Monday, October 31, 2011

This is the way to eliminate fuel poverty

Elderly woman in fuel poverty
Thousands of lives could be saved by giving energy bill rebates to the fuel poor that are conditional on having smart meters, advice, energy audits and eco-refits.

A recent report by Professor John Hills of the London School of Economics for the Government estimated that at least 2,700 people die every winter because they can’t afford their soaring heating bills.

This is more than the number who die on the roads each year.

Save the Children UK estimates that low-income families may pay up to £250 a year more for energy.

This is often because they do not pay by direct debit and are on pre-payment meters (although not all PPM customers are fuel poor).

But successive governments have found it hard to deal with the problem, and increased fuel prices have only served to make it worse.

Government policies to create a low carbon future are also adding around 8% to average energy bills, although in the future this means the bills won't be so vulnerable to fossil fuel price rises.

The only real solution to the problem is to help low-income householders use less energy and to improve the energy performance of their housing.

There has been no shortage of support for this idea already. Schemes include:

  • The Energy Efficiency Commitment (EEC, 2002–2008), the Carbon Emissions Reduction Target (CERT, 2008–2012) and the Energy Company Obligation (ECO) due next year to replace it. Half of CERT's budget (£1.8 billion) was targeted at households in receipt of means-tested benefits or disability-related benefits or where the householder is aged 70 or over
  • Publicly funded schemes like Warm Front in England, and related programmes in the devolved administrations, which cost £470 million in 2009/2010
  • The Decent Homes refurbishment scheme for social housing in England (and similar schemes in the devolved administrations). According to the DCLG (Department for Communities and Local Government) £4 billion was spent on heating and insulation improvements between 2000-2008, plus £2 billion between 2008/2009 and 2010/11)
  • The pilot Community Energy Saving Programme (CESP), running until December 2012 and costing £350 million, which is targeted at deprived areas and the hardest to treat housing.

This is about £1.77bn a year. But they have yet to prove that they provide effective value for money.

In fact the UK is further from eliminating fuel poverty in vulnerable households than ever.

For example, the House of Commons Public Accounts Committee, when it examined the Warm Front in 2009, found it to be poorly targeted despite using means-tested benefits, since nearly 75% of households entitled to a grant are unlikely to be in fuel poverty, yet only 35% of all those households likely to be in fuel poverty are eligible for it, partly because it only applied to private housing.

The scheme did not prioritise those with the most energy-inefficient accommodation, especially in rural areas.

How to eliminate fuel poverty

The first problem is targeting the appropriate households.

The Government is hoping to use two new ‘data frameworks’ – the Home Energy Efficiency Database (HEED) run by the Energy Saving Trust, and the National Energy Efficiency Data (NEED) framework, which is being developed by DECC.

But there are severe problems with this: HEED does not include EPC ratings from England and Wales, and anyway EPC ratings will be available only for properties that have been put up for sale, missing out most people, especially pensioners, who do not move.

Therefore much greater attention needs to be paid to gathering and matching information.

It should not be beyond the bounds of the technically possible that much of this work can be done automatically, cross-checking with data from Local Authorities, energy utilities and charities.

After all, it's the sort of thing which the marketing departments of companies like Tesco do all the time.

But why not actually harness the power of crowd sourcing and encourage the fuel poor themselves to come forward by rewarding them to do so with a reduction and a rebate on their bills?

They should be able to volunteer through a central helpline run by the Energy Saving Trust and publicised by the energy companies themselves, as part of the Energy Company Obligation (ECO), as well through local authorities and charities.

A condition for the receipt of rebates should then be that households are given, through the ECO, an energy audit, and a complete whole house eco-refit based on this audit, followed by training on how to use any equipment that has been installed.

The refurbishment should be done on a whole-home basis to achieve the maximum benefit.

Immediately on coming forward, all these households should also be automatically given smart meters.

When these are installed, the occupants should be visited and show how to use them, and given personal advice on how to achieve even greater reductions in energy bills through broader energy-saving behaviours.

This would get them off pre-payment tariffs straight away, which would reduce their costs.

It would encourage them to set and aim at specific energy usage or bill totals within a week or a month, so that they gain greater awareness and control over their energy use and budgets.

This could reduce their bills by at least 10%.

But this won't reach every home. Far more fuel poor households are in the private rented sector than are owner-occupiers.

These homes are more likely to be in a poor state.

The 2011 Energy Act will force landlords to improve the energy efficiency performance of their stock from the year 2015, using measures for which there is funding available through the Green Deal or the ECO, if a review, to be held in 2014, reveals that they have not already made voluntary improvements using the Green Deal.

