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Fuel poverty – time for a new approach?

From guest blogger: Dr Steven Fawkes

Fuel poverty continues to grow as energy prices increase and it brings with it massive economic and social costs. Age UK estimate that fuel poverty costs the NHS more than £1.3 billion a year and around 30% of the 30,000 excess winter deaths can be ascribed to fuel poverty. This is a massive social and economic problem that we need to address for economic as well as social and moral reasons.

Fuel poverty results from two factors – high fuel and electricity prices and the low energy performance of the UK housing stock. We cannot control energy prices which are fundamentally driven by global markets. There are improvements that could be made to the way the energy markets work but at the end of the day the effect of these on prices an only ever be marginal. What we can sensibly affect is the level of energy performance or energy efficiency of the housing stock - it is a choice we make either explicitly or implicitly. The energy performance of new housing is essentially controlled by Building Regulations and although these have got stronger, and continue to improve, there is still a long way to go. The evidence is that we can design and build extremely low energy houses at little or no extra cost. The real problem of course is the existing stock of buildings, the rate of new building won't even begin to solve the problem in any of our lifetimes.

Improving energy efficiency brings with it a layer cake of benefits at many levels – including improved health, job creation, reduced need to spend on energy supply infrastructure and improved energy security. Reducing fuel poverty through improving the efficiency of the building stock would bring all these benefits and more – at a national level we need to ensure that all the benefits are valued and counted in a cost benefit analysis. Typically when looking at energy efficiency the focus is just on the value of the energy savings and these important co-benefits are not valued.

At the operational and business level we need to move away from the idea that fixing fuel poverty is in the arena of big, publicly funded and centrally run programmes. Instead of specifying methods and processes in great detail we need a system in which we pay for the results we want – numbers of households removed from fuel poverty and units of energy saved. Delivery of the results should be left to a market responding to a price which would be determined by the holistic benefit analysis. Technical and business model innovation should be encouraged. Given that many (most if not all) households in fuel poverty pay a higher unit price for their energy than “normal” customers, there is potential and the margin currently being made by the energy suppliers that can be diverted into funding efficiency measures. This requires energy suppliers with new business models that offer a full energy services, energy supply and efficiency measures – suppliers that could be small new entrants (entering the energy supply market has become easier in recent years), large corporates not currently in the energy supply business but looking to disrupt the energy market, (think mobile phone companies and other companies with good brands and lots of touch points with customers), or the emerging municipal energy companies which will have social as well as financial objectives.

There are encouraging signs of technical innovation which new entrants into the energy market, (as well as the incumbents), need to incorporate into their thinking. WHISCERS, developed by the Sustainable Energy Academy and the National Energy Foundation, which uses laser scanning and factory cutting greatly reduces the time, disruption and mess of installing internal insulation. Technologies such as micro-Combined Heat and Power are entering the market, some wrapped into new energy supply models such as offered by Flow Energy. Other emerging innovations include the use of virtual electricity meters to supply electricity to specific devices including heaters at times of low wholesale prices – a technology that has been developed by Ubitricity in Germany for electric vehicle charging. Although whole house retrofits are always going to be the ideal there is much that can be done by using a range of single measures such as Zenex’s boiler heat recovery system, voltage regulation and LED lighting. We need to encourage innovation in technology and business model to solve the fuel poverty problem once and for all.

Dr Steven Fawkes

Steven Fawkes has over 30 years experience in energy efficiency and has several roles in the sector including being on the Investment Committee of the London Energy Efficiency Fund and a Non-Executive Director of Bglobal plc – a smart meter and energy software business. He has published widely on energy efficiency including two books and his blog – onlyelevenpercent.com.

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Alex Hook

Alex Hook

Alex Hook

Investment Manager

Alex is responsible for managing Nesta’s portfolio of direct investments in early stage UK technology companies, as well as Nesta’s fund of fund investments.

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