The recent increases in price-capped energy bills and rising inflation rates has provoked a ‘cost of living catastrophe’ in the UK. Emerging as a critical social crisis, fuel poverty is estimated to affect more than 3 million English households every year. The condition of households living in fuel poverty, those who spend more than 10% of their income to maintain satisfactory heating, is principally determined by energy prices, low levels of income and the energy efficiency of homes. The situation is of particular relevance to the UK, which has some of the least energy-efficient housing stock in Europe, and the highest rates of fuel poverty.
The government crucially needs to improve the energy efficiency of UK homes in order to reduce household energy bills and the associated adverse consequences of fuel poverty. This could address issues of degradation of the quality of life, social exclusion, and extensive health problems at the root which cause an alarming number of winter deaths. Additionally, it is necessary if we aim to meet the Climate Change Act target of reducing greenhouse gas emission to net zero by 2050. Increasing the energy efficiency of poorly insulated homes and replacing fuel inefficient heating infrastructures would significantly mitigate the greenhouse gas emissions arising from energy consumption, representing a quarter of those national emissions.
Current strategies to mitigate fuel poverty
Following the UK’s failure to meet the Warm Homes and Energy Conservation Act’s target of eradicating fuel poverty by 2010, The Fuel Poverty Strategy: Sustainable Warmth, published in February 2021, insists on the necessity of securing energy efficiency in homes in order to achieve affordable warmth.
Included in the framework, the Energy Company Obligation (ECO) scheme requires energy suppliers to install energy-efficient measures in eligible homes, paid for through a levy on energy bills. While the ECO, principally focused on low-cost measures, has successfully supported two million homes, the implementation of the scheme has significantly slowed with the need for more expensive measures. The ECO is also a regressive policy as the all-bill payer funding of the scheme results in higher national energy prices, disproportionately impacting the poorest households.
The Fuel Poverty Strategy further includes Winter Fuel Payments, Cold Weather Payments, Warm House Discount Scheme and a new cost-of-living support package, providing one-off payments aimed at increasing income to support fuel poor households during energy intensive periods. It should be noted that these short-term solutions offer no incentives for people to invest in energy efficiency measures and largely outstrip government spending on energy infrastructure improvements. Strategies such as the Home Upgrade Grants, Social Housing Decarbonisation Funds and Green Homes Grant are more effective in the long run, as they support the renovation of worst quality off-gas grid homes and social housing.
Suggestions for further interventions
Although the Sustainable Warmth Strategy in England is expected to see a slow decrease in fuel poverty due to the implementation of energy-efficient measures, a number of key objectives have to be addressed in the forthcoming years in order to reduce fuel poverty effectively. New policy interventions need to focus on the fair allocation of costs and benefits of upgrading the energy efficiency of the UK’s housing stock.
Such a holistic approach to eradicating fuel poverty should be taken by including interventions supporting energy efficiency improvements, high-quality advising and effective inclusive targeting of fuel poor eligible homes. Funding strategies, most particularly regarding the ECO scheme should be revised to avoid imposing an extra cost for low-income households, through additional governmental funding, investment from landlords and financing from energy companies directly. Similarly, considering that high-cost measures have received very little attention due to the disincentive conditioned by their cost, measures should focus on the introduction of interest-free loans, cashback schemes or vouchers clearly directed towards energy efficiency, in addition to the short-term grants that provide struggling households with extra income.
Elia is currently undertaking work experience at Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Khwanchai Phanthong]
