The Energy Poverty Alleviation Framework now embedded in the European Union’s Fit for 55 Legislation bodes well for vulnerable communities, as long as it’s properly implemented, concludes a recent analysis by the Regulatory Assistance Project.
But fulfilling the promise of the newly-minted framework will require implementers to ensure that those most in need receive support first, and rapidly, writes [pdf] RAP policy analyst Louise Sunderland.
That outcome will hinge on strategies that protect households against the buildup of “unmanageable debt” from unpaid energy bills, ensure that the most vulnerable are represented and consulted at national and local levels, and that funding and support are adequate from the start, accounting for everything from up-front costs to unintended consequences.
35% Higher Energy Poverty in One Year
Sunderland points to the high, entrenched levels of energy poverty in the EU, hardship worsened by an energy crisis that began during the pandemic and became full-blown with Russia’s invasion of Ukraine in February 2021. “Despite very significant governmental spending on measures to protect energy users, energy poverty rose by 35% between 2021 and 2022,” she writes.
The energy crisis has eased, but gas prices remain “more than double” what they were in 2020, the year the EU’s Green Deal passed, promising to be “just and inclusive” and to “leave no one behind.”
The EU’s Fit for 55 legislation spawned specific policies to reduce greenhouse gas emissions by 55% by 2030, including the Electricity Market Design Directive, the Energy Efficiency Directive, the Energy Performance of Buildings Directive, and the Social Climate Fund. Interwoven with these policies, the Energy Poverty Alleviation Framework will be critical to rapidly making good on this promise, Sunderland writes.
In a video presentation that breaks down the provisions of the framework for EU policy-makers and practitioners, Sunderland points to another reason to hasten its implementation.
The new support measures are urgently needed because of the “new burdens” the Fit for 55 legislation itself will create, with the EU’s new Emissions Trading Scheme (ETS) being “the most significant of these,” she says. The ETS will apply a carbon price to building and transport fuels, and thus “will add a price to households bills as early as 2027,” she explains. “And, as we know, any rise in bills affects households on lower incomes with already very high energy burdens.”
While “there are measures within the design that will aim to control significant price rises,” Sunderland adds, “it remains to be seen if these are truly effective, and we have seen predictions that the price around and beyond 2030 could rise significantly. So we need very swift action this decade to support households that are most at risk if the price rises.”
Finding Those Most at Risk
While the framework explicitly defines “energy poverty” in the EU for the first time, Sunderland says definitions alone won’t be enough to identify the households most at risk. Household income data is commonly used to identify energy-poor households, but acquiring such data “can be both difficult and intrusive if the data is not already available, for example within the tax system, and accessible to program implementers.”
There are proxy indicators of income available, like a homeowner’s pre-existing receipt of a social benefit. In Ireland, Sunderland says, “access to fully funded energy upgrades to homes is available to homeowners who receive one of a list of social benefits for people who are vulnerable, unemployed, disabled, carers, or in low-income or single-parent families.”
Using these proxies along with confirmed indicators that a home or elements of it are particularly energy inefficient can create “even more precise targeting of households at high risk of energy poverty.” In Ireland, once again, RAP identified a building upgrade scheme that is “open to recipients of specified social benefits whose homes were built before 2006.”
Programs can also consult geographical references for areas defined as deprived or economically stressed, socioeconomic data, or “trusted partners” like social and faith organizations or medical professionals to identify at-need households or provide referrals.
Preventing Unmanageable Debt
Under the Fit for 55 Electricity Market Design Directive, disconnecting vulnerable customers from a household electricity supply is now prohibited. While this provision was urgently needed, Sunderland warns, policy-makers and energy suppliers themselves must still protect households from building up unmanageable energy debt.
Having “swiftly identified households struggling to fully pay their bills,” energy suppliers should deploy one or several measures to mitigate the risk, including a debt payment plan, a debt waiver, or the application of a “minimum capacity connection”, which allows customers with unpaid bills who’ve used up emergency credit to be switched to a minimum supply of energy.
The system must also address up-front costs and unintended consequences, Sunderland adds.
“Lower-income households and people at risk of energy poverty rarely have access to savings or mainstream financial products to pay for energy-saving equipment,” she says, so “significant public funds” and related measures must provide financial support. That includes subsidies for energy efficiency and renewable energy upgrades that have traditionally focused on better-off households.
Well-known “unintended consequences” of renovation efforts include “increased housing costs, higher mortgages or rents, or evictions and displacement because of gentrification.”
Energy Empowerment
But Sunderland says the framework could go far in providing the support to tackle energy poverty, as long as it is “treated as a package and implemented coherently and strategically at national and local level, not directive by directive.” She praises the plan for shifting paradigms from a model in which “households are protected through short-term support, to one in which households are empowered to reduce their energy use and fossil fuel reliance in the long term, thereby addressing structural inequities.”
In her video presentation, Sunderland points to the “right to energy-sharing” provisions contained in the Electricity Market Design Directive (EMD) as a “really good example” of that shift. The EMD not only enshrines energy sharing between neighbours, for example, but will also require member states to ensure any publicly-owned energy-sharing projects supply at least 10% of the energy they generate to vulnerable and energy poor households. That will help ensure that those households are “the first, not the last, to benefit from these kinds of exciting new schemes.”
