WARMER HOMES - A Strategy for Affordable Energy in Ireland

WARMER HOMES - A Strategy for Affordable Energy in Ireland

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

For those unable to afford to heat or light their home, the effects can be hugely detrimental to their ongoing health and wellbeing. This document marks the first Government strategy aimed at specifically making energy more affordable for low-income households in Ireland. Up to now, efforts by government departments and agencies have focused on delivering on discrete policy remits; this strategy changes this approach, setting a clear framework for how we will measure, record and report on the numbers of households in difficulty and the actions necessary to improve the quality of life for such households.

The underlying factors that influence energy affordability are well understood and have been subject to extensive scrutiny as part of the development of this strategy. The complex interplay of energy prices, thermal efficiency and incomes mean that no one simple solution can be brought to bear. Each situation is unique, requiring a different set of policy interventions. The way in which Government responds needs to vary according to individual circumstances. We plan to tailor our response to ensure that resources are directed at those most in need.

There is only one long-term solution to making energy more affordable – using less of it. Improving the thermal efficiency of homes is the most cost- effective way of increasing energy affordability and reducing energy poverty. While income supports such as the National Fuel Scheme and Household Benefits play an important role in reducing the financial burden of energy bills, they represent an expensive way of addressing the real problem – poor quality homes. Since 2004, over €2 billion has been spent on income supports. Over the same period €60 million has been provided for thermal efficiency measures in the private sector, with a further €183 million spent on central-heating upgrades and retrofits in public sector housing. It is clear that we need to change our priorities if energy poverty is to be tackled in a meaningful way. Our starting point will be to assess whether it is possible to link thermal efficiency to energy-related income supports in a more effective manner, thereby taking into account a household’s need to spend on energy.

In addition to our ongoing commitment to improving energy efficiency in low-income homes, this Government will introduce, and progressively increase, minimum thermal efficiency standards for properties offered for rent. Our focus will be on progressively removing properties in the E, F and G bands from the rental market by 2020. We will also ensure that appropriate standards are set for the Rent Supplement and Rental Accommodation Schemes, for which Government provides financial support. We have looked at the experiences of other countries and taken note of efforts to fully eradicate energy poverty. In our view this is not a realistic goal for this strategy, as energy poverty is not something that we can overcome today, tomorrow or even in the next few years. The factors that influence vulnerability are numerous and pervasive. What we must do is address each of the underlying causes of vulnerability and systematically remove the barriers that prevent people from benefiting from high quality accommodation. Without an improvement in the quality of homes, this strategy will not be effective.

This strategy will require a cross-departmental and agency response, with identified actions to be delivered in the short, medium and long term, depending on the nature of the change required and the level of analysis to be undertaken. While we have been actively engaged in retrofitting low-income homes since 2000, more recently we have redoubled our efforts. In 2010 close to 25,000 homes benefited from energy efficiency measures, representing an 11-fold increase in programme activity since 2006. However, this level of action will need to continue and will require the ongoing support of the Sustainable Energy Authority of Ireland, the Money Advice and Budgeting Foreword Minister for Communications, Energy and Natural Resources

8 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 Paul

10 Warmer Homes A Strategy for Affordable Energy in Ireland

Introduction Everybody should be able to afford to heat and power their home to adequate levels. This fundamental objective is the starting point for Warmer Homes – A Strategy for Affordable Energy in Ireland 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 housing stock and energy awareness initiatives, but it is timely to develop and implement an affordable energy strategy given the financial difficulties currently being experienced by many in society. This strategy presents a cohesive framework for achieving more affordable energy, ensuring that existing and future measures are targeted at households where the risk and adverse effects of energy poverty are greatest. The strategy has been developed by the Inter- Departmental/Agency Group on Affordable Energy (IDGAE), which was established in the summer of 2008 to serve as the key coordinating body in this area.1 To deliver this strategy will require an integrated approach, involving extensive coordination amongst a range of actors in both the public and private sectors. This reflects the complex nature of the challenge, which necessitates government departments and agencies, local authorities, energy utilities, regulators, non-governmental organisations and community-based organisations all working together, each delivering a part of the solution. This spirit of collaboration is essential if we are to effectively implement actions that will have a lasting impact on the health and wellbeing of households in Ireland. 1  The IDGAE is chaired by the Department of Communications, Energy and Natural Resources and includes the Departments of Public Expenditure and Reform, Taoiseach, Environment, Community and Local Government, Social Protection, Health, and Children, in addition to the Commission for Energy Regulation, SEAI, ESB Electric Ireland, the Institute of Public Health in Ireland, the Energy Poverty Coalition and Bord Gáis. A Vision for Affordable Energy It is important to set an overarching vision for energy affordability so that it is clear what we are trying to achieve with the development and future implementation of this strategy. Vision for Affordable Energy in Ireland The achievement of a standard of living whereby households are able to afford all of their energy needs and where individuals and families live in a warm and comfortable home that enhances the quality of their lives and supports good physical and mental health Associated with this vision are a number of guiding principles, which permeate the priorities, actions and delivery approaches set out in this strategy. Specifically, this strategy will: •  Focus on improving the thermal efficiency of low- income homes.

•  Focus on maximising the quality of people’s lives through implementation of practical initiatives. •  Apply a partnership approach, entailing close coordination and alignment of policy levers between stakeholders, including government departments and agencies, local authorities, energy utilities, the health and social services providers, non-governmental organisations and community-based organisations. •  Promote social inclusion and target social need. •  Be integrated within emerging national anti- poverty policy.

•  Aim to deliver cost-effective approaches to addressing energy poverty. •  Be consistent with the Government’s wider climate-change policy, thereby also benefiting the environment. Executive Summary

12 Warmer Homes A Strategy for Affordable Energy in Ireland Defining Energy Poverty The definition of energy poverty that will be applied by Government departments, agencies and other bodies in the implementation of this strategy takes the above factors into account and is as follows: Definition of Energy Poverty A household is considered to be energy poor if it is unable to attain an acceptable standard of warmth and energy services in the home at an affordable cost. The above definition provides a starting point for the ongoing measurement of energy poverty in Ireland, which will require the following two-stage development process: 1. A preliminary measure of energy poverty will be estimated which compares an individual household’s actual expenditure on energy, relative to its income, to the average proportion of income spent on energy across all households in the State. Under the preliminary measure, a household is defined as being unable to afford its energy needs if it spends at a level greater than twice the national average (median) share (currently 10%) of disposable income spent on energy services.2 This is an interim solution which will be used until such time as a comprehensive measure can be developed.

2. A comprehensive measure of energy poverty will be developed using a new energy poverty modelling framework. This approach will combine a survey of housing conditions with a formal energy poverty modelling framework to 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. afford its energy needs if it is required to spend at a level greater than twice the national average (median) share (currently 10%) of disposable income spent on energy services to achieve an acceptable standard of warmth. Under this measure, a comprehensive indicator of energy poverty will be developed and implemented over the next 3-5 years.

By following this approach we will be able to estimate the overall extent of energy poverty in Ireland, before migrating to a more accurate and comprehensive model. It is therefore appropriate to complement the preliminary measure with supporting indicators that capture the severity of energy poverty in terms of households that are most critically affected. This is also important from the perspective of prioritising and targeting measures and resources at those households that are considered a priority. We will, therefore, measure energy poverty by reference to the following levels of severity: 1. The core indicator of energy poverty: whereby a household is considered to be experiencing energy poverty if, in any one year, it spends more than 10% of its disposable income on energy services in the home.

2. An indicator of severe energy poverty: whereby a household is considered to be experiencing severe energy poverty if, in 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.

Executive Summary 13 Once the comprehensive measure has been developed, we will recalibrate the above indicators to reflect the need to spend, as opposed to what is actually spent. This will provide a more accurate means of gauging energy poverty. Looking Forward Energy poverty is a complex phenomenon, which necessitates an appropriately nuanced response from Government. It is thus heartening to note that many of the organisations that will have a role in delivering this strategy are already engaged in carrying out a range of initiatives, programmes and supports, which deliver important benefits for those affected by energy poverty.

However, we need to be aware that our analysis suggests that an estimated one-fifth of households in Ireland are likely to experience some form of 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.

Of the actions identified in Chapter 5, the following five are central to the successful implementation of this strategy: 1. We will actively progress five priority work packages: Thermal Efficiency Standards, Energy Suppliers, Area-based Approach, Data and Information, and Communication. 2. We will introduce an area-based approach to energy poverty mitigation. 3. We will ensure greater access to energy efficiency measures. 4. We will reform eligibility criteria for energy efficiency schemes. 5. We will review the National Fuel Scheme and Household Benefits Scheme to examine the feasibility of aligning income supports with the energy efficiency and income of the home.

14 Warmer Homes A Strategy for Affordable Energy in Ireland

Chapter 1 Introduction,Policy Context and Vision for Affordable Energy 1.1 Introduction Ireland’s current economic difficulties bring into stark relief the challenges faced by everyone active in the area of energy poverty mitigation. A sharp increase in the number of domestic electricity and gas disconnections is one very visible result of a general trend in energy becoming relatively more expensive in the last few years. Likewise, the imposition of a carbon tax has had the effect of increasing the cost of carbon-intensive fuels, which are often the primary heating source for people on low incomes. While there is an argument to suggest that the carbon tax should be removed, there are other pressing priorities, most notably the mitigation of climate change, that also require immediate action. The strategy will therefore have to be implemented in a complex environment in which other policy objectives also have to be delivered. The Government believes that everyone should be able to afford to live in a warm and healthy home. While much has been accomplished in recent years to support this objective through the expansion of programmes to improve the energy efficiency of the housing stock, energy awareness initiatives and income supports, it is now timely to publish an affordable energy strategy. Warmer Homes – A Strategy for Affordable Energy in Ireland presents a cohesive governmental framework for achieving energy affordability, ensuring that existing and future measures are targeted at the most vulnerable groups in society, where the risk and adverse effects of energy poverty are greatest.

