & Energy Conservation Act 2000 and the subsequent absence of coherent policy responses from governments who relied far too heavily initially on falling fuel prices. The author provides a comprehensive and devastating critique of Government's failure to tackle energy poverty - and offers a constructive way forward, based on a low-carbon and energy-efficient strategy.
Read reviews of the book at Earthscan, and at Warmer Houses Healthier Homes' web site.

Read also:

- INFORSE-Europe on Energy Poverty in 2009.

- Results of the FinSH project - Financial and Support Instruments for Fuel Poverty in Social Housing. Intelligent Energy europe (IEE) Project in December 2007 - May 2010. Among the results are several reports, success and case stories and a guide book on improving energy efficiency in the social housing stock called “Affordable Warmth for all”.
(Among the partners of the project there were 2 INFORSE-Europe members: GERES and Severn Wye Energy Agency (UK).

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