Transcript Jan Rosenow - Fuel poverty and energy savings obligations – natural bedfellows or enemies? (pptx)

Environmental Change Institute
Fuel poverty and energy savings
obligations – natural bedfellows or
enemies?
Jan Rosenow, Reg Platt (IPPR) & Brooke Flanagan (Future Climate)
Fuel poverty in policy and practice a postgraduate symposium
July 17, 2016
July 17, 2016
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Structure
1.
The changing policy landscape
2.
An overview of the Supplier Obligation
3.
Tensions between fuel poverty and energy savings
obligations
4.
Impact of policy proposals for Green Deal and ECO on fuel
poverty
5.
A new approach to targeting within the Supplier Obligation
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The changing policy landscape
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Changing fuel poverty policy landscape in
England – a shift towards Supplier Obligations
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An overview of the Supplier Obligation
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Architecture of Supplier Obligations in the UK
Source: Rosenow (2012)
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Steeply increasing targets
Source: Rosenow & Eyre (2012)
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…until now
Source: Rosenow & Eyre (2012)
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What is the Energy Company Obligation?

successor of the Carbon Emissions Reduction Target (CERT)
and the Community Energy Saving Target (CESP)

falls into category of Energy Savings Obligation / White
Certificate Scheme

will work alongside the Green Deal from 2013

annual spending at least £1.3bn
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Tensions
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Tensions between energy savings
obligations and fuel poverty

cost pass through: energy savings obligations are consumer
funded and revenue raising part of obligations is by nature
regressive (at the moment ~£54 per year per household)

targeting of higher income households: energy suppliers
prefer working with able to pay

carbon savings: low-income households take more of the
energy savings in the form of increased comfort (rebound
effect)

cost effectiveness: badly designed provisions for targeting
fuel poor can increase cost exacerbating regressive impacts
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Impact on fuel poverty
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Fuel poverty

for the first time the Energy Savings Obligation (now ECO)
contains Affordable Warmth target defined in energy cost
savings

other fuel poverty schemes such as Warm Front have been
terminated by Coalition Government

about 25% of spending expected to benefit fuel poor
households (£350m)
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Fuel poverty

fuel poverty impact of ECO will be to take 125,000 – 250,000
households out of fuel poverty by 2023 (DECC 2012)

currently almost 5 million households in fuel poverty (DECC
2012c), it would take 200-400 years to eradicate fuel poverty at
this rate

under current plans, Green Deal and ECO ‘would be expected
to increase fuel poverty’ (Hills, 2012, p. 112)
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ECO is regressive, but earlier supplier obligations
likely to be much less or even progressive
Source: DECC (2012a)
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Why is ECO likely to be more regressive
than previous Supplier Obligations?

focus on high cost measures such as solid wall insulation
means much smaller number of households will benefit while
all have to pay

suppliers likely to target larger properties

uncertainty about cost pointing upwards
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Targeting of fuel poor in Supplier
Obligation
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Current approach relies on benefit
entitlements and age

40% of CERT target to be delivered in Priority
Group (over 70s and certain benefits)

15% of CERT target to be delivered in Super
Priority Group (low income and certain
benefits)

CESP focuses on bottom 10-15% of income
index
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Targeting efficiency of Supplier Obligation is
poor, but other policies are not much better
Scheme name
Warm Front
pre-Apr 2011
April 2011-Sep 2012
Winter Fuel Payments
Supplier Obligation
EEC 2005-08 PG
CERT 2008-12 PG
CERT 2008-12 SPG
CESP 2009-12
Warm Home Discount
Targeting efficiency
% of recipients
% of fuel poor that are
that are fuel poor
eligible
26%1-40%2
not known
19%4
35%2-53%3
77%3
50%4
22%1
24%6
>24%7
>22.4%8
28%9
584 - 70%5
not known
not known
not known
not known
Sources: Sources: 1: BERR (2008); 2: NAO (2009); 3: DECC (2011); 4: Boardman
(2010); 5: Lees (2008); 6: Sunderland and Croft (2011); 7: at least a high as PG
because SPG is part of PG; 8: CAG consultants et al. (2011); 9: Hills (2012), based on
archetypal modelling for hypothetical supplier funded rebates
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The need for better proxies
Low energy efficiency
Solid walls
Off-grid
Rural location
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An alternative policy approach: targeting
by ‘Low Income, Low Efficiency Area’

originally proposed by Boardman
(2010, 2012)

integrate in Supplier Obligation (if
it is to be a fuel poverty policy)

potentially high targeting
efficiency at low administrative
cost
Source: BRE (2009)
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Conclusions
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Conclusions

ECO will constitute main fuel poverty policy instrument

Tensions of using energy savings obligations for fuel poverty
reduction will not go away

Current proposals for ECO are regressive both on revenue
raising side as well as benefit allocation part

Targeting efficiency of fuel poor via Supplier Obligations
historically low (although never intended to be high)

New approach required such as ‘Low Income, Low Efficiency
Area’
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Key sources
Boardman, B. (2012): Achieving zero. Oxford, Environmental Change Institute, University of
Oxford.
DECC (2012a): Final Stage Impact Assessment for the Green Deal and Energy Company
Obligation. DECC, London.
DECC (2012b): Annual report on fuel poverty statistics 2012. London, DECC.
Eyre, N. (2008): Regulation of energy suppliers to save energy – lessons from the UK debate.
British Institute of Energy Economics Conference September 2008, BIEE.
Fahmy, E., D. Gordon and D. Patsios (2011): Predicting fuel poverty at a small-area level in
England. Energy Policy 39 (7), 4370-4377.
Hills, J. (2012): Getting the measure of fuel poverty. Final Report of the Fuel Poverty Review.
London, DECC.
Rosenow, J. (2012): Energy Savings Obligations in the UK – A History of Change. Energy Policy
49, 373–382. Link to paper
Rosenow, J., Eyre, N. (2012): The Green Deal and the Energy Company Obligation - will it work?.
In: Proceedings of British Institute of Energy Economics 9th Academic Conference. European
Energy in a Challenging World: The impact of emerging markets. St Johns College, Oxford, 19-20
September 2012. Download
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Jan Rosenow
[email protected]
www.janrosenow.com
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