WARMER HOMES A Strategy for Affordable Energy in Ireland
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WARMER HOMES A Strategy for Affordable Energy in Ireland
WARMER HOMES A Strategy for Affordable Energy in Ireland
2 Warmer Homes A Strategy for Affordable Energy in Ireland
Contents Foreword 7 Glossary of Terms and Abbreviations 9 Executive Summary 11 1 Introduction, Policy Context and Vision for Affordable Energy 15 1.1 Introduction 15 1.2 Approach to Formulation of this Strategy 15 1.3 Policy and Organisational Context 16 1.4 A Vision for Affordable Energy 17 1.5 Definitions and Nomenclature 19 2 Understanding and Measuring Energy Poverty 21 2.1 What is Energy Poverty? 21 2.2 What is Affordable Energy? 21 2.3 What are the Causes of Energy Poverty? 21 2.4 Defining and Measuring Energy Poverty 22 2.5 Individual Household-level Indicator of Energy Poverty 24 2.6 Non-Energy Benefits of Low-Income Housing Retrofits 32 2.7 Energy Prices and Affordability 33 3 The Challenge – Extent and Impact of Energy Poverty 37 3.1 Extent of Energy Poverty 37 3.2 Who is Affected and Most at Risk? 38 3.3 The Key Risk Factors for Energy Poverty 48 4 Existing Measures and Actions 51 4.1 Introduction 51 4.2 Improving Energy Efficiency of the Housing Stock 51 4.3 Income Supports 53 4.4 Energy Supply 56 4.5 Information Dissemination and Communication 57
4 Warmer Homes A Strategy for Affordable Energy in Ireland 5 Looking Forward 59 5.1 Introduction 59 5.2 Targeting Priority Households 59 5.3 Work Packages 60 5.4 Introducing an Area-based Approach to Energy Poverty Mitigation 62 5.5 Ensuring Greater Access to Energy Efficiency Measures 63 5.6 Reforming Eligibility Criteria for Energy Efficiency Schemes 63 5.7 Review of the National Fuel Scheme and Household Benefits Scheme 64 5.8 Other Activities 64 5.9 Conclusions 65 5.10 Key Actions 66 Annex 1 Membership of the Inter-Departmental/Agency Group on Affordable Energy 71 Annex 2 Respondees to Public Consultation Paper 72 Annex 3 Income Support Eligibility 73
List of Tables Table 1: Estimated Annual Running Costs for Typical Dwelling Types and BER Ratings based on 2010 Fuel Prices – € per annum 26 Table 2: Risk of Energy Poverty for Typical Dwelling Types and Energy Efficiency Ratings – Annual Energy Expenditure as % of Household Disposable Income: Median Income Household 28 Table 3: Risk of Energy Poverty for Typical Dwelling Types and Energy Efficiency Ratings – Annual Energy Expenditure as % of Household Disposable Income: Household with Income = 1/2 of Median Household Disposable Income 29 Table 4: Risk of Energy Poverty for Typical Dwelling Types and Energy Efficiency Ratings – Annual Energy Expenditure as % of Household Disposable Income: Household with Income = 1/3 of Median Household Disposable Income 30 Table 5: Risk of Energy Poverty for Typical Dwelling Types and Energy Efficiency Ratings - Annual Energy Expenditure as % of Household Disposable Income: Household with Income = 1/4 of Median Household Disposable Income 31 Table 6: Movements in Energy Affordability 35 Table 7: Energy Poverty in Ireland – Number of Households Experiencing Energy Poverty 37 Table 8: Subjective Measures of Energy Poverty 38 Table 9: Energy Poverty and Income Poverty 39 Table 10: Risk Factors for Energy Poverty 48 Table 11: National Fuel Scheme payments 2004–2010 54 Table 12: Household Benefits payments 2004–2010 55
6 Warmer Homes A Strategy for Affordable Energy in Ireland List of Figures Figure 1: Composition of Retail Electricity Prices 33 Figure 2: Energy Poverty Rates by Income Group 40 Figure 3: Energy Poverty Rates by Household Composition 41 Figure 4: Energy Poverty Rates by Housing Tenure 42 Figure 5: Energy Poverty Rates by Marital Status of Household Chief Economic Supporter 43 Figure 6: Energy Poverty Rates by Accommodation Type 44 Figure 7: Energy Poverty Rates by Accommodation Age 45 Figure 8: Energy Poverty Rates by Type of Heating Systems Used 47
Foreword
Minister for Communications,
Energy and Natural Resources
For those unable to afford to heat or light their to link thermal efficiency to energy-related income
home, the effects can be hugely detrimental to supports in a more effective manner, thereby taking
their ongoing health and wellbeing. This document into account a household’s need to spend on
marks the first Government strategy aimed at energy.
specifically making energy more affordable for
In addition to our ongoing commitment to
low-income households in Ireland. Up to now, efforts
improving energy efficiency in low-income homes,
by government departments and agencies have
this Government will introduce, and progressively
focused on delivering on discrete policy remits; this
increase, minimum thermal efficiency standards
strategy changes this approach, setting a clear
for properties offered for rent. Our focus will be on
framework for how we will measure, record and
progressively removing properties in the E, F and
report on the numbers of households in difficulty
G bands from the rental market by 2020. We will
and the actions necessary to improve the quality of
also ensure that appropriate standards are set for
life for such households.
the Rent Supplement and Rental Accommodation
The underlying factors that influence energy Schemes, for which Government provides financial
affordability are well understood and have support.
been subject to extensive scrutiny as part of the
We have looked at the experiences of other
development of this strategy. The complex interplay
countries and taken note of efforts to fully eradicate
of energy prices, thermal efficiency and incomes
energy poverty. In our view this is not a realistic goal
mean that no one simple solution can be brought
for this strategy, as energy poverty is not something
to bear. Each situation is unique, requiring a
that we can overcome today, tomorrow or even
different set of policy interventions. The way in which
in the next few years. The factors that influence
Government responds needs to vary according
vulnerability are numerous and pervasive. What we
to individual circumstances. We plan to tailor our
must do is address each of the underlying causes of
response to ensure that resources are directed at
vulnerability and systematically remove the barriers
those most in need.
