Energy hardship – Redefining measurement

Energy News

Energy hardship – Redefining measurement

In the last 15 years ‘fuel poverty’ – otherwise known as energy hardship – has been variously estimated at anywhere between less than 100,000 to over 400,000 households. See here for a summary of some of the attempts.

This ‘10% threshold’ discussion below has been written by Ian McChesney. Ian is deeply experienced in the community energy sector, having co-founded CEN member CEA in 1994. He was CEA’s representative on the forerunner to CEN (EECN – Energy Efficiency Community Network) and has recently worked with CEN on their response to the Healthy Homes Standards and the Electricity Pricing Review (EPR).

The Government has accepted the EPR recommendation asking for a better definition of energy hardship to be developed so that New Zealand knows how best to provide energy  for those who need it most, improving the health of our communities.

The fact that we don’t really know an exact number is a stark indication of the lack of clarity and understanding around this issue and why this has been reflected by piecemeal policies.

No one knows better than the energy service providers in the community energy sector just how incoherent home retrofit funding policies have been over the last 10 years. Household eligibility, fundable measures and subsidised rates have chopped and changed with little apparent rationale. And the result of this is that our most at-risk communities desperately need the Government to deliver on its promise of providing wellbeing through eliminating energy hardship.

For example, the winter fuel payment – with its $450M price tag – is a great initiative for those that need it, but it has been applied with such a broad brush that inevitably questions about focus, effectiveness and sustainability have been raised.

Although the lack of an agreed, durable definition of energy hardship isn’t the sole reason for this situation, the reality is that those of us working in the community energy sector see that this inability to anchor regulatory and funding policies within a coherent and stable policy framework is a significant contributor.

Banishing The ‘10% threshold’ – Ian McChesney

To date the fall-back position adopted widely in New Zealand is to define energy hardship by the 10% threshold. This is where a household that spends over 10% of their income on energy is considered to be in energy hardship.

It’s easy to see how the 10% threshold focus took hold – in 2001 the UK government adopted a formal definition of fuel poverty stating that a fuel poor household is one which ‘needs to spend more than 10% of its income on all fuel use and to heat its home to an adequate standard of warmth’.

However, what is far less well understood is how this ‘definition’ has been consistently misused in Aotearoa and why it is ineffectual as a measure of energy hardship.

Here are four key issues:

  1. 10% may have been relevant to the UK, but what about New Zealand? The original concept came about in the early 1990s from fuel poverty pioneer Brenda Boardman. Boardman determined that for the 30% of households in the UK with the lowest incomes, fuel costs averaged 10% of their total expenditure. For all households the average was 5%; hence 10% also conformed with a ‘double the average’ rule-of-thumb for indicating vulnerability. Thus in the context of the UK at that time 10% of expenditure was deemed to be an affordability threshold.

    Yet seemingly there has been little thought as to whether the basis for setting the 10% applies to our own experience in Aotearoa. Comparable expenditure: income ratios appear to be in the range of 7-8%, raising questions from the start whether the 10% threshold ever had any validity here?
  2. Required vs actual energy expenditure – the UK definition specified the 10% expenditure threshold as ‘required’ energy, not actual expenditure. Required energy is that needed to maintain a warm, dry and healthy home, taking account of the efficiency of the house and the cost of energy. Yet the required energy can be a far cry from that actually spent by income-poor and constrained households. In 2009 in the UK, the required energy expenditure for the 20% of households with the lowest incomes was 50% higher than actual expenditure. Yet, as commonly used in NZ, the 10% threshold is based on actual expenditure, largely because this data is readily available whereas determining required energy is complex.  Therefore, a large number of households that are in real energy hardship because they reduce their energy use and live in energy deprivation, are not counted when actual energy expenditure is used.
  3. Defining energy hardship by a single threshold is too simplistic – We know from experience when visiting households that a single threshold – in energy hardship or not – just doesn’t do justice to energy hardship realities. For example, setting single thresholds means excluding households that sit just below the threshold line. But for many of these households their energy hardship circumstances are often just as acute.
  4. The definition is out of date – Tellingly, in 2011, the UK government reviewed the definition of energy hardship, following growing dissatisfaction with the seeming lack of progress towards national fuel poverty goals. It was replaced in England by a low income-high-energy cost definition. Even then, this has not proven to be durable and consultation for a further definition change (to low income- low energy efficiency) was carried out during 2019. In the EU, after much debate, their preferred term ‘energy poverty’ has been given a descriptive definition, and will be assessed by a range of indicators, not just one.

While any one of these issues should be enough to raise serious misgivings about the use of the 10% threshold in New Zealand, with all four combined, it is paramount that we let go of this ‘definition’ for good.  That it has endured for so long speaks volumes about the policy ‘catch up’ New Zealand needs to make

Community Energy Network

CEN comment: By continuing to use the 10% threshold, New Zealand is behind the times and we need to work hard in 2020 to ensure we are achieving the best outcomes for our communities. That’s why we encourage the government to dig deeper to provide a definition that recognises the complexity of energy hardship, will be functional, durable, and useful for establishing effective policy and making the right funding decisions.

