ALLEVIATING FUEL POVERTY IN THE EU

Investing in home renovation, a sustainable and inclusive solution Oliver Rapf, Executive Director Buildings Performance Institute Europe Dublin, Ireland October 6, 2014

Europe 2020 targets & challenges

Europe 2020 targets Challenges Reduce by 25% (20 million) the number of Europeans living below national poverty lines. Increase the employment rate of the active population from 69% to 75%.

Reduce greenhouse gas emissions by 20%, increase the share of renewables in gross final consumption by 20% and reduce the energy consumption by 20% through improved energy efficiency.

In 2012, 124 million people were at risk of poverty & at least 50 million under fuel poverty.

The European population is ageing, increasing the number of vulnerable people.

Between 2010-2012 the employment rate remained stagnant (68.4%).

The primary energy consumption needs to be further reduced by 6.3% to meet the 2020 target.

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Could energy efficiency investments be the silver bullet to address all these challenges?

Combating fuel poverty by implementing energy efficiency measures would result in: Reduced energy costs Higher indoor thermal comfort Avoided illnesses Job creation Better social inclusion Reduced CO 2 emissions 3

Fuel poverty definition

Fuel poor people: • Need to spend more than 10% of their income on fuel to maintain an adequate level of warmth (UK 1991).

• Have required fuel costs that are above average (the national median level) and were they to spend that amount, they would be left with a residual income below the official poverty line” (UK 2013).

• Are unable to afford adequate warmth in a home (Ireland 2007).

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Fuel poverty in the EU (2012)

Inability to keep home adequately warm • 10.8% of the total population • 24.4% of people at risk of poverty Living in dwellings with leakages & damp walls • 15.1% of the total population • 23.5% of people at risk of poverty Arrears on utility bills • 9.7% of the total population • 22.1% of people at risk of poverty 5

Inability to keep home adequately warm in the EU (2012)  Bulgaria (46.5%) and Lithuania (34.1%) are the countries with the highest rates of people who are not able to keep their homes adequately warm, followed by Cyprus (30.7%), Portugal (27%) and Greece (26.1%).

 In colder Northern countries the percentages are low: Sweden (1.4%), Finland (1.5%), the Netherlands (2.2%) and Denmark (2.6%). Source: BPIE, based on Eurostat data 6 min. (0.6%) - 10% 10.1% - 20% 20.1% - 30% 30.1% - max. (46.5%)

People living in a dwelling with leaking roof, damp wall, floors or foundation in the EU (2012)  Slovenia (31.5%), Cyprus (30%) and Latvia (28.2%) show the highest percentages.

 In Slovakia, Sweden and Finland less than 9% of their population live in homes with these defects.

Source: BPIE, based on Eurostat data 7 min. (6%) - 10% 10.1% - 20% 20.1% - max. (31.5%)

Arrears on utility bills in the EU (2012)  Greece (31.8%), Romania (28.6%) and Bulgaria (28.4%) have the highest percentages of people falling behind on their payments.

 In Luxembourg, Germany, Denmark, and the Netherlands the payment of utility bills is a problem for only a small percentage of the total population (≤3.6%).

Source: BPIE, based on Eurostat data 8 min. (2.2%) - 10% 10.1% - 20% 20.1% - max. (31.8%)

The three fuel poverty indicators in the EU (2012)

Bulgaria, Cyprus and Greece have high rates for all three fuel poverty indicators.

In Sweden, the Netherlands, Denmark and Luxembourg fuel poverty is not a major problem.

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Fuel poverty indicators of people at risk of poverty (2012)

Country Arrears on utility bills (%) Inability to keep home adequately warm (%) Bulgaria Hungary Greece Latvia Cyprus Slovenia Italy Romania Lithuania Portugal Croatia Poland Malta Ireland

50.7

58.8

54.4

39.5

25.9

37.5

24.5

41.5

22.8

14.5

40.9

30.1

19.4

28.6

Source: BPIE, based on Eurostat data 70 33.9

47.6

35.1

50.6

17.3

44.1

25.4

38.2

43 21.8

27.6

32.1

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Dwellings with leakages & damp walls (%)

29.5

53

Country UK Estonia

21 43.3

34.6

46.1

30.1

30 28.6

Belgium France Czech Rep.

Spain Slovakia Netherlands Germany

28.4

19.9

20 12.4

18.3

Denmark Luxembourg Austria Finland Sweden Arrears on utility bills (%) Inability to keep home adequately warm (%)

20.3

20 14 17.8

19.4

17.9

18.3

8.6

8.6

5.5

6.6

11.3

13.7

10.3

19.4

9.6

18.8

15.2

15.3

18.2

13.6

8.7

14.8

7.1

2.2

7.7

3.8

3.5

Dwellings with leakages & damp walls (%)

21.4

30.3

26.2

22.1

20 17.9

19.7

27.4

21 25.3

28.9

15.2

8.6

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Analysing solutions

Cause of fuel poverty Low household income Solution Income increase / Income support schemes High cost of energy Low energy efficiency of the property Fuel prices regulation / Fuel subsidies Deep energy retrofits in dwellings 11

Income increase in the EU - Trend

 Mean equivalised net income: +11% (2007-2012).

18000 17500 17000 16500 16000 15500 15000 14500 14000 2005 2006 2007 European Union (28 countries) 2008 2009 2010 2011 European Union (27 countries)

Source: Eurostat

2012

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Energy cost in the EU – Trend

  Electricity prices: +25% (2007-2012).