This strategy is designed to ensure that households can achieve affordable access to their energy requirements through a range of practical initiatives and programmes designed to ultimately reduce their demand for energy, thus protecting those considered most at risk of energy poverty. In the long run this represents the most sustainable approach to energy poverty mitigation. It is important to note that, while attention is often focused on the consequences of energy poverty, such as electricity or gas disconnections, this strategy is focused on tackling the root causes of energy poverty, applying a holistic approach, combining national and geographically focused actions in the areas of income supports, targeted energy efficiency improvements, and advice and information. These measures will be aligned through the strategy and their implementation overseen by the Inter-Departmental/Agency Group on Affordable Energy (IDGAE).

The challenge facing each of the organisations involved in delivering this strategy should not be underestimated, particularly as Ireland faces a period of economic austerity, with pressures on public expenditure and against a backdrop of expected significant increases in the cost of energy. It is unlikely that the ultimate goal of this strategy can be achieved over the life of the strategy, 2011– 2013; there are simply too many poorly built homes to be improved in such a short period of time. Nevertheless, much can be done over the next three years, including, perhaps most importantly, better targeting of priority households. The strategy will be reviewed in 2014.

1.2  Approach to Formulation of this Strategy The strategy has been developed by the IDGAE, which was established in the summer of 2008 to serve as the key coordinating body to ensure the cohesiveness of the various actions already under way and those planned under this strategy.3 3  The IDGAE is jointly chaired by the Department of Communications, Energy and Natural Resources and the Department of Social Protection, and includes the Departments of Public Expenditure and Reform, Taoiseach, Environment, Community and Local Government, Health, and Children, in addition to the Commission for Energy Regulation, the Sustainable Energy Authority of Ireland (SEAI), ESB Electric Ireland, the Institute of Public Health in Ireland, The Society of St. Vincent de Paul and Bord Gáis.

16 Warmer Homes A Strategy for Affordable Energy in Ireland A steering group, consisting of members of the IDGAE, was formed in 2010 to oversee the development of the strategy. The steering group prepared a discussion paper for public consultation, for which twelve responses were received from a variety of bodies and NGOs (further details are contained in Annex 2). As a result, this document has benefited immensely from the submissions and presentations received from interested parties. In early 2010, following a competitive tendering process, Indecon International Economic Consultants were appointed to assist the IDGAE. 1.3  Policy and Organisational Context This strategy is set within the context of, and is consistent with, broader government policy in relation to poverty and social inclusion, and also climate change policy.

Three overarching policy documents are of particular relevance in setting the context for the affordable energy strategy, namely the National Action Plan for Social Inclusion, the Energy Policy Framework ‘Delivering a Sustainable Energy Future for Ireland’ and the National Energy Efficiency Action Plan. •  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 “the type of supports that enable older people 4  National Action Plan for Social Inclusion, 2007–2016. Government Publications Office, Dublin, February 2007, or via: http://www.socialinclusion.ie/documents/ NAPinclusionReportPDF.pdf.

to maintain a comfortable and high-quality standard of living”, and “building viable and sustainable communities, improving the lives of people living in disadvantaged areas and building social capital”. These areas include addressing the challenge of energy poverty. •  Delivering a Sustainable Energy Future for Ireland is the Government’s energy policy framework for the period 2007–2020. Strategic Goal 5 in this White Paper enunciates the Government’s policy in the area of affordable energy, stating that everyone should be able to afford an adequate energy supply and to live in a warm home.5 •  Maximising Ireland’s Energy Efficiency – the National Energy Efficiency Action Plan, 2009– 2020 6 sets out policies and measures that have the potential to contribute towards achieving Ireland’s national target of a 20% reduction in energy demand across the whole of the economy by 2020. The Action Plan devotes a chapter to the issue of affordable energy and identifies a number of actions that support improving the energy efficiency of low-income homes. The plan also sets out a vision for future housing stock where “all new Irish housing will be carbon-neutral” and where “efficiency standards in older homes will be significantly improved through retrofitting actions”.7 5  Delivering a Sustainable Energy Future for Ireland – Energy Policy Framework 2007–2020. Government White Paper. Department of Communications, Energy and Natural Resources. See: www.dcenr.gov.ie.

6  Maximising Ireland’s Energy Efficiency – the National Energy Efficiency Action Plan, 2009–2020. Department of Communications, Energy and Natural 7 Ibid. Page 75.

Introduction, Policy Context and Vision for Affordable Energy Chapter 1 17 1.4 A Vision for Affordable Energy By setting an overarching vision for energy affordability, we can make a clear statement about what we are trying to achieve with the development and future implementation of this strategy. Vision for Achievement of Affordable Energy The achievement of a standard of living whereby households are able to afford all of their energy needs and where individuals and families live in a warm and comfortable home that enhances the quality of their lives and supports good physical and mental health.

1.4.1 Guiding principles for this vision Several guiding principles associated with this vision permeate the priorities, actions and delivery approaches set out in this strategy. Specifically, this strategy will: • Focus on improving the thermal efficiency of low-income homes. • Focus on maximising the quality of people’s lives through implementation of practical initiatives. • Apply a partnership approach, entailing close coordination and alignment of policy levers between stakeholders, including government departments and agencies, local authorities, energy utilities, the health and social services providers, non-governmental organisations and community-based organisations.

• Promote social inclusion and target social need. • Be integrated within emerging national anti- poverty policy. • Aim to deliver cost-effective approaches to addressing energy poverty; and • Be consistent with the Government’s wider climate change policy, thereby also benefiting the environment. 1.4.2 Achieving the vision 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 in this framework result in improved outcomes for low-income households. In particular, it is envisaged that the realisation of this strategy will bring about real and lasting benefits, under the following headings: • The relief of hardship and suffering among families and individuals experiencing energy poverty. • The social benefits arising from improved public health and the economic benefits arising from reduced heath service expenditure and the reduction of health inequalities. • The benefits to the environment and the achievement of Ireland’s climate change policy goals through an improvement in the energy efficiency of the housing stock, combined with better energy consumption behaviour of households.

This strategy fundamentally tries to do two things: first, to set out a framework for measuring energy affordability and energy poverty (while these are similar concepts, in practice they mean different things), and, secondly, develop a series of measures and actions that will both improve the affordability of energy in Ireland and reduce the instances of energy poverty. One of the first and most important actions will be to create a model that can accurately track movements in energy affordability and poverty. This is an essential first step to enable the design of fact-based policies. Energy poverty, as with poverty more generally, is a complex phenomenon and is influenced by a range of economic and

18 Warmer Homes A Strategy for Affordable Energy in Ireland social issues. Setting out a formal definition and measurement approach will facilitate the ongoing assessment and monitoring of the extent and characteristics of energy poverty. However, the application of a formal definition in line with international best practice is dependent upon the availability of detailed information on the characteristics of households and the accommodation in which they live. Unfortunately, not all of this information is available, which makes it difficult to precisely measure and track energy poverty in Ireland. Nevertheless, this strategy sets out an approach which will see a transition from an interim approach to measurement of energy poverty to a more comprehensive and robust mechanism over the next 3–5 years. 1.4.3  Requirement for a partnership approach Effective implementation of this strategy will require an integrated approach, involving extensive coordination by a range of actors. This reflects the complex nature of the challenge, which necessitates government departments and agencies, local authorities, energy utilities, regulators, non-governmental organisations and community-based organisations all working together; each delivering within its own areas and competencies. This spirit of collaboration is essential if we are to effectively implement actions that will have a lasting impact on the health and wellbeing of at-risk households in society.

The main government departments that have a role in implementing this strategy, working in partnership with each other and with other agencies and stakeholders, are as follows: • The Department of Communications, Energy and 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: Homes scheme. It is also implementing the new National Energy Retrofit Programme (from 2011), which brings a new focus to energy-saving programmes more generally.

• The Department of Social Protection formulates appropriate social protection policies and administers and manages the delivery of a wide range of schemes and supports. These include schemes such as the National Fuel Scheme and Household Benefits Package (electricity/ gas component) which are designed to provide income support to low-income and other qualifying households, including to older persons. • The Department of Environment, Community and Local Government is responsible for funding social housing delivered through local authorities and voluntary and cooperative housing bodies, and the establishment of minimum standards and regulations for new buildings and private rental accommodation. The Department also provides supports for structural upgrades of homes occupied by older people and for local authority houses under the Housing Aid for Older People scheme and the Local Authority social housing improvement programme.

• The Department of Health is responsible for government policy on population health and health services. The Health Services Executive (HSE) is responsible for the delivery and management of health services, and assists in the Keep Well and Warm initiative. • The Department of Public Expenditure and Reform, which has a key policy role to play in relation to the resource implications of delivering this strategy.

Introduction, 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? Energy poverty can be described as a situation whereby a household is unable to attain an acceptable level of energy services (including heating, lighting, etc) in the home due to an inability to meet these requirements at an affordable cost. 2.2 What is Affordable Energy? The terms ‘energy poverty’ and ‘affordable energy’ are often used interchangeably, as they are closely related concepts. Affordability more generally measures expenditure relative to a household’s income. In this context, affordable energy describes a situation where a household can attain an acceptable level of energy services at a level of expenditure that is affordable relative to its overall disposable income. In practice, the achievement of achieving more affordable energy equates to a corresponding reduction in energy poverty. This strategy sets out a formal definition that will facilitate the ongoing measurement of energy poverty but also includes a complementary affordability index which will enable monitoring of the extent to which energy is becoming more or less affordable for households from a macro perspective as a result of changes in key drivers such as energy prices.