that prevent people from benefiting from high
There is only one long-term solution to making quality accommodation. Without an improvement
energy more affordable – using less of it. Improving in the quality of homes, this strategy will not be
the thermal efficiency of homes is the most cost- effective.
effective way of increasing energy affordability and
This strategy will require a cross-departmental
reducing energy poverty. While income supports
and agency response, with identified actions to
such as the National Fuel Scheme and Household
be delivered in the short, medium and long term,
Benefits play an important role in reducing the
depending on the nature of the change required
financial burden of energy bills, they represent an
and the level of analysis to be undertaken. While
expensive way of addressing the real problem –
we have been actively engaged in retrofitting
poor quality homes. Since 2004, over €2 billion has
low-income homes since 2000, more recently we
been spent on income supports. Over the same
have redoubled our efforts. In 2010 close to 25,000
period €60 million has been provided for thermal
homes benefited from energy efficiency measures,
efficiency measures in the private sector, with
representing an 11-fold increase in programme
a further €183 million spent on central-heating
activity since 2006. However, this level of action
upgrades and retrofits in public sector housing. It is
will need to continue and will require the ongoing
clear that we need to change our priorities if energy
support of the Sustainable Energy Authority
poverty is to be tackled in a meaningful way. Our
of Ireland, the Money Advice and Budgeting
starting point will be to assess whether it is possible8 Warmer Homes A Strategy for Affordable Energy in Ireland Service, the Society of St. Vincent de Paul, the Department of Social Protection, community-based organisations, state energy companies and others, if we want to address this problem substantively. We are publishing a technical annex in order to put into the public domain the data that has been generated as part of the strategy development process. We hope that this will be of assistance to those with an interest in the area. The publication of this document marks the delivery of an important Programme for Government commitment. I would like to thank the Inter- Departmental Group on Affordable Energy for its work in developing this strategy, along with the stakeholders who made valuable submissions to the consultation exercise. Pat Rabbitte T.D. Minister for Communications, Energy and Natural Resources
Glossary of Terms and
Abbreviations
CER Commission for Energy Regulation
DCENR Department of Communications, Energy
and Natural Resources
DoECLG Department of Environment, Community
and Local Government
DSP Department of Social Protection
EPBD Energy Performance of Buildings Directive
EPSSU Energy Policy Statistical Support Unit (SEAI)
IDGAE Inter-Departmental/Agency Group on
Affordable Energy
IPH Institute of Public Health in Ireland
Mean A measure of the average value of a set of
numbers, whereby the average equates
to the mathematical or arithmetic
average of the values, or the sum of the
values divided by the number of values. A
mean value is subject to greater influence
from outlier (very high or low) values in a
range of values.
Median A measure of the average value of a set
of numbers, which separates the higher
half of a sample, a population, or a
probability distribution from the lower half.
SEAI Sustainable Energy Authority of Ireland
SVP The Society of St. Vincent de Paul10 Warmer Homes A Strategy for Affordable Energy in Ireland
Executive Summary
Introduction A Vision for Affordable Energy
Everybody should be able to afford to heat It is important to set an overarching vision for
and power their home to adequate levels. This energy affordability so that it is clear what we
fundamental objective is the starting point for Warmer are trying to achieve with the development and
Homes – A Strategy for Affordable Energy in Ireland future implementation of this strategy.
and acts as the guiding principle for everything
that follows. Much has been achieved in recent
years through a combination of income supports,
programmes to improve the energy efficiency of the Vision for Affordable Energy
housing stock and energy awareness initiatives, but
in Ireland
it is timely to develop and implement an affordable
energy strategy given the financial difficulties currently The achievement of a standard of living whereby
being experienced by many in society. This strategy households are able to afford all of their energy needs
presents a cohesive framework for achieving more and where individuals and families live in a warm and
affordable energy, ensuring that existing and future comfortable home that enhances the quality of their
measures are targeted at households where the risk lives and supports good physical and mental health
and adverse effects of energy poverty are greatest.
Associated with this vision are a number of guiding
The strategy has been developed by the Inter- principles, which permeate the priorities, actions
Departmental/Agency Group on Affordable Energy and delivery approaches set out in this strategy.
(IDGAE), which was established in the summer of 2008 Specifically, this strategy will:
to serve as the key coordinating body in this area.1
• Focus on improving the thermal efficiency of low-
To deliver this strategy will require an integrated income homes.
approach, involving extensive coordination
amongst a range of actors in both the public and • Focus on maximising the quality of people’s lives
private sectors. This reflects the complex nature of through implementation of practical initiatives.
the challenge, which necessitates government • Apply a partnership approach, entailing close
departments and agencies, local authorities, energy coordination and alignment of policy levers
utilities, regulators, non-governmental organisations between stakeholders, including government
and community-based organisations all working departments and agencies, local authorities,
together, each delivering a part of the solution. This energy utilities, the health and social services
spirit of collaboration is essential if we are to effectively providers, non-governmental organisations and
implement actions that will have a lasting impact on community-based organisations.
the health and wellbeing of households in Ireland.
• Promote social inclusion and target social need.
• Be integrated within emerging national anti-
poverty policy.
1 The IDGAE is chaired by the Department of Communications, • Aim to deliver cost-effective approaches to
Energy and Natural Resources and includes the Departments
addressing energy poverty.
of Public Expenditure and Reform, Taoiseach, Environment,
Community and Local Government, Social Protection, Health, • Be consistent with the Government’s wider
and Children, in addition to the Commission for Energy
climate-change policy, thereby also benefiting the
Regulation, SEAI, ESB Electric Ireland, the Institute of Public
environment.
Health in Ireland, the Energy Poverty Coalition and Bord Gáis.12 Warmer Homes A Strategy for Affordable Energy in Ireland
Defining Energy Poverty afford its energy needs if it is required to spend at
a level greater than twice the national average
The definition of energy poverty that will be applied (median) share (currently 10%) of disposable
by Government departments, agencies and other income spent on energy services to achieve
bodies in the implementation of this strategy takes an acceptable standard of warmth. Under this
the above factors into account and is as follows: measure, a comprehensive indicator of energy
poverty will be developed and implemented
over the next 3-5 years.