In theory this approach should eradicate the worst performance (F and G SAP-rated), but it doesn’t guarantee a minimum standard, and this needs to be set in absolute terms - say the number of kWh used per square meter per year.

The Warm Home Discount is a step towards such an approach using energy bill rebates.

However, it is currently confined to a single subset of target groups and is not linked at all to any characteristic of the dwelling.

It should therefore be reformed and made conditional on a combination of the above interventions.

This approach is argued for by Paul Ekins, of the UCL Energy Institute, University College London, and Matthew Lockwood, Institute of Public Policy Research (IPPR) and Institute of Development Studies, at the University of Sussex in a new report on Tackling fuel poverty during the transition to a low-carbon economy.

They propose that any energy bill rebates would be paid to eligible recipients, from the moment they are given their smart meters, while their energy efficiency upgrading is being done, and through the follow-up advisory stage.

The cost of this could partly be paid for, they say, through a reform of the Winter Fuel Payments, which is currently also not targeted well enough.

The cost of eliminating fuel poverty

The IPPR and National Energy Action recently tried to estimate the cost of doing this through energy efficiency measures and came up with around £20–30 billion for England, or up to £64 billion for the whole of the UK.

The combined annual average spend on Warm Front, the CERT priority group and CESP is just around £1 billion for 2008–2011.

At that rate it would take 20-30 years to get around to every household in England.

Doubling the annual spend to £2 billion would end fuel poverty in England within 10–15 years as well as creating jobs.

Quadrupling it would bring the end date even nearer.

Given the huge amounts being spent on bailing out the banking system this is a small consideration that would save thousands of lives and vastly improve the quality of life for millions of people in this country.

And it is about the same amount as that spent on the measures I list above anyway - so there wouldn't be much change, it would simply be better targeted. There would just be the cost of running the helpline and administering the process.

And this sum is not much more than the £1.77bn being spent per year already on the measures listed above.

So there would be just a slight step change financially; and the money would simply be better targeted, with an additional cost for running the helpline and administering the process.

If the cost of a £2bn spend were completely to be passed on to the consumer, it would add £80, or 6%, to an average annual energy bill of £1,200, and the fuel poor would automatically be protected from this by the rebate.

Surely this is worth it?


LinniR said...

mostly very good sense, except for
'In theory this approach should eradicate the worst performance (F and G SAP-rated), but it doesn’t guarantee a minimum standard, and this needs to be set in absolute terms - say the number of kWh used per square meter per year.'
Absolutely disagree. Fuel poverty is not about how many kWh used, but about how much money is used.
SAP sets an absolute standard, in terms of £ used per square metre per year, and this is why the SAP standard must continue to be used.

David said...

SAP does, but the Green Deal doesn't. kWh/sq m is the same as £/sq m; but the former is independent of the changes in energy prices and easily converted to current prices.

The current consultation for the Green Deal and ECO states that success of measures will be evaluated as follows: "the overall Carbon Saving target will use a metric based on annual tonnes of CO2 reductions; and that this should be set at a level of 0.52MtCO2/yr by 2015 (equivalent to 2.0MtCO2/yr in 2022 pro-rata)."

This is a relative level and assumes it is known what the previous metric for the house was, which will vary in each case. As such it is open to guesswork and inaccuracy.

The overall Affordable Warmth target is also relative: it "will use a metric based on reductions in lifetime heating costs; and that this should be set at a level of £3.4 billion reduction in notional lifetime costs of heating for low income and vulnerable households by 2015".

Note the use of the word 'notional'; again, how will we guarantee that specific levels energy cost have been reached?

The following paragraph (50) states that SAP will be used, but again to measure a relative reduction: "Property-specific scores will be calculated through a similar SAP or RdSAP methodology used for Green Deal assessments with scores reflecting the modelled reductions in carbon and heating cost reductions."

Perhaps I am missing something? Are you a practitioner?

LinniR said...

yes, I am.

the issue here is that not all energy is charged to the customer at equal cost, electricity being much costlier than mains gas, for instance. SAP & RdSAP take this into account and evaluate the energy efficiency of the home, ie, how efficiently does the home turn money into what you are paying for; heat, hot water, and light.

If a kWh/m2 standard was achieved using electric heating, the home would be much more expensive to run than a similar home achieving the same standard using mains gas. So that's why I believe it is better to set standards using SAP instead of kWh/m.

Using carbon instead of cost is very roughly approximate to setting standards based on money, since the high carbon fuels tend also to be high priced (electricty, again). Obviously though, it's not as useful for the fuel poor as a standard based on cost.

Thanks for your response and very interesting questions relating to the consultation. Regretably I haven't yet had time to read the condoc, as I'm far too busy working on.. wait for it.. greendeal...!

David said...

Thanks for pointing this distinction out.