Fuel Poverty

The Department of Energy and Climate Change consider a household as being in ‘fuel poverty’ if it spends more than 10% of its income on energy in order to keep one room at 21 °C and the other rooms at 18 °C. As DECC, and this ‘Poverty‘ site make clear, fuel poverty has three causes:

  1. The cost of energy.
  2. The energy efficiency of the property (and therefore, the energy required to heat and power the home)
  3. Household income.

At the moment, popular focus immediately falls on item 1 – gas and electricity prices. But as I have mentioned before, it is hard to imagine that fuel prices are going to do anything other than rise in coming years. Artificially reducing the price of energy for vulnerable groups may seem like a smart idea, and may be an appropriate short term compassionate gesture. But ultimately reducing the cost of something encourages people to use more of it!

In a recession it is easy to blame the situation on item 3 – household income. Sadly, eliminating ‘poverty’ is something that is unlikely to be achieved in the near term. But although many ‘poor’ people are also in ‘fuel poverty’, that is not the whole story. As the 2007 – 2009 data below shows, the majority (60%) of ‘poor’ people (i.e. people n the bottom 20% of household income) are not in ‘fuel poverty’. So simply being ‘poor’ does not automatically cause ‘fuel poverty.’

The risk of fuel poverty rises sharply as household income falls and, for example, very few households with above-average incomes are in fuel poverty: averaging across 2007 to 2009, around two-fifths of households in the poorest fifth after deducting housing costs were in fuel poverty.  Even so, a majority of households in the poorest fifth were not in fuel poverty and, furthermore, there were a substantial number of households who are not in the poorest fifth but who are nevertheless in fuel poverty (around half of the total number in fuel poverty).  Clearly, therefore, there are factors other than household income which affect whether a household is in fuel poverty or not.

The risk of fuel poverty rises as household income falls. Around 40% of households in the poorest fifth after deducting housing costs were in fuel poverty. Even so, a majority of households in the poorest fifth were not in fuel poverty. Also, there were a substantial number of households who are not in the poorest fifth but who are nevertheless in fuel poverty (around half of the total number in fuel poverty). Clearly, there are factors other than household income which affect whether a household is in fuel poverty or not. Click for larger version. Source www. poverty.org.uk

The real culprit is item 2, the energy efficiency of houses. If people have modest incomes, but a house which leaks heat, then they will find themselves in fuel poverty. It’s like saying that people in leaky boats will find themselves wet.

It is the poor condition of UK housing that causes fuel poverty. In a modern well-insulated house, almost no heating is required except in the depths of winter. The responsibility for improving this stock falls on the owners of the houses: the government (i.e. us) in the case of public housing; private landlords in the case of rented housing; and owner occupiers.

The best use of government money is not in subsidising the cost of energy, or battling to eliminate poverty (noble though that cause may be). The best use of subsidies is to make it cheaper and easier to insulate the existing poorly-built housing stock. This subsidy will save individuals money, and reduce demand, which will save us all money and carbon emissions in the future.

5 Responses to “Fuel Poverty”

  1. Chris Styles Says:

    Love this!
    Keep up the good work and ill keep visiting your blog 🙂

    -Chris Styles
    http://www.idolizejournal.com

  2. Bernard Naylor Says:

    Michael: I was very surprised to hear recently that the price of gas has fallen dramatically (by 50%?) in recent years in the USA. This is, so I heard, attributed to the extraction of gas from shale deposits by fracking, resulting in a massive increase in indigenous supply. My main feeling about this is one of alarm. There are enough allegations about the adverse impact of fracking on the environment (especially the water table) to cause serious concern. And making gas cheaper is likely to result in more CO2 emissions, hence accelerating climate change. Nevertheless, one can imagine governments being seriously tempted by the possibility of greatly increasing the supply of an indigenous fossil fuel, enough to make them forget any promises to move towards a more sustainable energy policy, and quietly abandon resolutions to improve the fuel efficiency of housing. The struggle for a more responsible policy towards the burning of fossil fuels could get more difficult in the shorter term.

    • protonsforbreakfast Says:

      Well put. Burning fossil fuels brings great benefits. The fuels are cheaper than alternatives, and so give us access to more energy at lower cost. This drives industry and gives us many benefits – people can keep warm in winter. And if people listen to the sirens such as the global warming policy foundation, one can almost believe there are no downsides to cheap energy. I am not sure ‘fracking’ will take off in the UK, but it must be tempting when fuel prices are high. But actually it is only high fuel prices for fossil fuels that will make sustainable alternatives viable. Have you heard the ‘Fracking Song?’

  3. Bernard Naylor Says:

    The Fracking Song? That’s new to me. Is there a web reference? I’ll try googling it.
    You probably already know – but they are currently investigating a reported major find of ‘frackable’ shale in the Blackpool area, and they are talking of Blackpool itself possibly becoming the new Aberdeen – though knowing Blackpool as well as I do (from countless holidays spent there), they’ll probably refer to Aberdeen as ‘the old Blackpool’.
    Bernard

    • protonsforbreakfast Says:

      Enjoy 🙂

      If you search back through my blog you will find comments on the Earthquakes in Blackpool, and the idea of shale gas exploitation in the UK.

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