Both indicators will play an important role in understanding the prevalence of energy poverty but also the number of at-risk households. In this way we believe that state bodies and other organisations will be better placed to respond to further changes in the economic environment. 2.3  What are the Causes of Energy Poverty? Both energy poverty and affordable energy can be considered the product of the interaction of three factors or drivers, namely: 1. Household income. 2. The price of energy. 3.  The energy efficiency of the dwelling, its energy systems and the household’s energy consumption patterns or behaviour. In practice, each of the above factors/drivers is influenced by a complex mix of economic and social issues. All households have individual requirements in relation to heating and energy for other uses, including electricity for appliances, which are dependent upon factors such as household occupancy and the characteristics of occupants such as their age and behaviour. As a result, the nature and extent of energy poverty will vary depending on how these factors interact with the above drivers. This makes the development of a comprehensive measure of energy poverty a complex process, requiring data from a number of sources in order to create a robust reporting framework.

Fundamentally, the most effective long-term solution is ensuring that demand for energy decreases. This is the only mechanism that protects against future increases in energy prices, over which Ireland has a limited ability to control. Likewise, the effects of extended periods of cold weather, such as those experienced in recent years, can only be mitigated through highly energy efficient homes.

22 Warmer Homes A Strategy for Affordable Energy in Ireland 2.4  Defining and Measuring Energy Poverty Depending on the precise approach applied to the definition and measurement, varying levels of energy poverty can be reported.8 An effective definition of energy poverty must serve three purposes, namely: • To establish the existing position in relation to the extent of energy poverty and the groups most affected. • To facilitate effective policy design to address the impact of energy poverty. • To monitor progress and assess the effectiveness of policy interventions to address energy poverty and improve energy affordability.

During the development phase of this strategy, a wide range of views and inputs were received regarding the strengths and weaknesses of alternative approaches to defining and measuring energy poverty and affordability.9 In addition to these inputs, the definition of energy poverty set out below reflects and builds upon international experience and research, including developments at European Union level. On the basis of consideration of these factors, the definition of energy poverty that will be applied by government departments, agencies and other bodies in implementing this strategy will be as follows: 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. Definition of Energy Poverty A household is considered to be energy-poor if it is unable to attain an acceptable standard of warmth and energy services in the home at an affordable cost.

2.4.1  Measuring the extent of energy poverty The application of a formal definition, in line with best practice internationally, is dependent upon the availability of detailed information on the characteristics of households and the accommodation in which they live. Unfortunately, there are a number of informational deficiencies that preclude precise measurement, which leads to difficulties tracking energy poverty on a consistent basis. To overcome these informational constraints, this strategy sets out a two-stage approach to implementing the above definition of energy poverty. This involves initially using existing information to estimate the extent and nature of energy poverty currently affecting Irish households but moves, over the next 3-5 years, towards a comprehensive data-collection and modelling framework which will enable more precise measurement and assessment of energy poverty on an ongoing basis. Crucially, this will allow us to take into account the relative thermal efficiency of households, combined with occupation patterns, in determining the numbers in energy poverty. This will greatly assist in targeting households for future energy efficiency upgrades.

Understanding and Measuring Energy Poverty Chapter 2 23 On the basis of the above two-stage approach, this strategy will measure the extent of energy poverty as follows:10 • A preliminary measure of energy poverty will be estimated which compares an individual household’s actual expenditure on energy, relative to its income, to the average proportion of income spent on energy across all households in the State.11 Under the preliminary approach, a household is considered to be experiencing energy poverty if, in any one year, it spends more than 10% of its disposable income on energy services in the home. This approach will estimate the overall number of households experiencing energy poverty in addition to indicating, on the basis of the available data, the types of households affected and the risk factors associated with energy poverty. The estimates based on this preliminary approach are presented in the next chapter. However, this approach may underestimate the extent of energy poverty as low-income households can under-heat their homes relative to the level that would be required based on healthy standards. 10  For a full description of the methodological and technical assumptions underlying the approach to defining and 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. Estimating Severity of Energy Poverty under the Preliminary Measure The preliminary measure of energy poverty enables the estimation of the overall extent of energy poverty in Ireland. In practice, some social groups are likely to be more severely affected by energy poverty than others. As a result, it is appropriate to complement the core preliminary indicator of energy poverty with supporting indicators which capture the severity of energy poverty in terms of households that are most critically affected. This is critical in order to prioritise and target measures and resources at households that are most in need. 1. The core indicator of energy poverty: whereby a household is considered to be experiencing energy poverty if, in any one year, it spends more than 10% of its disposable income on energy services in the home.

2. An indicator of severe energy poverty: whereby a household is considered to be experiencing severe energy poverty if, in 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 severity of energy poverty under the preliminary measure are presented in the next chapter.

24 Warmer Homes A Strategy for Affordable Energy in Ireland • A comprehensive measure of energy poverty will be developed using a new energy poverty modelling framework. This approach will combine a survey of housing conditions with a formal energy poverty modelling framework (described further in Chapter 4 under ‘Information and Data Systems’) to estimate what households need to spend “to attain an acceptable standard of warmth and energy services in the home at an affordable cost” as per the full definition of energy poverty set out above. It will define ‘acceptable standard of warmth’ by reference to international best-practice standards and will take account of the efficiency of the dwelling, 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 data on household incomes will assist in the identification of energy-poor households. Under this approach, a formal, comprehensive measure of energy poverty will be developed and implemented over the next 3-5 years. Estimating Severity of Energy Poverty under the Comprehensive Measure The comprehensive measure will seek to assess the severity of energy poverty in a household by reference to the following: 1. A household is considered to be in energy poverty if it must spend at a level equal to or greater than twice the national average (median) share of disposable income spent on energy services to achieve an acceptable standard of warmth.

12  The standard approach to defining ‘adequate warmth’ is by reference to World Health Organisation (WHO) guidelines, which defines ‘adequate’ as equating to a temperature of 21ºC in the main family/living-room and 18ºC in other occupied rooms of a dwelling. 2. A household is considered to be in severe energy poverty if it must spend at a level equal to or greater than three times the national average (median) share of disposable income spent on energy services to achieve an acceptable standard of warmth.

3. A household is considered to be in extreme energy poverty if it must spend at a level equal to or greater than four times the national average (median) share of disposable income spent on energy services to achieve an acceptable standard of warmth. 2.5  Individual Household-level Indicator of Energy Poverty The preliminary measure is based on actual expenditures on household energy and does not take account of the actual levels of expenditure required for households to attain adequate levels of comfort in the home.

A key factor missing from the existing information sources concerns the availability of datasets which combine information on household income and expenditure with data on the physical – including energy efficiency – characteristics of the dwelling in which the household resides. Detailed information on household incomes and expenditure patterns (including energy expenditures) is available through the Household Budget Survey. In addition, the SEAI’s Building Energy Rating (BER) database currently contains data on the energy rating of some 250,000 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 is necessary to enable estimation of the extent of energy poverty reflecting all three drivers of the phenomenon.

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 21o C and the remaining habitable area of the house is heated to a temperature of 18o C). 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 Dwelling Type/ Size 2 bed apartment (75 Sq M) 3 bed semi- detached house (100 Sq M) 4 bed semi- detached house (150 Sq M) Detached house (200 Sq M) Large house (300 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 9,400

Understanding 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 Dwelling Type/ Size 2 bed apartment (75 Sq M) 3 bed semi- detached house (100 Sq M) 4 bed semi- detached house (150 Sq M) Detached house (200 Sq M) Large house (300 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 income

Understanding and Measuring Energy Poverty Chapter 2 29 Lower-income households – disposable income equal to 1/2 average household income The following table (Table 3) presents a similar analysis for households with disposable income at half the average income across all households, i.e. where household income equals approximately €400 per week. This would be likely to closely resemble a household comprising, for example, a family where both parents are unemployed and in receipt of welfare supports. For households at this level of income, the risk and incidence of energy poverty increases. In this case, for example, a household living in a three-bed semi-detached house of 100m2 would experience energy poverty at these income levels if the dwelling has a BER rating of E2 or below, with the incidence of energy poverty increasing sharply for similar-income households living in larger dwellings and or with lower energy efficiency ratings.

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 Dwelling Type/ Size 2 bed apartment (75 Sq M) 3 bed semi- detached house (100 Sq M) 4 bed semi- detached house (150 Sq M) Detached house (200 Sq M) Large house (300 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 income

30 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 Dwelling Type/ Size 2 bed apartment (75 Sq M) 3 bed semi- detached house (100 Sq M) 4 bed semi- detached house (150 Sq M) Detached house (200 Sq M) Large house (300 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% of disposable income

Understanding and Measuring Energy Poverty Chapter 2 31 Lower-income households – disposable income equal to 1/4th average household income A more extreme example, where households have a disposable income equivalent to just one-quarter of the average across all households (i.e. approximately €200 per week) is also considered. In this case, lower income households at this level of disposable income who live in mid-sized dwellings or even smaller apartment-style dwellings would start to experience energy poverty where these dwellings achieve mid- range BER ratings at low C or D levels (see Table 5). 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* BER Rating and Dwelling Type/ Size 2 bed apartment (75 Sq M) 3 bed semi- detached house (100 Sq M) 4 bed semi- detached house (150 Sq M) Detached house (200 Sq M) Large house (300 Sq M) Annual Energy Expenditure as % of Household Disposable Income** A1 1.1% 1.4% 2.2% 2.9% 4.8% A2 2.2% 2.9% 4.3% 5.8% 8.7% A3 2.7% 3.6% 5.8% 6.7% 10.6% B1 3.3% 4.4% 6.7% 8.7% 13.5% B2 4.2% 5.8% 8.7% 11.6% 17.4% B3 4.8% 6.7% 10.6% 13.5% 21.2% C1 5.8% 8.7% 12.5% 16.4% 25.1% C2 7.7% 9.6% 14.5% 19.3% 28.9% C3 8.7% 11.6% 16.4% 22.2% 33.7% D1 9.6% 13.5% 20.2% 26.0% 39.5% D2 11.6% 15.4% 23.1% 30.9% 46.3% E1 13.5% 17.4% 27.0% 35.7% 53.0% E2 15.4% 20.2% 29.9% 40.5% 60.7% F 18.3% 24.1% 36.6% 48.2% 72.3% G 23.1% 29.9% 45.3% 60.7% 90.6% Source: Analysis based on SEAI annual running cost estimates for domestic principal energy usage Notes: * Where 1/4 of estimated annual median household disposable income in 2009 = €10,372 or €199 per week ** Shaded cells refer to households experiencing energy poverty based on annual running costs being greater than 10% of disposable income

32 Warmer Homes A Strategy for Affordable Energy in Ireland It is important to note that the estimates presented above are indicative only and do not enable estimation of the overall number of households experiencing energy poverty. However, the tables do provide a useful indicator of the risk of energy poverty based on combining information on energy prices, energy efficiency characteristics and income at the level of the individual household. These indicators will be an important characteristic of modelling energy poverty in the future. 2.6  Non-Energy Benefits of Low- Income Housing Retrofits One of the issues raised in respect of retrofit programmes targeted at low-income households is that the energy-saving benefits just offset the energy efficiency investment required, suggesting a poor return on Exchequer investment. However, such retrofit programmes have additional benefits for property owners, energy providers, programme participants, local communities and society as a whole which are often not factored into the evaluation of these programmes.