Gas prices: +37% (2007-2012).

0,21 Electricity prices for domestic consumers (taxes and levies included) 0,20 0,19 0,18 0,17 0,16 0,15 0,08 0,07 0,07 0,06 0,06 0,05 0,05 0,04 Gas prices for domestic consumers (taxes and levies included)

Source: Eurostat 13

Unit consumption per dwelling in the EU - Trend

 Energy consumption in dwellings: -8.5% (2007-2011).

1,15 1,1 1,05 1 0,95 0,9 0,85 2005

Source: ODYSSEE – MURE

2006 2007 2008 2009 2010 2011

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Trends - Conclusions

Energy prices have significantly increased The household net income has not grown at the same pace

Europe is moving deeper into fuel poverty

Energy consumption per dwelling has only slightly decreased

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Energy price regulation & direct financial support to fuel poor people Are strongly dependent on many economic factors Need continuous and even increased funding from the public budgets Do not generate added value or economic growth 16

Deep energy retrofits in fuel poor homes The only sustainable way to address the cause of fuel poverty Local spending Reduced unwanted mobility Higher property values Improved community appearance Fewer energy subsidies Local employment Source: IEA, 2011 Improved human health 17 Reduced emissions Reduced energy infrastructure costs

Budget allocation to fuel poverty measures

3500 3000 2500 2000 1500 1000 500 0 UK

    In UK from the “winter fuel payments”, the main income support programme only 12% of the recipients are thought to be fuel poor.

In Greece €650 million were allocated to oil subsidies and €548 million to the main programme supporting energy efficiency improvements in households (2010 2014).

In Ireland in 2013, the one week extension of the Fuel Allowance (€20/week) season cost €8 million!

Even though energy efficiency measures have proven to be the most sustainable solution to the fuel poverty problem they receive lower funding compared to income and fuel price support schemes.

Energy Price Support Programmes Income Support Programmes Energy Efficiency Programmes

18 Source: “National fuel poverty budgets”, Association for the Conservation of Energy

Energy efficiency programmes for fuel poor households

Name Country Duration Investment Number of benefited households Warm Front Scheme

UK 2000-2012 £2.84 billion 2,324,500

Kirklees Warm Zones Warmer Homes Scheme Renovation Programme of 800,000 Social Housing Dwellings ERDF Thermal Renovation of Block of Flats for Low Income Families Buildings Renovation Programme through the Jessica Holding Fund

UK Ireland France Romania Lithuania 2007-2010 2000-2013 2009-2013 2013-ongoing (Expected results) 2009-ongoing (Expected results) £24.30 million €82 million €233.7 million €304 million €227 million 70,645 95,000 58,800 65,000 1000 multi-apartment buildings (by 2015)

Social benefits

 Decreased levels of anxiety &  depression Reduced number of winter deaths  Positive impacts in mental health £248.8 million net social benefit (job creation, house value, savings to National Health Service) Improvements in health problems (heart attacks, arthritis, headaches, mental disability) 7,225 additional jobs 5,000 jobs are estimated to be created and maintained  Improved thermal comfort levels  Higher percentage of people involved in community activities  Improved quality of life 19

Conclusions

Between 50 and 125 million people, cannot afford having a comfortable indoor environment.

Many MS recognise the fuel poverty problem, even though there is no single definition.

Social tariffs and heating subsidies address only partially the problem.

Energy efficiency improvements are sustainable solutions that address the problem at its roots.

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Policy recommendations (1)

Dedicated national programmes addressing the fuel poverty problem • The national plan to stimulate investments in building renovation, as required by Article 4 of the EED, should include national programmes addressing low-income and fuel poor people.

• Under the EED Art 7, energy efficiency obligation schemes may be introduced with dedicated components addressing fuel poor and vulnerable consumers.

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Policy recommendations (2)

Top priority at national levels, shifting price control mechanisms and fuel subsidies to more active and effective public expenditure on renovation measures • Shifting public budgets from energy subsidies to renovation programmes in a careful stepwise approach will result in a far greater and lasting benefit to families in fuel poverty, while at the same time generating a range of societal benefits.

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Policy recommendations (3)

A higher allocation of EU Funds to renovation programmes targeting fuel poor, low-income and vulnerable categories of people • The EU Cohesion Funds 2014-2020 have a higher (compared to 2007-2013 period) share allocated to energy renovation of buildings.

• Due to the similarity between less developed regions addressed by the EU Funds and regions with most vulnerable and fuel poor households, there is a great opportunity to design national dedicated programmes to renovate these homes by using EU Funds.

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Policy recommendations (4)

Need for a long-term strategy for fuel poverty alleviation in the EU • Long-term policy predictability is needed due to the size of the problem and its importance in reaching the EU socio-economic, energy and climate goals.

• The introduction of an EU-wide energy saving target for 2030 including binding measures on improving the energy performance of the EU building stock will trigger predictable and coherent actions and release investments addressing fuel poverty.

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Policy recommendations (5)

Improvement of statistical data collection by providing more evidence on the scale and impact of fuel poverty in the EU • There is a need to have more linkage between data provided by Eurostat and National Statistics Institutes in order to better identify the relationship between housing conditions, fuel poverty and other drivers of people’s vulnerability on energy issues.

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