Want to learn more? Stay tuned for Ian’s next blog about what a better definition could look like and why CEN advocates for taking a more sophisticated approach to fix this systemic issue.

Energy Hardship, living with it in New Zealand

Energy News

Energy Hardship, living with it in New Zealand

People living in energy hardship live in homes that perform so poorly that the cost of keeping the home warm and dry (and have hot water when they need it) is too high.

Lining up with the dynamics of economic poverty, energy hardship comes from having a home that is hard to heat and keep dry, which then usually leads to the growth of harmful mould. The reason this is so problematic for the health of society is because damp, cold and mouldy homes create the perfect conditions for a large range of diseases, particularly respiratory illnesses, such as asthma and bronchiolitis.

Anyone who is cold becomes more susceptible to these illnesses and it impacts on physical and mental health, particularly for children. This also effects the ability to learn for kids or for adults be able to maintain stable employment and a good level of overall wellbeing.

How do we address the problem

Tackling energy hardship isn’t just about fixing the house. Instead, it is about combining the fixing of the physical infrastructure with behavior change. In CEN’s experience in assessing and insulating over 150,000 New Zealand homes, we have found there are often behaviours that make the housing issues worse. This includes as drying clothes inside, not removing the mould when you see it, and, leaving windows open during the daytime. The ability to pay, at any price, for the energy is also a key issue. It’s why in New Zealand to address energy hardship, we must find ways to make energy more affordable for everyone.

Energy hardship is best addressed when we fix the technical issues with the house, educate the residents to change behaviours and make the energy itself as affordable as possible (more on that latter). 

Why community energy is key for taking people out of energy hardship

The Government implemented the Energy Price Review, which was completed in May 2019. As part of the consultation round during this review, several options for addressing energy hardship were presented. One of the best ideas was to establish an Energy Hardship Group. This is a group made up of Government Ministries, industry stakeholders and, hopefully, NGOs that are working directly with people in the community. These are organisations such as Salvation ArmyFinCapCommunity Housing AotearoaHabitat for Humanity, the Wise Group (mental health) and CEN, of course.

The function of this group would be to advise Government on those policies and funding options that would have the biggest, most effective impact on delivering improved wellbeing of those in energy hardship. As we’ve seen with programmes dealing with homelessness in recent years, when agencies work together to provide a cohesive wrap around service, we see the optimal outcomes.

There are many overseas examples of where this has been done well and CEN advocates that New Zealand must follow these international roadmaps. Programmes such as Home Energy Scotland, funded by the Scottish Government,  and the EU Energy Poverty Observatory, which provides a wide range of both technical, economic and social policy guidance.

By weaving together multiple threads, we can quickly make large inroads into reducing energy hardship. It’ s why the Energy Hardship Group, that has been an accepted recommendation from the EPR report, may well provide the cohesion this approach needs.

Aside from making sure the social services sector work cohesively, housing is healthy and energy affordable, we also need to look at how New Zealand communities can engage in their own energy generation, storage and use. This creates an Energy Democracy – the concept of which will be discussed in our next blog.

Read more on CEN’s latest article on energy hardship – refining measurement

To learn more about the work of CEN, contact us.

Community Energy Network

Energy Democracy, communities owning Energy networks

Energy News

Energy Democracy, communities owning Energy networks

Energy democracy is the idea that New Zealand can shift from a centralised, top-down provision of energy to one that prioritises deep engagement and local decision-making for communities to literally “own” their energy network.

The reason this is so important is not only because it helps to give a resilient supply of electricity, but it also quickly addresses inequity because all community members can engage in the process.

What does it look like?

The CEN version of energy democracy is about each community owning as much of their renewable energy generation, storage and use infrastructure as they can. This enables them to then make decisions about how much power costs and how to spend any profits on the specific needs of their community.

CEN’s last blog on Energy Hardship was about the need to fix the homes and support the people so that that they can stay healthy in warm and dry homes. Alongside making our homes as effective and efficient as they can be, the cost of energy probably has the biggest impact on the level of energy hardship people face.

Why we need people to get on board…

Right now, many people are disengaged with how they get their energy and what they can do to reduce their costs. CEN even argues that most of us don’t even know how to read and understand our power bills. This makes it hard to talk about the value of making changes to the way we use energy or even to how we produce it.

This lack of engagement is, at least partially, because features of the system, including the different generation profiles, the wholesale market, how the grid is managed, and complicated pricing structures all providing a disincentive for people to get engaged.

If we’re going to address energy hardship and if we want our communities to take ownership of their future and become more resilient, this needs to change.

The international landscape…

The good news is we don’t need to start from scratch. In fact, despite having the world’s first Wellbeing budget, New Zealand is behind the game on uptake of community energy. Most, if not all the countries we would benchmark ourselves against are well advanced in developing a community energy sector. This includes the European UnionUKUSA and even our cousins over the ditch.

The other good news is the Government has accepted many of the Price Review’s recommendations. We are looking forward to supporting the roll out of many of these recommendations.

To learn more about the work of CEN, contact us.

Community Energy Network