Definition of Energy Poverty
By following this approach we will be able to
A household is considered to be energy poor if estimate the overall extent of energy poverty in
it is unable to attain an acceptable standard of Ireland, before migrating to a more accurate and
warmth and energy services in the home at an comprehensive model. It is therefore appropriate
affordable cost. to complement the preliminary measure with
supporting indicators that capture the severity of
energy poverty in terms of households that are most
The above definition provides a starting point for
critically affected. This is also important from the
the ongoing measurement of energy poverty in
perspective of prioritising and targeting measures
Ireland, which will require the following two-stage
and resources at those households that are
development process:
considered a priority.
1. A preliminary measure of energy poverty will
We will, therefore, measure energy poverty by
be estimated which compares an individual
reference to the following levels of severity:
household’s actual expenditure on energy,
relative to its income, to the average proportion 1. The core indicator of energy poverty: whereby
of income spent on energy across all households a household is considered to be experiencing
in the State. Under the preliminary measure, a energy poverty if, in any one year, it spends more
household is defined as being unable to afford than 10% of its disposable income on energy
its energy needs if it spends at a level greater services in the home.
than twice the national average (median) share
2. An indicator of severe energy poverty: whereby
(currently 10%) of disposable income spent on
a household is considered to be experiencing
energy services.2 This is an interim solution which
severe energy poverty if, in any one year, it
will be used until such time as a comprehensive
spends more than 15% of its disposable income
measure can be developed.
on energy services in the home.
2. A comprehensive measure of energy poverty
3. An indicator of extreme energy poverty: whereby
will be developed using a new energy poverty
a household is considered to be experiencing
modelling framework. This approach will
extreme energy poverty if, in any one year, it
combine a survey of housing conditions with a
spends more than 20% of its disposable income
formal energy poverty modelling framework to
on energy services in the home.
estimate what households need to spend, so
that a household is defined as being unable to
2 Household Disposable Income equates to total Household
Disposable Income and is unadjusted.Executive Summary 13
Once the comprehensive measure has been Of the actions identified in Chapter 5, the following
developed, we will recalibrate the above indicators five are central to the successful implementation of
to reflect the need to spend, as opposed to what this strategy:
is actually spent. This will provide a more accurate
1. We will actively progress five priority work
means of gauging energy poverty.
packages: Thermal Efficiency Standards, Energy
Suppliers, Area-based Approach, Data and
Information, and Communication.
Looking Forward
2. We will introduce an area-based approach to
Energy poverty is a complex phenomenon, which
energy poverty mitigation.
necessitates an appropriately nuanced response
from Government. It is thus heartening to note that 3. We will ensure greater access to energy
many of the organisations that will have a role in efficiency measures.
delivering this strategy are already engaged in
carrying out a range of initiatives, programmes and 4. We will reform eligibility criteria for energy
supports, which deliver important benefits for those efficiency schemes.
affected by energy poverty.
5. We will review the National Fuel Scheme and
However, we need to be aware that our analysis Household Benefits Scheme to examine the
suggests that an estimated one-fifth of households feasibility of aligning income supports with the
in Ireland are likely to experience some form of energy efficiency and income of the home.
energy poverty, while about 10% of households are
likely to be experiencing severe energy poverty.
There is an urgent and critical need for a carefully
focused plan to address this issue.
In the long run, an effective strategy for addressing
energy poverty and attaining affordable access
to household energy requirements must focus on
ensuring that the energy efficiency performance of
the housing stock is improved. This is the overarching
objective of the strategy and represents the most
cost-effective means of protecting priority groups.
Moreover, the relationship between energy poverty
and energy efficiency clearly points to the fact that
the poorest households stand to benefit most from
improvements in energy efficiency.14 Warmer Homes A Strategy for Affordable Energy in Ireland
Chapter 1
Introduction, Policy Context and Vision for
Affordable Energy
1.1 Introduction such as electricity or gas disconnections, this
strategy is focused on tackling the root causes
Ireland’s current economic difficulties bring into of energy poverty, applying a holistic approach,
stark relief the challenges faced by everyone active combining national and geographically focused
in the area of energy poverty mitigation. A sharp actions in the areas of income supports, targeted
increase in the number of domestic electricity energy efficiency improvements, and advice and
and gas disconnections is one very visible result information. These measures will be aligned through
of a general trend in energy becoming relatively the strategy and their implementation overseen
more expensive in the last few years. Likewise, the by the Inter-Departmental/Agency Group on
imposition of a carbon tax has had the effect of Affordable Energy (IDGAE).
increasing the cost of carbon-intensive fuels, which
are often the primary heating source for people on The challenge facing each of the organisations
low incomes. While there is an argument to suggest involved in delivering this strategy should not be
that the carbon tax should be removed, there are underestimated, particularly as Ireland faces a
other pressing priorities, most notably the mitigation period of economic austerity, with pressures on
of climate change, that also require immediate public expenditure and against a backdrop of
action. The strategy will therefore have to be expected significant increases in the cost of energy.
implemented in a complex environment in which It is unlikely that the ultimate goal of this strategy
other policy objectives also have to be delivered. can be achieved over the life of the strategy, 2011–
2013; there are simply too many poorly built homes
The Government believes that everyone should be to be improved in such a short period of time.
able to afford to live in a warm and healthy home. Nevertheless, much can be done over the next
While much has been accomplished in recent years three years, including, perhaps most importantly,
to support this objective through the expansion better targeting of priority households. The strategy
of programmes to improve the energy efficiency will be reviewed in 2014.