These non-energy benefits can be categorised according to the type of benefit and the beneficiary, which typically fall into the following categories:13 i. Direct financial benefits that accrue to governments and energy providers in the form of avoided bad-debt write-off; reduced cost of billing arrears; reduced spending on notices, collections, customer calls, shut-offs and reconnections; transmission and distribution loss reduction. ii. Direct and indirect socio-economic benefits in the form of increased property values and economic activity, created by low-income energy efficiency programme spending, 13 Source: IEA that accrue to property owners and local communities (including increased local employment; increased local sales of energy efficient goods and services) and other social benefits including community pride and social cohesion.

iii. Direct and indirect benefits to participating low- income households (e.g., avoided costs of shut- offs and reconnections, reduced forced mobility and school drop-outs; increased safety in the home; improved health and comfort through reduction of noise, drafts, mould and mildew; and improvement in the home’s appearance). Of particular importance are the health benefits that accrue to the beneficiaries of retrofit measures and the health system. Recent research suggests that, for every euro invested in energy poverty measures, 42 cents are returned in savings from health expenditure on all householders.14 In this regard, a recent report, ‘The Health Impacts of Cold Homes and Fuel Poverty’, published by the Marmot Review Team15 in the UK showed: • Countries which have more energy efficient housing have lower excess winter deaths. • A clear relationship between excess winter deaths, low thermal efficiency of housing and low indoor temperature.

• A strong relationship between cold temperatures and cardiovascular and respiratory diseases. • Around 40% of excess winter deaths in the UK are attributable to cardiovascular disease and 33% of excess winter deaths are attributable to respiratory diseases. • Children living in cold homes are twice as likely to suffer from respiratory illnesses as those living in warm homes. 14 Source: Liddell (2009) 15  Source: ‘The Health Impacts of Cold Homes and Fuel Poverty’, Marmot Review Team, for Friends of the Earth, May 2011.

Understanding and Measuring Energy Poverty Chapter 2 33 • Cold damp housing is associated with negative effects on mental health in all age groups. These findings demonstrate the negative effects of living in poor-quality accommodation. At the same time, they also offer hope. If the quality of housing can be improved for those living with cardio- vascular disease or respiratory illness, the potential health benefits are considerable. Not only will such improvements reduce the burden on the health system, they will also lead to a huge enhancement in quality of life.

One of the challenges of this strategy will be to ensure that the necessary linkages between the health system, social protection mechanisms and thermal efficiency programmes are put in place so that each responsible organisation understands the role of the others in mitigating the effects of energy poverty. 2.7  Energy Prices and Affordability A key factor influencing the affordability of energy is the price that people are paying for their electricity. At a high level, the price of electricity in a customer’s bill is made up of four components: generation costs, network charges, supplier costs, and levies.

Figure 1: Composition of Retail Electricity Prices In the domestic electricity market, over 54%16 of the price charged to consumers is directly linked to the cost of generation. Unfortunately, Ireland’s electricity generation is highly dependent on fossil fuels; natural gas accounts for approximately 60% of all generation capacity, while oil, coal and peat make up a further 20%. When compared to other European countries, Ireland is one of the most dependent on imported fossil fuels for electricity generation. In recent years, Ireland has seen an increase in the amount of renewables contributing to electricity generation with the majority of this coming from wind.

16  Based on a breakdown of the 2009/2010 regulated domestic tariffs for ESB Electric Ireland. 12% 54% 29% 5% Transmi Distribu Retail PSO Lev Generat 0% Figure 1 12% 54% 29% 5% Transmission Distribution Retail PSO Levy Generation 0% Figure 1

34 Warmer Homes A Strategy for Affordable Energy in Ireland With about 80% of electricity generation in Ireland coming from imported fossil fuels, international fuel prices are the key driver of Irish generation costs and therefore electricity prices. The impact of this was seen during 2007 and 2008 when record-breaking world fossil-fuel prices led to higher electricity prices, while reductions in fossil-fuel prices since then correspondingly resulted in reductions in prices for 2009 and 2010. The wholesale cost of natural gas clearly also has a direct impact on the charges to customers for natural-gas supply to their homes. While this strategy cannot deal with external influences on energy affordability such as the international wholesale prices of fossil fuel, considerable work has been undertaken to mitigate the impact of increases in energy prices. The Single Electricity Market (SEM) is the wholesale electricity market for the whole island of Ireland, regulated jointly by the Commission for Energy Regulation (CER) and the Northern Ireland Authority for Utility Regulation. The SEM is designed to run the most efficient source of generation available across the island of Ireland at all times, so that market prices track the trend in fossil-fuel market prices. Overall the market provides for the running of the cheapest generators to meet demand across the island, which in turn results in consumers being charged a price based on the most efficient generation possible. In addition to the introduction of a more efficient way of purchasing wholesale electricity, the increasing competition in the electricity and natural- gas markets allows consumers to exercise choice to achieve lower prices for their natural gas and electricity. Given the level of discounts available, substantial savings can be made. Central to maintaining high levels of ‘switching’ will be ensuring that customers are fully aware of their choices and how to make informed decisions regarding their energy bills. To date, Ireland has seen an extremely high rate of switching amongst domestic customers; over 900,000 households have changed energy supplier since January 2009. The CER will continue to monitor natural gas and electricity markets to ensure that customers are benefiting from competition. This strategy also introduces a complementary energy affordability index which will enable monitoring, from a macro perspective, of the extent to which energy is becoming more or less affordable for households as a result of changes in key drivers such as energy prices. This index will track the share of household income that would be required to purchase the current level of energy services required by households given the movements over time in energy prices, household incomes and the energy efficiency of the dwelling stock. Under this measure, if household incomes increase and energy prices remain static, other factors (including the energy efficiency of the dwelling) remaining equal, household energy requirements will become more affordable. Conversely, if energy costs/prices rise at a faster rate than household incomes, with other factors remaining equal, energy requirements would become less affordable.

This measure can be applied at the level of households as a whole across the State or to households falling within certain, predefined categories, for example, households in different income categories, thereby facilitating the assessment of movements in energy affordability for different groups in society, including low income households. Table 6 below compares the position in relation to energy affordability across all households in the State in 2005 and in 2009 by reference to this definition.

Understanding and Measuring Energy Poverty Chapter 2 35 Table 6: Movements in Energy Affordability Definition/Measure 2005 (%) 2009 (%) Average share of household income spent on energy – all households* 3.8% 4.8% Affordability Index – 2005 = 100** 100% 79.2% * In 2009 this equated to an average weekly spend on energy of approximately €40 per week or €2,080 per annum. The comparison for 2005 was €26/week or €1,353 per annum. ** A downward movement in the index value points to a reduction in affordability, and an upward movement to an improvement in affordability.

On average, households had to pay more for their energy needs relative to their income in 2009 than was the case in 2005, meaning that their energy needs became less affordable during this period. This reflected the faster rate of increase in energy costs/prices compared to average household income growth over this period.

36 Warmer Homes A Strategy for Affordable Energy in Ireland

Chapter 3 The Challenge – Extent and Impact of Energy Poverty 3.1 Extent of Energy Poverty Applying the preliminary measure (expenditure method) of energy poverty set out in the previous chapter, it is estimated that some 317,000 households were experiencing energy poverty in 2009, equivalent to over one-fifth or 20.5% of all households in the State. Of this total, it is estimated that over 151,000 households were experiencing severe energy poverty while over 83,000 were experiencing extreme energy poverty. These figures may underestimate the numbers in energy poverty, as some households under-heat their homes relative to international guidance on healthy standards of comfort. Adverse movements in energy prices are likely to have a disproportionate impact on poorer households, thereby tending to push up the energy poverty rate, other factors being equal. In particular, the period between 2005 and 2008 saw substantial increases in the prices of oil and other fuels including electricity. Although prices fell back significantly, they are predicted to rise again in the future. 3.1.1 Subjective measures of energy affordability The measures of energy poverty outlined above use information on household expenditure on energy services and on disposable incomes. It is also possible to measure energy affordability based on self-reported, subjective measures. This approach is based on householders’ responses to a range of questions that elicit subjective responses, posed as part of ongoing survey research.

