How Much? The Cost of Alleviating Fuel Poverty

Author:
Organisation:
Centre for Sustainable Energy
Association for the Conservation of Energy (ACE).
Date: 2008
Location:

Rationale

Tackling fuel poverty requires significant capital investment, but it is also important to ensure that measures are directed at those who most need them in order to optimise the outcomes with regard to policy objectives. Understanding whether current delivery mechanisms are adequately funded and are effectively targeting fuel poor households is essential, not least because legal commitments exist to eliminate fuel poverty. In addition, obtaining an estimate of the financial obligations required to fulfil national objectives will enable a comparison to be made with the actual sums earmarked for addressing the issue.





Key research Question

The study sought to quantify the economic resources needed to meet the UK’s mandatory targets for ending fuel poverty, within an environment of increasing numbers of fuel poor households. As part of this exercise, it attempted to establish a more accurate baseline of the situation.



Summary of activity

Statistical models developed in the earlier Fuel Price Rises project (Guertler, Moore & Preston, 2007) and the ACE’s Fuel Prophet tool were adapted and used to estimate a baseline of fuel poverty. A ‘threshold model’ was then established, which could forecast the impact on fuel poverty of multiple combinations of different interventions in order to predict which would have the largest effect on fuel poverty. A round-table discussion was organised with policy-makers to discuss the outputs from the ‘How Much?’ model and consider possible ways forward.





Findings

The numbers of households in fuel poverty are likely to rise steadily, which means that more resources are needed to eliminate it. Taking this factor into account, the total cost of eradicating fuel poverty in all households is estimated to be £6 billion. Existing government-funded programmes (e.g. Warm Front) are not equipped to deliver the outputs needed to meet fuel poverty goals, in part because they do not fund measures such as microgeneration by solar hot water systems or ground source heat pumps, but also because the eligibility criteria exclude significant numbers of households (e.g. hard-to-treat homes).



Recommendations

The report includes short-, medium- and long-term proposals. Existing policy should be modified by a range of measures including:

  • The scope of current financial support and energy efficiency grants should be amended to fund a wider number of technologies, and the eligibility criteria should be changed to better target assistance to those most in need (e.g. creating a special status for houses in multiple occupation). In addition, access to such schemes should be rationalised into a single pathway (e.g. a single agent for an area).
  • Better coordination and regulation of the sector by government and industry are needed. For example, schemes such as the Carbon Emissions Reduction Target should provide clear directions to installers and energy suppliers as to which measures should be prioritised.
  • Accepted standards relating to fuel poverty, thermal comfort and excess cold should be revised to reflect the true state of these issues.

In addition, practical one-off steps should be implemented, such as reducing the cost of Energy Performance Certificates and aligning prepayment tariffs with standard arrangements.



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