of the housing stock, energy awareness initiatives
and income supports, it is now timely to publish
an affordable energy strategy. Warmer Homes – A 1.2 Approach to Formulation of
Strategy for Affordable Energy in Ireland presents
this Strategy
a cohesive governmental framework for achieving
energy affordability, ensuring that existing and The strategy has been developed by the IDGAE,
future measures are targeted at the most vulnerable which was established in the summer of 2008 to
groups in society, where the risk and adverse effects serve as the key coordinating body to ensure the
of energy poverty are greatest. cohesiveness of the various actions already under
way and those planned under this strategy.3
This strategy is designed to ensure that households
can achieve affordable access to their energy
requirements through a range of practical initiatives
3 The IDGAE is jointly chaired by the Department of
and programmes designed to ultimately reduce Communications, Energy and Natural Resources and
their demand for energy, thus protecting those the Department of Social Protection, and includes the
considered most at risk of energy poverty. In Departments of Public Expenditure and Reform, Taoiseach,
the long run this represents the most sustainable Environment, Community and Local Government, Health, and
Children, in addition to the Commission for Energy Regulation,
approach to energy poverty mitigation. It is
the Sustainable Energy Authority of Ireland (SEAI), ESB Electric
important to note that, while attention is often
Ireland, the Institute of Public Health in Ireland, The Society of
focused on the consequences of energy poverty, St. Vincent de Paul and Bord Gáis.16 Warmer Homes A Strategy for Affordable Energy in Ireland
A steering group, consisting of members of to maintain a comfortable and high-quality
the IDGAE, was formed in 2010 to oversee the standard of living”, and “building viable and
development of the strategy. The steering group sustainable communities, improving the lives
prepared a discussion paper for public consultation, of people living in disadvantaged areas and
for which twelve responses were received from building social capital”. These areas include
a variety of bodies and NGOs (further details are addressing the challenge of energy poverty.
contained in Annex 2). As a result, this document
• Delivering a Sustainable Energy Future for Ireland
has benefited immensely from the submissions and
is the Government’s energy policy framework
presentations received from interested parties.
for the period 2007–2020. Strategic Goal 5 in this
In early 2010, following a competitive tendering White Paper enunciates the Government’s policy
process, Indecon International Economic in the area of affordable energy, stating that
Consultants were appointed to assist the IDGAE. everyone should be able to afford an adequate
energy supply and to live in a warm home.5
• Maximising Ireland’s Energy Efficiency – the
1.3 Policy and Organisational National Energy Efficiency Action Plan, 2009–
Context 2020 6 sets out policies and measures that have
the potential to contribute towards achieving
This strategy is set within the context of, and is
Ireland’s national target of a 20% reduction
consistent with, broader government policy in
in energy demand across the whole of the
relation to poverty and social inclusion, and also
economy by 2020. The Action Plan devotes a
climate change policy.
chapter to the issue of affordable energy and
Three overarching policy documents are of identifies a number of actions that support
particular relevance in setting the context for the improving the energy efficiency of low-income
affordable energy strategy, namely the National homes. The plan also sets out a vision for future
Action Plan for Social Inclusion, the Energy Policy housing stock where “all new Irish housing will
Framework ‘Delivering a Sustainable Energy Future be carbon-neutral” and where “efficiency
for Ireland’ and the National Energy Efficiency standards in older homes will be significantly
Action Plan. improved through retrofitting actions”.7
• The National Action Plan for Social Inclusion
sets out how the Government’s social inclusion
strategy will be achieved over the period
2007–2016.4 The plan identifies a number of
high-level strategic goals in key priority areas
in order to achieve the overall objective of
reducing consistent poverty. The areas where
the plan focuses its attention include provision of 5 Delivering a Sustainable Energy Future for Ireland – Energy
“the type of supports that enable older people Policy Framework 2007–2020. Government White Paper.
Department of Communications, Energy and Natural
Resources. See: www.dcenr.gov.ie.
4 National Action Plan for Social Inclusion, 2007–2016. 6 Maximising Ireland’s Energy Efficiency – the National
Government Publications Office, Dublin, February Energy Efficiency Action Plan, 2009–2020. Department of
2007, or via: http://www.socialinclusion.ie/documents/ Communications, Energy and Natural
NAPinclusionReportPDF.pdf. 7 Ibid. Page 75.Introduction, Policy Context and Vision for Affordable Energy Chapter 1 17
1.4 A Vision for Affordable Energy • Be consistent with the Government’s wider
climate change policy, thereby also benefiting
By setting an overarching vision for energy the environment.
affordability, we can make a clear statement about
what we are trying to achieve with the development 1.4.2 Achieving the vision
and future implementation of this strategy.
Ultimately, the success of this strategy will be judged
on the extent to which the overarching vision is
realised, and the outcomes of the actions set out
Vision for Achievement of
in this framework result in improved outcomes for
Affordable Energy low-income households. In particular, it is envisaged
The achievement of a standard of living whereby that the realisation of this strategy will bring about
households are able to afford all of their energy real and lasting benefits, under the following
needs and where individuals and families live in headings:
a warm and comfortable home that enhances
• The relief of hardship and suffering among families
the quality of their lives and supports good
and individuals experiencing energy poverty.
physical and mental health.
• The social benefits arising from improved public
health and the economic benefits arising from
reduced heath service expenditure and the
1.4.1 Guiding principles for this vision
reduction of health inequalities.
Several guiding principles associated with this
vision permeate the priorities, actions and delivery • The benefits to the environment and the
approaches set out in this strategy. Specifically, this achievement of Ireland’s climate change policy
strategy will: goals through an improvement in the energy
efficiency of the housing stock, combined
• Focus on improving the thermal efficiency of
with better energy consumption behaviour of
low-income homes.
households.
• Focus on maximising the quality of people’s lives
This strategy fundamentally tries to do two things:
through implementation of practical initiatives.
first, to set out a framework for measuring energy
• Apply a partnership approach, entailing close affordability and energy poverty (while these are
coordination and alignment of policy levers similar concepts, in practice they mean different
between stakeholders, including government things), and, secondly, develop a series of measures
departments and agencies, local authorities, and actions that will both improve the affordability
energy utilities, the health and social services of energy in Ireland and reduce the instances of
providers, non-governmental organisations and energy poverty.
community-based organisations.
One of the first and most important actions will
• Promote social inclusion and target social need. be to create a model that can accurately track
movements in energy affordability and poverty.