The Survey of Income and Living Conditions (SILC), administered by the CSO and undertaken in line with similar surveys across the European Union, includes a number of questions which enable identification of the following features relating to energy affordability: • The number and proportion of households stating that they could not afford to heat their homes adequately during the past year. • The number and proportion of households stating that they had to go without heating during the last year due to lack of money. The following table presents SILC-based subjective estimates for households in energy poverty, describing trends in each of the above indicators, along with a composite measure. Using a composite indicator, based on information on both of the above household self-reported measures, Table 7: Energy Poverty in Ireland – Number of Households Experiencing Energy Poverty Energy-Poor – All Households Definition/Measure No. of Households 2009 % of All Households 2009 Household expenditure on energy greater than 10% of household disposable income 316,712 20.5% Households experiencing severe energy poverty (expenditure greater than 15% of disposable income) 151,344 9.8% Households experiencing extreme energy poverty (expenditure greater than 20% of disposable income) 83,137 5.4% Source: Indecon

38 Warmer Homes A Strategy for Affordable Energy in Ireland indicates that in 2008 a total of almost 128,000 households fell into one or both of the above categories, representing 8% of households across the State. There was a noticeable increase in the numbers and rate of energy poverty based on these measures compared to the position in 2007, when the SILC survey reported 104,382 or 6.8% of households experiencing energy poverty. This is likely to have reflected the sharp increase in energy prices in 2008.

Table 8: Subjective Measures of Energy Poverty Year Source Survey A: Households reporting that they cannot afford to heat their homes adequately B: Households that had to go without heating in the past year due to lack of money Composite Indicator Share of Households (%) Number of Households Share of Households (%) Number of Households Share of Households (%) Number of Households 2003 SILC 3.5% 47,000 7.8% 104,000 8.9% 119,000 2004 SILC 3.7% 51,000 5.7% 79,000 6.9% 95,000 2005 SILC 4.0% 57,000 6.5% 93,000 7.7% 110,000 2006 SILC 4.6% 68,000 6.6% 97,000 8.1% 119,000 2007 SILC 3.6% 56,047 5.7% 88,382 6.8% 104,382 2008 SILC 4.2% 67,139 6.7% 105,483 8.0% 127,984 Source: Data for 2003-2006 and definition of Composite Indicator: ESRI Working Paper 262; Data for 2007: ESRI; Data for 2008: Indecon analysis based on data from EU-SILC provided by CSO.

3.1.2  Understanding the differences in methodologies As can be seen from the previous sections, the numbers reported as being in energy poverty vary considerably depending on the approach adopted (expenditure versus subjective reporting). This is one of the challenges in developing a robust reporting measure as neither methodology accurately represents the true picture of households in energy poverty. This dichotomy highlights the need for a comprehensive measure that reports on the need to spend as opposed to actual expenditure. 3.2  Who is Affected and Most at Risk?

In addition to facilitating ongoing reporting, the primary purpose of data collection is to inform effective and efficient targeting and prioritisation of policy interventions to households in need. This section presents the findings of our research into identifying characteristics of households at risk of energy poverty, in order to ensure that finite resources are appropriately disbursed.

The Challenge – Extent and Impact of Energy Poverty Chapter 3 39 3.2.1 Energy poverty and income poverty There is a strong overlap between households that are energy-poor and those that are income- poor. It is estimated that approximately 241,000 households were both energy- and income-poor in 2009, based on the definition of energy poverty set down in Chapter 2. These households represented over three-quarters of all energy-poor households in 2009. Moreover, the energy poverty rate among income-poor households (i.e. the proportion of all income-poor households who are also energy-poor) suggests that a household that is income-poor has a 55% chance of also being energy-poor. Table 9: Energy Poverty and Income Poverty Characteristic Energy-Poor Estimated No.

of Energy-Poor Households in 2009 % of Energy- Poor Households Energy Poverty Rate: Energy-Poor Households as % of All Income-Poor Households Energy-poor households where total household disposable income is

40 Warmer Homes A Strategy for Affordable Energy in Ireland These findings are consistent with the fact that incomes and energy prices are among the three drivers of energy affordability/poverty. However, it is important to note that energy poverty and income poverty are not synonymous; there is not perfect correlation between these two forms of poverty. Indeed, the above figures imply that 45.4% of the income-poorest households across the State are not energy-poor. This may suggest that these households are likely to be living in energy efficient homes. However, these households may be vulnerable to energy poverty if energy prices rise. Another perspective on the relationship between energy affordability/poverty and income can be found by considering the income distribution of households. Figure 2 describes the distribution of energy-poor households by income group and indicates the risk of energy poverty within each group. This further supports the previous finding that the energy-poor are concentrated in the lowest income groups. In particular, if a household falls within the lowest income group (10% decile) it has a 68.5% chance of experiencing energy poverty. This probability falls to 14.9% for households at the median level of income (50% income decile) and to between 0.5%-1% for households with the highest incomes. Figure 2: Energy Poverty Rates by Income Group Source: CSO, Household Budget Survey 2004-05 and analysis of movements in energy prices and incomes between 2004/05 and 2009 20,000 40,000 60,000 80,000 100,000 120,000 30% 40% 50% 60% 70% 80% 20% 10% 68.5% 10% 55.7% 20% 40% 30% 24.3% 40% 14.9% 50% 6.5% 60% 3.1% 70% 1.6% 80% 1% 90% 0.5% 100% Estimated No. of Energy Poor Households in 2009 Energy Poverty Rate – Energy Poor as % of All Households in Income Decile Figure 2 100,410 81,670 58,568 35,656 21,781 9,491 4,587 2,388 1,405 761

The Challenge – Extent and Impact of Energy Poverty Chapter 3 41 Figure 3: Energy Poverty Rates by Household Composition Source: CSO, Household Budget Survey 2004-05 and analysis of movements in energy prices and incomes between 2004/05 and 2009 The ‘working poor’ Households where the head of the household is in employment but where household income is low make up a particular category, often termed the ‘working poor’. It is estimated that some 44,000 households in the working-poor group were experiencing energy poverty in 2009. Working-poor households are at high risk of experiencing energy poverty; the energy poverty rate among these households is 51.1%. While this rate is similar to that for the income-poor generally, working- poor households represent a group that require attention in the context of this strategy. 3.2.2 Energy poverty and household composition Another important factor associated with energy poverty concerns the composition or structure of the household. Most notable is that energy-poor households, comprised of older persons aged 65 or over living on their own, account for an estimated 94,647 households or almost 30% of all energy-poor households. Moreover, these households have a 49.1% probability of being in energy poverty (see Figure 3).

10,000 20,000 30,000 40,000 50,000 60,000 30% 40% 50% 60% 20% 10% 49.1% 94,647 56,409 9,488 63,543 3,396 39% 29.6% 21.8% 15.3% 9.6% 9.2% 8% Estimated No. of Energy Poor Households in 2009 Energy Poverty Rate – Energy Poor as % of All Households by Composition 70,000 80,000 90,000 100,000 6,675 9,009 4,923 Figure 3 1 a d u l t a g e d 6 5 o r o v e r S i n g l e a d u l t w i t h c h i l d r e n 1 a d u l t a g e d 1 4 - 6 4 y e a r s M a r r i e d c o u p l e o n l y M a r r i e d c o u p l e w i t h 4 o r m o r e c h i l d r e n M a r r i e d c o u p l e w i t h 1 c h i l d M a r r i e d c o u p l e w i t h 2 c h i l d r e n M a r r i e d c o u p l e w i t h 3 c h i l d r e n

42 Warmer Homes A Strategy for Affordable Energy in Ireland 3.2.3 Energy poverty and housing tenure Another important risk factor for energy poverty is housing tenure. The largest single category associated with the energy-poor is households in owner-occupied dwellings, which account for three-quarters of households experiencing energy poverty (see Figure 4). Figure 4: Energy Poverty Rates by Housing Tenure Source: CSO, Household Budget Survey 2004-05 and analysis of movements in energy prices and incomes between 2004/05 and 2009 50,000 100,000 150,000 200,000 250,000 15% 20% 25% 30% 35% 40% 10% 5% 39% 29.4% 22.3% 21.8% 15% 12% 8.8% Estimated No. of Energy Poor Households in 2009 Energy Poverty Rate – Energy Poor as % of All Households by Housing Tenure 45% L o c a l A u t h o r i t y R e n t a l O w n e d O u t r i g h t T e n a n t P u r c h a s e S c h e m e P r i v a t e O w n e r ( u n fi u r n i s h e d ) R e n t a l R e n t - f r e e P r i v a t e O w n e r ( f u r n i s h e d ) R e n t a l O w n e d w i t h M o r t g a g e 40,893 209,763 1,705 5,076 2,608 14,434 42,236

The Challenge – Extent and Impact of Energy Poverty Chapter 3 43 However, when considered from the perspective of the risk of being in energy poverty across the housing tenure categories, households renting their home from a local authority have the highest probability of being in energy poverty. A total of 39% of households living in rented local authority accommodation are energy-poor, according to these figures, followed by households who own their home outright, where the rate of energy poverty is 29.4%.

3.2.4 Energy poverty and marital status of household chief economic supporter The marital status of a household’s chief economic supporter represents another risk factor for energy poverty. In particular, energy poverty is likely to be more closely associated with households where the chief economic supporter is married or cohabiting or, notably, with households consisting of a widowed person. A household comprising a widowed person has a 50.5% chance of being in energy poverty. This finding is likely to be correlated with households comprising adults aged 65+, who are more likely to be widowed.

