Modelling fuel poverty targets

How to deploy proposed domestic energy efficiency measures to address fuel poverty

Project duration: March 2014 to November 2014

In light of its duty to implement meaningful, measureable and enforceable fuel poverty targets, the Government Department of Energy and Climate Change (DECC) published a consultation document in July 2014 on its new Fuel Poverty Strategy for England: 'Cutting the cost of keeping warm'. It includes proposals for a legal obligation for as many fuel poor homes as “reasonably practicable” to be raised to a Band C energy efficiency rating by 2030, with interim targets for improving as many fuel poor homes (as reasonably practicable) to Band E by 2020 and Band D by 2025.

Previous work undertaken by CSE for the Committee on Climate Change (CCC) used DECC’s National Household Model (NHM) to explore the implications for fuel poverty to 2030 of meeting emission reduction targets (specifically the four successive legally binding carbon budgets which cover five-year periods from 2008 to 2027). Building on this work and in response to the consultation, the CCC commissioned CSE to undertake some additional modelling and analysis using the NHM. The research aimed to explore the potential implications of meeting the proposed targets, including producing estimates of measures needed, costs and impacts on fuel poverty, and to compare these results with the existing mix of measures identified by the CCC as necessary to meet the fourth carbon budget.

What was modelled?
A scenario to model the proposed fuel poverty targets set out in the Government’s consultation document (targets and interim milestones) was developed in the NHM, along with a scenario to simulate a more stringent ‘stretch’ target to achieve an energy efficiency rating of B in all fuel poor homes by 2030 (with interim targets of D by 2020 and C by 2025).  The analysis compared the results of these scenarios – and those from the previous work that modelled the impact the CCC’s fourth carbon budget projections - on fuel poverty estimates, energy efficiency ratings, and the mix of measures identified to 2030.

All the modelling and analysis in the study applied to England and the ‘Low Income, High Cost’ (LIHC) definition of fuel poverty only (consistent with the proposed targets).

The cost of raising the target
The results from modelling (using the NHM) to identify measures needed to meet the Government’s proposed fuel poverty targets to 2030 suggest that a total investment of around £18 billion is needed. This increases by around one third if the target is extended to be a minimum of Band B energy efficiency rating in fuel poor homes by 2030. More than twice the number of measures are identified overall in the ‘stretch’ target scenario; the average cost per dwelling increases; as does the number of dwellings requiring over £10,000 of investment. This reflects the mix of measures needed in fuel poor homes to achieve the higher standards of energy efficiency.

Implications for the fuel poverty gap
The estimated total fuel poor ‘head count’ is substantially reduced when measures are simulated to meet the Government’s proposed fuel poverty targets (and the ‘stretch’ target) in 2030. As a result, the aggregate fuel poverty gap* also appears substantially lower in both scenarios compared to the 2013 baseline estimate.

*the amounts by which the assessed energy needs of fuel poor households exceed the threshold for reasonable costs.

Summary table: Implications for fuel poor households in 2030 of meeting the proposed and 'stretch' fuel poverty targets (Source: NHM modelling results, CSE, 2014)

 2013 baseline

Proposed target
Min. C by 2030

Extended target
Min. B by 2030
LIHC fuel poor count (m)2.510.950.81
% of households LIHC fuel poor12%4.4%3.8%
Mean Gap£648£545£560
Aggregate Gap (£m)£1,625£518£452
Average SAP (of LIHC fuel poor)487274
Average energy bill (of LIHC fuel poor)£2,113£2,019£1,990

Measures needed to meet the targets
The modelling identified one potential mix of measures to meet the proposed and ‘stretch’ fuel poverty targets. Comparing these measures with those in the CCC’s current projections for meeting the fourth carbon budget suggests that overall, the fuel poor represent approximately 12% of the population in 2013 whilst approximately 19% of the total measures from the CCC’s mix are required to meet fuel poverty targets to 2030. In particular, the modelling suggests that the majority of solar PV in the CCC's projections will have to be installed in fuel poor homes. In addition, cavity wall insulation, internal and external solid wall insulation, top-up loft insulation and heating controls feature highly in the measures necessary to meet the proposed fuel poverty targets in 2030.

Inefficiency of targeting
In the model of the Government’s proposed fuel poverty target scenario, a number of households receive measures in more than one target year. This is a consequence of the tiered structure of the proposed targets, which include two interim targets, for 2020 and 2025 respectively. Targeting the fuel poor in the least energy efficient homes first makes sense. However, the low initial proposed target of Band E by 2020 means that the improvements needed to meet this target are insufficient to lift a number of homes out of fuel poverty. These results highlight the potential inefficiency of the tiered approach to improving the housing stock and this level of repeat targeting has important implications in terms of added costs (e.g. of finding households, gaining access, administration and so on).

What would seem a far more effective approach (economically, socially and environmentally) would be to drop the interim lower energy efficiency targets and go straight to achieving a higher rating (at least Band C) in fuel poor dwellings. The worst rated properties could still be targeted first.

The results from modelling the proposed fuel poverty targets and an additional ‘stretch’ target indicate that whilst the costs of achieving a higher level of energy efficiency may be greater initially, in the long term this should represent a more cost-effective approach that avoids the costs associated with repeat targeting and accessing target households. Improving the energy efficiency of these dwellings to a minimum of C would also offer these households (and future occupants) greater protection from rising energy costs.

Photo: Peter Gerdes, Flickr, reproduced under a Creative Commons license

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