• Be integrated within emerging national anti- This is an essential first step to enable the design
poverty policy. of fact-based policies. Energy poverty, as with
poverty more generally, is a complex phenomenon
• Aim to deliver cost-effective approaches to
and is influenced by a range of economic and
addressing energy poverty; and18 Warmer Homes A Strategy for Affordable Energy in Ireland
social issues. Setting out a formal definition scheme. It is also implementing the new National
and measurement approach will facilitate the Energy Retrofit Programme (from 2011), which
ongoing assessment and monitoring of the extent brings a new focus to energy-saving programmes
and characteristics of energy poverty. However, more generally.
the application of a formal definition in line
• The Department of Social Protection formulates
with international best practice is dependent
appropriate social protection policies and
upon the availability of detailed information
administers and manages the delivery of a wide
on the characteristics of households and the
range of schemes and supports. These include
accommodation in which they live. Unfortunately,
schemes such as the National Fuel Scheme
not all of this information is available, which makes
and Household Benefits Package (electricity/
it difficult to precisely measure and track energy
gas component) which are designed to provide
poverty in Ireland. Nevertheless, this strategy sets
income support to low-income and other
out an approach which will see a transition from
qualifying households, including to older persons.
an interim approach to measurement of energy
poverty to a more comprehensive and robust • The Department of Environment, Community
mechanism over the next 3–5 years. and Local Government is responsible for funding
social housing delivered through local authorities
1.4.3 Requirement for a partnership approach and voluntary and cooperative housing bodies,
Effective implementation of this strategy will and the establishment of minimum standards
require an integrated approach, involving and regulations for new buildings and private
extensive coordination by a range of actors. This rental accommodation. The Department also
reflects the complex nature of the challenge, provides supports for structural upgrades of
which necessitates government departments homes occupied by older people and for local
and agencies, local authorities, energy utilities, authority houses under the Housing Aid for Older
regulators, non-governmental organisations People scheme and the Local Authority social
and community-based organisations all working housing improvement programme.
together; each delivering within its own areas and
• The Department of Health is responsible for
competencies. This spirit of collaboration is essential
government policy on population health and
if we are to effectively implement actions that will
health services. The Health Services Executive
have a lasting impact on the health and wellbeing
(HSE) is responsible for the delivery and
of at-risk households in society.
management of health services, and assists in
The main government departments that have a role the Keep Well and Warm initiative.
in implementing this strategy, working in partnership
• The Department of Public Expenditure and
with each other and with other agencies and
Reform, which has a key policy role to play in
stakeholders, are as follows:
relation to the resource implications of delivering
• The Department of Communications, Energy and this strategy.
Natural Resources has responsibility for the energy
portfolio within government and has adopted a
leadership role in the area of energy affordability.
The Department funds the Sustainable Energy
Authority of Ireland (SEAI)’s Better Energy: Warmer
Homes scheme and Better Energy: HomesIntroduction, Policy Context and Vision for Affordable Energy Chapter 1 19
In addition to the above government departments,
the following agencies and bodies have key roles in
implementing this strategy:
• The Sustainable Energy Authority of Ireland (SEAI)
is responsible for delivering energy efficiency-
based support schemes to households. It
administers the Better Energy: Warmer Homes
scheme, which is the primary mechanism for
improving the energy performance of homes
occupied by those on low incomes.
• The Commission for Energy Regulation (CER)
plays a statutory role in protecting vulnerable
customers in the energy markets. It has set
out guidelines for the protection of household
electricity and gas customers, particularly
older people, customers relying on life-support
equipment and those with disabilities.
• Energy suppliers – electricity and gas suppliers
have already put in place customer charters
and codes of practice. The IDGAE will engage
with oil and solid-fuel energy suppliers to ensure
that their customers are equally protected.
1.5 Definitions and Nomenclature
This strategy sets out formal definitions to facilitate
ongoing assessment and monitoring of the extent
of energy poverty and the closely related concept
of affordable energy. Throughout this document
the terms ‘affordable energy’ and ‘energy poverty’
are used to express different concepts and, while
related, mean different things. Internationally, the
term fuel poverty is often used interchangeably with
energy poverty.20 Warmer Homes A Strategy for Affordable Energy in Ireland
Chapter 2
Understanding and Measuring Energy Poverty
2.1 What is Energy Poverty? 2.3 What are the Causes of
Energy poverty can be described as a situation Energy Poverty?
whereby a household is unable to attain an Both energy poverty and affordable energy can be
acceptable level of energy services (including considered the product of the interaction of three
heating, lighting, etc) in the home due to an factors or drivers, namely:
inability to meet these requirements at an
affordable cost. 1. Household income.
2. The price of energy.
2.2 What is Affordable Energy? 3. The energy efficiency of the dwelling, its
energy systems and the household’s energy
The terms ‘energy poverty’ and ‘affordable energy’
consumption patterns or behaviour.
are often used interchangeably, as they are closely
related concepts. Affordability more generally In practice, each of the above factors/drivers
measures expenditure relative to a household’s is influenced by a complex mix of economic
income. In this context, affordable energy describes and social issues. All households have individual
a situation where a household can attain an requirements in relation to heating and energy for
acceptable level of energy services at a level of other uses, including electricity for appliances,
expenditure that is affordable relative to its overall which are dependent upon factors such as
disposable income. In practice, the achievement household occupancy and the characteristics of
of achieving more affordable energy equates to a occupants such as their age and behaviour. As a
corresponding reduction in energy poverty. result, the nature and extent of energy poverty will
vary depending on how these factors interact with
This strategy sets out a formal definition that will
the above drivers. This makes the development of
facilitate the ongoing measurement of energy
a comprehensive measure of energy poverty a
poverty but also includes a complementary
complex process, requiring data from a number
affordability index which will enable monitoring
of sources in order to create a robust reporting
of the extent to which energy is becoming more
framework.
or less affordable for households from a macro
perspective as a result of changes in key drivers Fundamentally, the most effective long-term
such as energy prices. solution is ensuring that demand for energy
decreases. This is the only mechanism that protects
Both indicators will play an important role in
against future increases in energy prices, over which
understanding the prevalence of energy poverty
Ireland has a limited ability to control. Likewise, the
but also the number of at-risk households. In
effects of extended periods of cold weather, such
this way we believe that state bodies and other
as those experienced in recent years, can only be
organisations will be better placed to respond to
mitigated through highly energy efficient homes.