Figure 5: Energy Poverty Rates by Marital Status of Household Chief Economic Supporter Source: CSO, Household Budget Survey 2004-05 and analysis of movements in energy prices and incomes between 2004/05 and 2009 20,000 40,000 60,000 80,000 100,000 20% 30% 40% 50% 60% 10% 50.5% 37.2% 22.3% 15.4% Estimated No. of Energy Poor Households in 2009 Energy Poverty Rate – Energy Poor as % of All Households by Marital Status of Chief Economic Supporter W i d o w / W i d o w e r D i v o r c e d S i n g l e M a r r i e d / C o h a b i t i n g 120,000 140,000 160,000 87,955 9,158 79,758 139,842 Figure 5

44 Warmer Homes A Strategy for Affordable Energy in Ireland 3.2.5 Energy poverty and accommodation Type of accommodation The type of accommodation in which a household lives also affects the pattern of energy poverty and affordability, owing to the influence of size and structural features affecting energy performance/ efficiency. According to Figure 6, the highest incidence of energy poverty, at 24.3%, occurs amongst households living in detached dwellings. This may be associated with a greater likelihood that larger, detached homes are more likely to be under-occupied, thereby increasing energy costs relative to household size.

Figure 6: Energy Poverty Rates by Accommodation Type Source: CSO, Household Budget Survey 2004-05 and analysis of movements in energy prices and incomes between 2004/05 and 2009 10% 15% 20% 25% 5% 24.3% 19.6% 14.7% 12.1% 9.5% 5.8% Estimated No. of Energy Poor Households in 2009 Energy Poverty Rate – Energy Poor as % of All Households by Accommodation Type 30% H o u s e – d e t a c h e d H o u s e – s e m i - d e t a c h e d / t e r r a c e d A p a r t m e n t / F l a t – c o n v e r t e d B e d s i t t e r A p a r t m e n t / F l a t – c u s t o m b u i l t l a r g e b l o c k A p a r t m e n t / F l a t – c u s t o m b u i l t s m a l l b l o c k 171,019 139,751 2,065 334 1,086 739 Figure 6 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000

The Challenge – Extent and Impact of Energy Poverty Chapter 3 45 Age of accommodation Perhaps of greatest importance in identifying households in energy poverty is the age of the housing stock. Cross-referencing the numbers of households in energy poverty with the year in which the accommodation was constructed indicates that a higher proportion of energy poor households live in older properties. It is notable that houses built up to and including 1980 are associated with 72% of dwellings occupied by energy-poor households, whereas houses constructed since 1990 account for only 15% of dwellings occupied by energy-poor households. Moreover, the risk of energy poverty also increases with dwelling age. Households living in dwellings constructed prior to 1945 have a 33% chance of being energy-poor. The rate drops to 14% for dwellings built after 1990.

Figure 7: Energy Poverty Rates by Accommodation Age Source: CSO, Household Budget Survey 2004-05 and analysis of movements in energy prices and incomes between 2004/05 and 2009 10,000 20,000 30,000 40,000 50,000 60,000 15% 20% 25% 30% 10% 5% 33% 48,676 40,346 55,356 27,885 55,220 1 9 1 8 - 1 9 4 5 30% P r e 1 9 1 8 27% 1 9 4 6 - 1 9 6 23% 1 9 6 1 - 1 9 7 20% 1 9 7 1 - 1 9 8 17% 1 9 8 1 - 1 9 9 14% 2 1 t o d a t e 14% 1 9 9 1 - 2 Estimated No. of Energy Poor Households in 2009 Energy Poverty Rate – Energy Poor as % of All Households in Age Category 41,621 12,145 35,469 Figure 7 35%

46 Warmer Homes A Strategy for Affordable Energy in Ireland The energy efficiency characteristics of accommodation are shaped by factors such as the impact of changes in building regulations and standards. Much has improved in this area since the 1970s and 1980s; dwellings constructed since the late 1990s and early 2000s have attained much higher efficiency standards. This is evident in the Building Energy Rating (BER) performance of recently constructed housing in Ireland. There is a strong association between the level of BER ratings and age of dwelling, with BERs for dwellings constructed pre-1950 generally showing a lower level of energy efficiency.

Because it can be linked to the calibre of construction or structural features which impact on energy efficiency, dwelling age is an important predictor of energy poverty. In particular, information on the age of the housing stock, when linked to local authority and building regulations data, may be used to assist in locating estates and homes that fall into the high-risk categories of construction quality and energy efficiency. The implementation of this strategy will use accommodation age as an important element in targeting thermal efficiency-based measures. 3.2.6  Energy poverty and household heating systems The overall thermal energy performance of the home will reflect a combination of the thermal efficiency of the fabric of the dwelling and the efficiency of the heating systems used by the household. In relation to the latter factor, Figure 8 indicates the estimated numbers of energy-poor households according to the type of central and other space heating systems used in the household.

The Challenge – Extent and Impact of Energy Poverty Chapter 3 47 Figure 8: Energy Poverty Rates by Type of Heating Systems Used Source: CSO, Household Budget Survey 2004-05 and analysis of movements in energy prices and incomes between 2004/05 and 2009 The analysis of the association between energy poverty and the type of winter space-heating system used indicates that heating types more closely associated with a higher risk of energy poverty include solid-fuel heaters and cookers, and open-fire and back-boiler central heating. The single highest risk category is that of solid-fuel cooker – almost 54% of households using a solid-fuel cooker are likely to be energy-poor, although the total number of energy-poor households falling into this category is relatively low.

The analysis highlights the impact of heating systems on energy efficiency and contribution to risk of energy poverty. The design of capital expenditure-based programmes to address energy affordability will need to take this into account when identifying the most appropriate solutions for different households. 20% 30% 40% 50% 10% 53.6% 34.3% 34% 29.7% 28.2% 24.4% 24.1% 21.6% 15.3% 13.3% 8.8% 13.6% Estimated No. of Energy Poor Households in 2009 Energy Poverty Rate – Energy Poor as % of All Households by Heating System Used 60% S o l i d F u e l C o o k e r 8,026 8,936 61,705 3,777 1,477 334 188 24,797 5,632 13,236 17,550 6,385 4,390 334 668 1,474 1,574 155,646 Figure 8 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 36.3% 36% 23% 17% 16.4% 14.6% S o l i d F u e l C o o k e r – C e n t r a l H e a t i n g S o l i d F u e l B o i l e r – C e n t r a l H e a t i n g O p e n F i r e B a c k F u e l B o i l e r – C e n t r a l H e a t i n g S o l i d F u e l R o o m H e a t e r – C e n t r a l H e a t i n g D u a l f u e l b o i l e r – C e n t r a l H e a t i n g O t h e r S o l i d F u e l R o o m H e a t e r E l e c t r i c – p o r t a b l e a p p l i a n c e O i l – C e n t r a l H e a t i n g E l e c t r i c – C e n t r a l H e a t i n g E l e c t r i c – o t h e r fi x e d a p p l i a n c e P i p e d g a s – C e n t r a l H e a t i n g E l e c t r i c – s t o r a g e h e a t e r L P G – C e n t r a l H e a t i n g P i p e d g a s h e a t e r L P G h e a t e r

48 Warmer Homes A Strategy for Affordable Energy in Ireland 3.3  The Key Risk Factors for Energy Poverty The analysis and assessment of energy poverty based on existing information presented above show how the risk of energy poverty varies between different groups. The key factors contributing to the risk of households experiencing energy poverty are summarised in Table 10.17 Table 10: Risk Factors for Energy Poverty* Risk Factor Energy Poverty Rate: Energy-Poor as % of All Households in Each Risk Category % of All Energy- Poor Households Estimated Number of Energy-Poor Households in Risk Category Vulnerable households (comprising persons aged 75+ or where head of household has a permanent incapacity to work) 42.7% 28.8% 91,213 Income poverty: Lowest income group (10% decile) 68.5% 31.7% 100,410 Household income less than 60% of median household disposable income 54.6% 76.2% 241,312 Working poor** 51.1% 13.9% 44,023 Household with 1 adult aged 65 or over 49.1% 29.9% 94,647 Single-parent households 39% 3.0% 9,488 Head of household aged 75 or over 42.4% 18.8% 59,542 Household where chief economic supporter is a widow/widower 50.5% 27.8% 87,955 Housing tenure – local authority rented 39% 12.9% 40,893 Housing tenure – owned outright 29.4% 66.2% 209,763 Accommodation/dwelling type – detached house 24.3% 54.0% 171,019 Accommodation – age of dwelling construction: 1918-1945 33% 15.4% 48,676 17 Note that there may be overlap between categories.

The Challenge – Extent and Impact of Energy Poverty Chapter 3 49 Accommodation – age of dwelling construction: 1991 to-date 14% 15.0% 47,614 Household heating/cooking systems: oil central heating 21.6% 49.1% 155,646 Household heating/cooking systems – solid-fuel cooker 53.6% 2.5% 8,026 Household heating/cooking systems – solid-fuel cooker as central heating 36.3% 7.8% 24,797 Source: Analysis based on CSO, Household Budget Survey * Where energy poverty is defined on basis of whether a household is required to spend greater than twice the average/ median household expenditure on energy as a proportion of disposable income (i.e. greater than 10% annually) ** Where head of household is employed but household income falls below 60% of national average (median) household income The factors that are associated with the highest risk of energy poverty are: • Low income, particularly where a household falls within the lowest income group/decile (where 68.5% of households are energy-poor) or where the head of household falls within the ‘working poor’ group (51.1%).

• Where a household is occupied by older people, and particularly if they are living alone (49.1%) or where the main breadwinner is widowed (50.5%). • Households renting their homes from a local authority (39%). • Households living in accommodation built prior to 1945. The above analysis demonstrates the complexity of making energy more affordable, particularly when the available data may mask the number of households that under-heat their home. However, what the data does demonstrate is that policy can be targeted at, and resources prioritised towards, locating and assisting those groups in society that are more likely to experience and suffer the adverse impact of energy poverty. This information will be used in order to refocus existing programmes and measures towards those most in need. It is also important to recognise that the solution to energy poverty is multi-faceted, requiring a combination of thermal efficiency measures to be matched with income supports and efforts to reduce price fluctuations in energy markets. This strategy addresses the challenge by identifying a series of measures and actions through which we can substantively improve the quality of life for those experiencing energy poverty.

50 Warmer Homes A Strategy for Affordable Energy in Ireland

Chapter 4 Existing Measures and Actions 4.1 Introduction Owing to the multi-dimensional nature of energy poverty, responsibility for its mitigation has traditionally been spread across government departments and agencies as well as the energy regulator. In addition, many community-based organisations and voluntary bodies have been active in this area. There is a strong rationale for the segmentation of responsibilities as it allows policymakers to focus on their area of competence. However, the evidence presented in the previous chapters demonstrates the need for a new approach, one that takes the best of and builds on what works so as to more effectively target the households where the greatest need lies. Our analysis of existing measures and schemes suggests that much of what is required is being delivered already. The changes that need to be made are those that will improve targeting and delivery. This will have a considerable impact on the effect of resources directed in this area. 4.2  Improving Energy Efficiency of the Housing Stock Improving the energy efficiency of the housing stock is the primary mechanism through which vulnerable households can be protected. It is also the most cost-effective means of supporting those in need. In theory, Government could increase the incomes of households experiencing energy poverty in order to bring households out of energy poverty, although this would prove prohibitively expensive, particularly if energy prices rise in future years, as most expect them to. Furthermore, such an approach would fail to substantively address energy efficiency, thus the benefits would be transitory rather than enduring, and the State’s investment would largely be repatriated out of the State in the form of imported fuel costs.

The Government and other bodies active in the area continue to drive investment in energy efficiency improvements in residential housing across a number of programmes and initiatives. These include national programmes, such as SEAI-administered schemes (e.g. Better Energy), and those operated by the Department of the Environment, Community and Local Government. These are described below. Better Energy: The National Upgrade Programme Better Energy is designed to support the energy efficiency upgrade of one million homes, businesses and public buildings. The overriding objective is to deliver energy savings of 8,000GWh in 2020, which would bridge the gap in energy savings identified in the National Energy Efficiency Action Plan. As a first step, Better Energy merges the Warmer Homes Scheme (WHS), Home Energy Saving scheme and Greener Homes Scheme (renewable technologies) into a single programme. This will greatly simplify the application process and make it easier for households to claim financial support for energy efficiency upgrades.

Better Energy: Warmer Homes focuses on assisting people on low incomes, living in private/non-local authority homes, who receive the National Fuel Allowance, invalidity benefit or disability benefit. This scheme is the primary mechanism by which low- income households are protected and represents the ideal mechanism through which efficiency- based supports are channelled. Energy efficiency upgrades are directly delivered through a network of 28 regional Community-Based Organisations (CBOs) and augmented through a panel of private contractors.

Measures assisted under the standard WHS include the installation of certain energy saving measures in eligible households free of charge, including:

52 Warmer Homes A Strategy for Affordable Energy in Ireland • Attic insulation • Draught proofing • Lagging jackets • CFL bulbs • Cavity wall insulation. In 2009 private contractors were introduced to the scheme in order to expand the geographic coverage of the scheme. In addition, a pilot programme was launched to identify the feasibility of developing a more extensive package of energy efficiency and renewable technology measures. This was further developed in 2010, which saw for the first time full national coverage. In addition, a number of other approaches to delivery were trialled in 2010, including working with voluntary housing associations and mixed-ownership estates. To date, the scheme has assisted over 65,000 homes at a cost of over €60 million. Because it focuses on low-income households in receipt of the National Fuel Scheme allowance, the scheme represents an important component of the achievement of the vision set out in this strategy. However, it is recognised that changes need to be made to the eligibility criteria in order to ensure that those most at-risk are able to access the scheme. This will be prioritised.

Better Energy: Homes Better Energy: Homes (formally the Home Energy Saving scheme) was launched in March 2009 following a successful regional pilot in 2008. Although not explicitly targeted at the energy- poor, it supports households that do not qualify for Better Energy: Warmer Homes. The scheme is also available to landlords seeking to upgrade their properties. It is anticipated that the quality of accommodation available for rent will be improved over time, which will go a long way towards protecting at-risk households.

The scheme provides grants to homeowners of dwellings built prior to 2006 to invest in energy efficiency improvements. The following works are covered under the scheme: • Roof insulation • Wall insulation • Installation of high-efficiency gas/oil fired boilers, with heating controls upgrade • Heating controls upgrade • Installation of solar panels • Completion of a Building Energy Rating (BER) (post-retrofit). Grant levels are fixed for each type of measure. To date, over 250,000 measures have been installed in households under the scheme, entailing an overall grant expenditure of over €100 million. A second element of Better Energy will see energy suppliers allocated an energy saving target, which can be met by installing energy efficiency measures in low-income households. Future developments will see the Department evaluating the feasibility of introducing a national pay-as-you-save scheme, which would remove the need for homeowners to find the upfront capital necessary to undertake energy efficiency measures, instead repaying the cost through their regular energy bill.

Existing Measures and Actions Chapter 4 53 DoECLG and Local Authority schemes In addition to SEAI-administered schemes, the Department of the Environment, Community and Local Government (DoECLG) provides funding for local authorities to improve the energy efficiency of both local authority-owned and private units. These include: • Housing Aid for Older People – for privately owned units • Local authority-owned housing improvement works programmes. The Housing Aid for Older People grant scheme, administered by local authorities, is available to older people (generally aged over 60), who require necessary repairs or improvements to their homes. It is means-tested, with a maximum grant available of up to €10,500, to cover up to 100% of the cost of works. Types of works assisted include structural repairs or improvements; re-wiring; dry-lining; repairs to/replacement of windows and doors; provision of central heating, water and sanitary services; contract-cleaning and painting; and radon remediation works.

Since 2004, the DoECLG has provided specific funding streams for improving the energy efficiency of local authority-owned dwellings. Under the central heating and energy efficiency retrofit programmes, the Department has directly supported the improvement of approximately 30,000 units, with additional units improved as part of the general improvement works programme. In 2011, the Department consolidated its approach to improving standards in local authority-owned housing, focusing on the improvement of vacant properties and undertaking estate-wide improvement works. Importantly, the programme maintains a financial incentive for greater energy efficiency improvements, with the objective of achieving a post-works BER of C1 wherever practical.

4.3 Income Supports While energy efficiency measures are considered to provide the greatest long-term benefits to householders, the social welfare system plays a central role in alleviating the impacts on families and individuals of various forms of poverty and social exclusion. Even individuals residing in relatively good accommodation may need some form of financial assistance if their income is low or their individual circumstances require additional heating needs. While no scheme exists which is directed explicitly at the energy-poor, a number of schemes and programmes operate with the primary objectives of providing income support to families and individuals to assist in meeting the costs of household energy/ fuel needs.

Specifically, the Government is currently providing energy/fuel cost-related supports under the following DSP-administered schemes (see Annex 3 for eligibility criteria): • The National Fuel Scheme • The electricity and natural gas allowances under the Household Benefits Package • The Heating Supplement under the Supplementary Welfare Allowance Scheme. National Fuel Scheme The objective of the National Fuel Scheme (NFS) is to assist householders on long-term social welfare or Health Services Executive payments to meet the additional cost of their heating needs during the winter.

The NFS involves a basic cash payment, currently set at €20 per week, to eligible households for a 32-week period from September to May each year. Eligible households must already be in receipt of one of a range of welfare payments, with one allowance being paid per qualifying household.

54 Warmer Homes A Strategy for Affordable Energy in Ireland It is estimated that a total of 390,000 households are currently in receipt of the allowance. The current rate of support under the scheme of 20/week represents approximately 37% of the estimated 2009 average (median) weekly level of expenditure on energy services among households that are energy- poor.18 One of the benefits of the scheme is that it provides a cash-based payment, meaning that 18  Where energy poverty is defined according to the definition set out in this strategy (Chapter 2, Section 0). 19  Refers to the number of recipients of Fuel Scheme aid in each year. There was an average of 121,000 recipients of Smokeless Fuel Allowance in 2004, 115,000 in 2005, 114,200 in 2006, 118,000 in 2007, 120,000 in 2008, 129,000 in 2009 and 138,000 in 2010.

households can choose to use the assistance in the manner best suited to their needs, e.g. for different fuels such as electricity, heating oil, peat-based products, etc. Since 2004, over €1 billion has been spent on providing income supports under the National Fuel Scheme. Household Benefits Package – Electricity and Natural Gas Allowances Under the Household Benefits Package (HHB), qualifying households may choose between either an Electricity or Gas Allowance, as follows: • Electricity Allowance: This covers normal standing charges, including the Public Service Obligation (PSO) levy, and up to 1,800 units of electricity each year.

• Electricity (Group Account) Allowance: If the applicant has an electricity slot meter or if the registered consumer of electricity at their address is a landlord, they may alternatively qualify for an Electricity (Group Account) Allowance. • Natural Gas Allowance: This is an alternative to the Electricity Allowance for people whose homes are connected to a natural-gas supply. It covers normal standing/supply charges and a certain amount of natural-gas kilowatt hours each year. • Bottled Gas Allowance: This is an alternative allowance if the applicant’s home is not connected to an electricity or natural-gas supply but they otherwise satisfy the conditions of the scheme. A bottled-gas refill allowance totals €32.70 per month from September 2011. Table 11: National Fuel Scheme payments 2004–2010 2004 2005 2006 2007 2008 2009 2010 Number of successful claims18 272,000 266,000 288,800 295,795 300,000 318,000 370,000 Expenditure €000 84,710 82,386 130,249 158,289 175,990 193,624 228,329

Existing Measures and Actions Chapter 4 55 The HHB differs from the NFA in that it is a units- based support linked to usage of electricity and gas rather than a cash payment.20 In general, the recipient must be in receipt of a carer’s allowance or aged 70 or above, while people aged 66 or above living alone also qualify under specific criteria. Those under 70 may qualify if they are in receipt of a qualifying payment and satisfy the household composition requirements. 20  This has the advantage that households cannot generally spend their supports on non-energy-related products/ services, although they may not use their full entitlements. In certain instances recipients who have switched energy supplier may receive a cash payment in lieu of units. The electricity and gas allowances under the HHB cost approximately €192 million, assisting some 380,000 households, during 2010. This would imply an average level of support per household of €492 per annum, which is equivalent to 18% of the estimated 2009 average (median) level of expenditure on energy services among households that are energy-poor.