further changes in the economic environment.22 Warmer Homes A Strategy for Affordable Energy in Ireland
2.4 Defining and Measuring Definition of Energy Poverty
Energy Poverty A household is considered to be energy-poor if
it is unable to attain an acceptable standard of
Depending on the precise approach applied to
warmth and energy services in the home at an
the definition and measurement, varying levels
affordable cost.
of energy poverty can be reported.8 An effective
definition of energy poverty must serve three
purposes, namely:
2.4.1 Measuring the extent of energy poverty
• To establish the existing position in relation to the
The application of a formal definition, in line
extent of energy poverty and the groups most
with best practice internationally, is dependent
affected.
upon the availability of detailed information
• To facilitate effective policy design to address on the characteristics of households and the
the impact of energy poverty. accommodation in which they live. Unfortunately,
there are a number of informational deficiencies
• To monitor progress and assess the effectiveness
that preclude precise measurement, which leads to
of policy interventions to address energy poverty
difficulties tracking energy poverty on a consistent
and improve energy affordability.
basis.
During the development phase of this strategy,
To overcome these informational constraints,
a wide range of views and inputs were received
this strategy sets out a two-stage approach to
regarding the strengths and weaknesses of
implementing the above definition of energy
alternative approaches to defining and measuring
poverty. This involves initially using existing
energy poverty and affordability.9 In addition to
information to estimate the extent and nature of
these inputs, the definition of energy poverty set
energy poverty currently affecting Irish households
out below reflects and builds upon international
but moves, over the next 3-5 years, towards a
experience and research, including developments
comprehensive data-collection and modelling
at European Union level.
framework which will enable more precise
On the basis of consideration of these factors, the measurement and assessment of energy poverty
definition of energy poverty that will be applied on an ongoing basis. Crucially, this will allow us to
by government departments, agencies and other take into account the relative thermal efficiency of
bodies in implementing this strategy will be as households, combined with occupation patterns,
follows: in determining the numbers in energy poverty. This
will greatly assist in targeting households for future
energy efficiency upgrades.
8 See the technical annex for further information.
9 We are particularly grateful to Dr Sean Lyons, ESRI, and Dr
Brenda Boardman, Environmental Change Unit, Oxford
University, for their advice and assistance in the formulation
of this strategy. Previous research referenced during the
development of this strategy included: (a) Scott, S., Lyons, S.,
Keane C., McCarthy D., and Richard S.J. Tol, Fuel Poverty in
Ireland: Extent, Affected Groups and Policy Issues. ESRI Working
Paper 262, November 2008, and (b) Boardman, B., 2010. Fixing
Fuel Poverty – Challenges and Solutions, Earthscan.Understanding and Measuring Energy Poverty Chapter 2 23
On the basis of the above two-stage approach, this Estimating Severity of Energy Poverty
strategy will measure the extent of energy poverty
under the Preliminary Measure
as follows:10
The preliminary measure of energy poverty
• A preliminary measure of energy poverty will
enables the estimation of the overall extent of
be estimated which compares an individual
energy poverty in Ireland. In practice, some
household’s actual expenditure on energy,
social groups are likely to be more severely
relative to its income, to the average proportion
affected by energy poverty than others. As a
of income spent on energy across all households
result, it is appropriate to complement the core
in the State.11 Under the preliminary approach,
preliminary indicator of energy poverty with
a household is considered to be experiencing
supporting indicators which capture the severity
energy poverty if, in any one year, it spends
of energy poverty in terms of households that are
more than 10% of its disposable income on
most critically affected. This is critical in order to
energy services in the home. This approach
prioritise and target measures and resources at
will estimate the overall number of households
households that are most in need.
experiencing energy poverty in addition to
indicating, on the basis of the available data, 1. The core indicator of energy poverty: whereby
the types of households affected and the risk a household is considered to be experiencing
factors associated with energy poverty. The energy poverty if, in any one year, it spends
estimates based on this preliminary approach more than 10% of its disposable income on
are presented in the next chapter. However, energy services in the home.
this approach may underestimate the extent of
2. An indicator of severe energy poverty:
energy poverty as low-income households can
whereby a household is considered to be
under-heat their homes relative to the level that
experiencing severe energy poverty if, in
would be required based on healthy standards.
any one year, it spends more than 15% of its
disposable income on energy services in the
home.
3. An indicator of extreme energy poverty:
whereby a household is considered to be
experiencing extreme energy poverty if, in
any one year, it spends more than 20% of its
disposable income on energy services in the
home.
Estimates of the extent of energy poverty and
10 For a full description of the methodological and technical severity of energy poverty under the preliminary
assumptions underlying the approach to defining and measure are presented in the next chapter.
measuring energy poverty set out in this strategy, refer to
the supporting document Warmer Homes: A Strategy for
Affordable Energy in Ireland – Technical Annex.
11 This preliminary approach represents a partial application of
the definition of energy poverty set out in Table 1 on the basis
that it measures energy poverty on the basis of a household’s
actual expenditures on energy as opposed to required
expenditure to achieve pre-defined levels of comfort.24 Warmer Homes A Strategy for Affordable Energy in Ireland
• A comprehensive measure of energy poverty 2. A household is considered to be in severe
will be developed using a new energy poverty energy poverty if it must spend at a level
modelling framework. This approach will combine equal to or greater than three times the
a survey of housing conditions with a formal national average (median) share of
energy poverty modelling framework (described disposable income spent on energy services
further in Chapter 4 under ‘Information and Data to achieve an acceptable standard of
Systems’) to estimate what households need warmth.
to spend “to attain an acceptable standard
3. A household is considered to be in extreme
of warmth and energy services in the home at
energy poverty if it must spend at a level
an affordable cost” as per the full definition
equal to or greater than four times the
of energy poverty set out above. It will define
national average (median) share of
‘acceptable standard of warmth’ by reference
disposable income spent on energy services
to international best-practice standards and will
to achieve an acceptable standard of
take account of the efficiency of the dwelling,
warmth.
variations in outside temperatures (particularly
during the winter) and energy/fuel costs to
determine the required levels of household
energy use.12 Combining this information with 2.5 Individual Household-level
data on household incomes will assist in the Indicator of Energy Poverty
identification of energy-poor households. Under
The preliminary measure is based on actual
this approach, a formal, comprehensive measure
expenditures on household energy and does not
of energy poverty will be developed and
take account of the actual levels of expenditure
implemented over the next 3-5 years.
required for households to attain adequate levels of
comfort in the home.
Estimating Severity of Energy Poverty A key factor missing from the existing information
under the Comprehensive Measure sources concerns the availability of datasets which
combine information on household income and
The comprehensive measure will seek to assess
expenditure with data on the physical – including
the severity of energy poverty in a household by
energy efficiency – characteristics of the dwelling in
reference to the following:
which the household resides. Detailed information
1. A household is considered to be in energy on household incomes and expenditure patterns
poverty if it must spend at a level equal to (including energy expenditures) is available through
or greater than twice the national average the Household Budget Survey. In addition, the SEAI’s
(median) share of disposable income spent Building Energy Rating (BER) database currently
on energy services to achieve an acceptable contains data on the energy rating of some 250,000
standard of warmth. households across the State. However, the two
databases are not integrated, precluding the
identification of income, expenditure and energy
efficiency features for the same household – which
12 The standard approach to defining ‘adequate warmth’ is by is necessary to enable estimation of the extent of
reference to World Health Organisation (WHO) guidelines,
energy poverty reflecting all three drivers of the
which defines ‘adequate’ as equating to a temperature
phenomenon.
of 21ºC in the main family/living-room and 18ºC in other
occupied rooms of a dwelling.Understanding and Measuring Energy Poverty Chapter 2 25
Estimating the extent of, and risk factors associated
with energy poverty based on required, as opposed
to actual, expenditures on energy services,
necessitates the application of a formal energy
poverty and residential fuel cost modelling framework.
In advance of the development of this model, it is
possible to use information developed by the SEAI
as a basis to identify combinations of household
income, dwelling type and energy efficiency rating
that are associated with a higher or lower risk of
energy poverty at the individual household level. This
approach is based on the measure of energy poverty
where annual required energy costs are greater than
10% of household disposable income. The estimates
provide a ‘ready reckoner’ for households to estimate
the risk of experiencing energy poverty and are
described further below.
2.5.1 Estimates of risk of energy poverty for typical
households and dwellings
The following table (Table 1) presents the SEAI
estimates on annual running costs for principal
energy usage for typical dwelling types and BER
energy efficiency ratings, based on fuel prices
prevailing in July 2010. The running cost estimates
are indicative only as additional research is required
to fully validate these numbers. In addition, these
estimates relate to ‘principal energy usage’, defined
for the purposes of calculating a dwelling’s BER
rating on the basis of household energy for water
and space heating. This does not include energy
usage for cooking, lighting and other appliances.
The estimates are also based on specific
assumptions regarding household heating regimes
(and, inherently, occupancy), whereby a dwelling
is assumed to be heated to a level of comfort (i.e.
the main living-room/area is heated to achieve a
temperature of 21oC and the remaining habitable
area of the house is heated to a temperature of
18oC). These running cost estimates may therefore
need to be adjusted to reflect international norms.26 Warmer Homes A Strategy for Affordable Energy in Ireland
Table 1: Estimated Annual Running Costs for Typical Dwelling Types and BER Ratings based on 2010 Fuel Prices
– € per annum
BER Rating and 2 bed 3 bed semi- 4 bed semi- Detached Large house
Dwelling Type/ apartment detached detached house (300 Sq M)
Size (75 Sq M) house house (200 Sq M)
(100 Sq M) (150 Sq M)
A1 110 150 230 300 500
A2 230 300 450 600 900
A3 280 370 600 700 1,100
B1 340 460 700 900 1,400
B2 440 600 900 1,200 1,800
B3 500 700 1,100 1,400 2,200
C1 600 900 1,300 1,700 2,600
C2 800 1,000 1,500 2,000 3,000
C3 900 1,200 1,700 2,300 3,500
D1 1,000 1,400 2,100 2,700 4,100
D2 1,200 1,600 2,400 3,200 4,800
E1 1,400 1,800 2,800 3,700 5,500
E2 1,600 2,100 3,100 4,200 6,300
F 1,900 2,500 3,800 5,000 7,500
G 2,400 3,100 4,700 6,300 9,400Understanding and Measuring Energy Poverty Chapter 2 27 The annual household energy running-cost estimates, relative to household disposable income, provide a basis to identify combinations of household income, dwelling type and energy efficiency rating that are associated with a higher or lower risk of energy poverty, based on the comprehensive measure of energy poverty set out in the strategy. In general, for a given level of household disposable income, a household is likely to face a higher risk of energy poverty where they reside in larger and less energy efficient dwellings. This is because such dwellings typically need more energy to achieve an adequate level of heat. In addition, all other factors being equal, the lower a household’s disposable income the higher the risk of the household experiencing energy poverty. Mid-income households The following table (Table 2) considers the position for a reference household at the average (median) level of household disposable income (in this case where a household’s disposable income equates to just under 800 per week). The analysis suggests that a median-income household living in a typical three-bed semi-detached house would, at 2010 energy prices, be likely to escape energy poverty (i.e. required energy spend is not greater than 10% of household disposable income). However, in the case of larger dwellings, the risk of energy poverty increases, particularly where the dwellings in which these households reside have BER ratings towards the bottom end of the scale. For example, a mid-income household living in an older, less energy efficient detached house of 200m2 in size with a BER rating at E2 or below would be likely to experience energy poverty. The risk of energy poverty would increase further for mid-income households living in larger dwellings (e.g. 300m2) with a BER of D2 or below.
28 Warmer Homes A Strategy for Affordable Energy in Ireland
Table 2: Risk of Energy Poverty for Typical Dwelling Types and Energy Efficiency Ratings – Annual Energy
Expenditure as % of Household Disposable Income: Median Income Household*
BER Rating and 2 bed 3 bed semi- 4 bed semi- Detached Large house
Dwelling Type/ apartment detached detached house (300 Sq M)
Size (75 Sq M) house house (200 Sq M)
(100 Sq M) (150 Sq M)
Annual Energy Expenditure as % of Household Disposable Income**
A1 0.3% 0.4% 0.6% 0.7% 1.2%
A2 0.6% 0.7% 1.1% 1.4% 2.2%
A3 0.7% 0.9% 1.4% 1.7% 2.7%
B1 0.8% 1.1% 1.7% 2.2% 3.4%
B2 1.1% 1.4% 2.2% 2.9% 4.3%
B3 1.2% 1.7% 2.7% 3.4% 5.3%
C1 1.4% 2.2% 3.1% 4.1% 6.3%
C2 1.9% 2.4% 3.6% 4.8% 7.2%
C3 2.2% 2.9% 4.1% 5.5% 8.4%
D1 2.4% 3.4% 5.1% 6.5% 9.9%
D2 2.9% 3.9% 5.8% 7.7% 11.6%
E1 3.4% 4.3% 6.7% 8.9% 13.3%
E2 3.9% 5.1% 7.5% 10.1% 15.2%
F 4.6% 6.0% 9.2% 12.1% 18.1%
G 5.8% 7.5% 11.3% 15.2% 22.7%
Source: Analysis based on SEAI annual running-cost estimates for domestic principal energy usage
Notes: * Where estimated median annual household disposable income in 2009 = €41,500 or €798 per week
** Shaded cells refer to households experiencing energy poverty based on annual running costs being greater than 10%
of disposable incomeUnderstanding and Measuring Energy Poverty Chapter 2 29
Lower-income households – disposable income level of income, the risk and incidence of energy
equal to 1/2 average household income poverty increases. In this case, for example, a
The following table (Table 3) presents a similar household living in a three-bed semi-detached
analysis for households with disposable income at house of 100m2 would experience energy poverty
half the average income across all households, i.e. at these income levels if the dwelling has a BER
where household income equals approximately rating of E2 or below, with the incidence of energy
€400 per week. This would be likely to closely poverty increasing sharply for similar-income
resemble a household comprising, for example, a households living in larger dwellings and or with
family where both parents are unemployed and in lower energy efficiency ratings.
receipt of welfare supports. For households at this
Table 3: Risk of Energy Poverty for Typical Dwelling Types and Energy Efficiency Ratings – Annual Energy
Expenditure as % of Household Disposable Income: Household with Income = 1/2 of Median Household
Disposable Income*
BER Rating and 2 bed 3 bed semi- 4 bed semi- Detached Large house
Dwelling Type/ apartment detached detached house (300 Sq M)
Size (75 Sq M) house house (200 Sq M)
(100 Sq M) (150 Sq M)
Annual Energy Expenditure as % of Household Disposable Income**
A1 0.5% 0.7% 1.1% 1.4% 2.4%
A2 1.1% 1.4% 2.2% 2.9% 4.3%
A3 1.3% 1.8% 2.9% 3.4% 5.3%
B1 1.6% 2.2% 3.4% 4.3% 6.7%
B2 2.1% 2.9% 4.3% 5.8% 8.7%
B3 2.4% 3.4% 5.3% 6.7% 10.6%
C1 2.9% 4.3% 6.3% 8.2% 12.5%
C2 3.9% 4.8% 7.2% 9.6% 14.5%
C3 4.3% 5.8% 8.2% 11.1% 16.9%
D1 4.8% 6.7% 10.1% 13.0% 19.8%
D2 5.8% 7.7% 11.6% 15.4% 23.1%
E1 6.7% 8.7% 13.5% 17.8% 26.5%
E2 7.7% 10.1% 14.9% 20.2% 30.4%
F 9.2% 12.1% 18.3% 24.1% 36.2%
G 11.6% 14.9% 22.7% 30.4% 45.3%
Source: Analysis based on SEAI annual running cost estimates for domestic principal energy usage
Notes: * Where 1/2 of estimated annual median household disposable income in 2009 = €20,744 or €399 per week
** Shaded cells refer to households experiencing energy poverty based on annual running costs being greater than 10%
of disposable income30 Warmer Homes A Strategy for Affordable Energy in Ireland
Lower-income households – disposable income
equal to 1/3rd average household income
Table 4 indicates the likelihood of energy poverty
among lower-income households where household
disposable income equates to one-third of the
average across all households, i.e. equivalent to a
weekly disposable income of around €266. In this
scenario the risk of energy poverty increases even
further compared with the preceding analysis.
Table 4: Risk of Energy Poverty for Typical Dwelling Types and Energy Efficiency Ratings – Annual Energy
Expenditure as % of Household Disposable Income: Household with Income = 1/3 of Median Household
Disposable Income*
BER Rating and 2 bed 3 bed semi- 4 bed semi- Detached Large house
Dwelling Type/ apartment detached detached house (300 Sq M)
Size (75 Sq M) house house (200 Sq M)
(100 Sq M) (150 Sq M)
Annual Energy Expenditure as % of Household Disposable Income**
A1 0.8% 1.1% 1.7% 2.2% 3.6%
A2 1.7% 2.2% 3.3% 4.3% 6.5%
A3 2.0% 2.7% 4.3% 5.1% 8.0%
B1 2.5% 3.3% 5.1% 6.5% 10.1%
B2 3.2% 4.3% 6.5% 8.7% 13.0%
B3 3.6% 5.1% 8.0% 10.1% 15.9%
C1 4.3% 6.5% 9.4% 12.3% 18.8%
C2 5.8% 7.2% 10.8% 14.5% 21.7%
C3 6.5% 8.7% 12.3% 16.6% 25.3%
D1 7.2% 10.1% 15.2% 19.5% 29.6%
D2 8.7% 11.6% 17.4% 23.1% 34.7%
E1 10.1% 13.0% 20.2% 26.8% 39.8%
E2 11.6% 15.2% 22.4% 30.4% 45.6%
F 13.7% 18.1% 27.5% 36.2% 54.2%
G 17.4% 22.4% 34.0% 45.6% 68.0%
Source: Analysis based on SEAI annual running cost estimates for domestic principal energy usage
Notes: * Where 1/3 of estimated annual median household disposable income in 2009 = €13,830 or €266 per week
** Shaded cells refer to households experiencing energy poverty based on annual running costs being greater than 10%
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