Since 2004, over €1 billion has been spent providing income supports under the Household Benefits Package. Table 12: Household Benefits payments 2004–2010 Year Type 2004 €000 2005 €000 2006 €000 2007 €000 2008 €000 2009 €000 2010 €000 Electricity 87,992 103,919 108,323 147,225 156,740 165,515 171,589 Gas 5,614 6,424 8,515 15,359 15,627 17,699 19,983 TOTAL 93,606 110,343 116,838 162,584 172,367 183,214 191,572

56 Warmer Homes A Strategy for Affordable Energy in Ireland Overall, between the National Fuel Scheme and the electricity and natural-gas allowances under the Household Benefits Package, the Government contributes to the energy cost of over 630,000 households at an estimated cost of over €400 million.21 Heating Supplement under the Supplementary Welfare Allowance Scheme In addition to the basic supports available under the National Fuel Scheme and the Household Benefits Package, under the DSP’s Supplementary Welfare Allowance Scheme, a Community Welfare Officer may also provide a special heating supplement for people who have an exceptional heating need by virtue of a health condition or medical need.22 As of January 2011, approximately 3,200 people are in receipt of this supplement. Expenditure on the heating supplement in 2010 was €2.24 million.

21  It should be noted that there is some overlap between households assisted. Around 142,000 households received supports under both the National Fuel Scheme and the Household Benefits Package (electricity and gas allowances) in 2010. For these households, the currently implied weekly levels of support between the two schemes would suggest that these supports account for approximately 58% of their average weekly fuel bills. 22  The Supplementary Welfare Allowance (SWA) Scheme came into operation on 1 July 1977. It was introduced to replace the home assistance service for people whose means are insufficient to meet their needs and those of their dependants. SWA can consist of a basic payment and/or a supplement in respect of certain expenses a person may not be able to meet. To qualify for a heating supplement, the claimant must live alone or only with a qualified adult or child/children and must have exceptional heating needs due to ill-health or infirmity. See: http://www.welfare.ie/EN/ OperationalGuidelines/pages/swa.aspx.

4.4 Energy Supply Understanding the role of energy prices is critical to introducing measures that can counteract the effects of price fluctuations. As was explained in section 2.8, the driving factor behind energy prices is outside Government control. Therefore it is even more critical to ensure that energy suppliers act in a responsible manner and that any market imperfections are minimised or removed. 4.4.1 Regulated energy suppliers The CER has an important role in ensuring that energy customers are appropriately protected in the energy market. The economic difficulties being experienced by many have resulted in an increasing number of customers finding themselves in arrears, with some ultimately facing the prospect of having their energy supply disconnected. The CER requires suppliers to use disconnection only as a last resort, where it has not been possible to put in place an alternative arrangement with the customer. In addition, the CER has directed suppliers who choose to disconnect their customers to bear 50% of the costs to further incentivise the use of all other possibilities prior to disconnection. The third EU energy package will add additional consumer protection obligations on the industry. It is anticipated that the CER will have an important role in its implementation and ongoing operation.

Existing Measures and Actions Chapter 4 57 4.4.2 Non-regulated energy suppliers While the network-connected energy suppliers such as BGE, ESB Electric Ireland and others are regulated by the CER, others not connected to a national grid, such as oil, coal and peat suppliers, are not. This is an area that the Better Energy programme will seek to address through the energy saving targets for energy suppliers. In addition, one of the early work packages that the IDGAE will prioritise will be to examine the role of non-regulated energy suppliers. 4.5  Information Dissemination and Communication Access to appropriate and timely information about energy use and state supports is a key element in protecting vulnerable households. The IDGAE has been active in this regard through the publication and dissemination of over 75,000 copies of the Keep Well and Warm booklet in recent years. More recently this has been complemented by a website (www.wellandwarm.ie) which is designed to make relevant information more accessible.

58 Warmer Homes A Strategy for Affordable Energy in Ireland

Chapter 5 Looking Forward 5.1 Introduction If we are to meet the challenge of energy poverty and deliver on the vision for the strategy, a new approach to energy poverty mitigation is required, one that is based on partnership between government departments, agencies, local authorities, energy utilities, regulators, non- governmental organisations and community-based organisations. Many of these organisations are already engaged in delivering a range of initiatives, programmes and supports, which will continue to play an important role for at-risk households. Reflecting upon the findings of Chapter 3 that around 20% of households are likely to be experiencing energy poverty and about 10% to be experiencing severe energy poverty, there is a critical need for a more carefully focused plan to tackle the issue, one that expands action to ensure that all the policy levers available to Government are appropriately directed.

The strategy seeks to combine nationally and geographically focused actions to improve the thermal efficiency of the housing stock, provide targeted income supports, and ensure that comprehensive advice and information is provided to households affected by energy poverty. This chapter considers each of these elements in turn and indicates areas for future action. A full list of these is presented in section 5.10. In the long run, an effective strategy for addressing energy poverty and making sure that households can afford to meet their 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. Of the actions listed at the end of this chapter, the following are central to the successful implementation of this strategy: 1. We will actively progress five priority work packages: Thermal Efficiency Standards, Energy Suppliers, Area-based Approach, Data and Information, and Communication. 2. We will introduce an area-based approach to energy poverty mitigation.

3. We will ensure greater access to energy efficiency measures. 4. We will reform eligibility criteria for energy efficiency schemes. 5. We will review the National Fuel Scheme and Household Benefits Package to examine the feasibility of aligning income supports with the energy efficiency and income of the home. 5.2 Targeting Priority Households In support of the above work packages, the efforts of the IDGAE will be focused on ensuring that people who are suffering the worst effects of energy poverty benefit from receipt of mitigation measures. A first step is to derive a ‘priority group’ of households. Based upon our analysis, priority households will initially be those considered: • In extreme energy poverty • In severe energy poverty • In energy poverty • At particular risk of health and/or social harm associated with being in energy poverty. The data contained in Tables 1 to 5, along with those in the technical annex, point towards the following factors having a significant correlation with low-income households:

60 Warmer Homes A Strategy for Affordable Energy in Ireland • Houses with a BER in the worst-performing categories (F and G) • Houses built before 1990 • Houses with no central heating. We have limited evidence about which Irish households are at the greatest risk of health and social harm associated with living in energy poverty. However, international studies and strategies from other countries suggest that the following low- income households could also be considered at risk: • Households comprising older people • Single-adult households, particularly those with older people or lone parents • Households comprising people with disability or chronic illness, particularly respiratory, mental and circulatory illness • Households with pre-school children • Households where there is a history of debt, disconnection, eviction over non-payment of bills or homelessness.

While government departments and agencies will initially focus on individual households’ expenditure relative to their disposable income in order to prioritise delivery of measures, the additional factors and indicators may enable prioritisation of households according to more nuanced criteria. This is an area that merits further consideration by the IDGAE, although given the number of households experiencing extreme or severe energy poverty, it is anticipated that household’s expenditure on energy will remain the main locus of attention for the foreseeable future. 5.3 Work Packages There are a number of areas in which the IDGAE and its members can adopt a leadership role to ensure that the strategy is successfully delivered. In order to ensure that resources are allocated to tasks that will deliver the greatest benefit, five initial work packages are envisioned: • Thermal Efficiency Standards • Energy Suppliers • Area-based Approach • Data and Information • Communication. Work Package 1: Thermal Efficiency Standards Improving the quality of accommodation offered for rent represents a huge challenge for Government. It is a classic case of split-incentive. Since the owner of the property is not responsible for the energy bill, there is no incentive for the landlord to improve the thermal efficiency of the dwelling. Tenants can get trapped in a cycle of energy poverty, spending more to heat and power their home than necessary, which results in less disposable income for other necessary household expenditures. In addition, there is an increasing library of academic research which directly correlates poor-quality accommodation with negative impacts on health and wellbeing, and the consequential cost burden on the health system. Much has been done in recent years to improve the standard of rental accommodation, including the introduction of the Housing (Standards for Rented Houses) Regulations in 2008, which state that all accommodation must be properly insulated, although no reference point is given against which to assess the suitability of insulation. The Building Energy Rating (BER) system will allow the Government to specify what properly insulated means in real terms. New regulations will focus on

Looking Forward Chapter 5 61 progressively removing properties rated E, F and G from the rental market by 2020. This work will be used to inform the setting of minimum standards for the Rental Accommodation and Rent Support Schemes. Led by: EPBD Implementation Group Delivery timeframe: 12 months Relevant Action Number: 1 Work Package 2: Energy Suppliers To date, the IDGAE has interacted mainly with the state energy suppliers such as the ESB and BGE. However, the strategy has identified that a considerable portion of energy-poor households either use oil and solid fuels or lack access to the gas network. As a result, it is appropriate that the IDGAE broaden its membership and engage with such energy suppliers in order to further protect consumers.

Chaired by: CER Delivery timeframe: Ongoing Relevant Action Number: 17 – 24 Work Package 3: Area-based Approach The third work package will focus on developing the area-based approach to mitigating energy poverty. This is discussed in greater detail below. Chaired by: SEAI Delivery timeframe: 12 months Relevant Action Number: 2 Work Package 4: Data and Information Central to implementation of the strategy will be the ongoing monitoring of the number of households in energy poverty and the development of the comprehensive measure. To do this will require the IDGAE to have access to robust statistical data. The SEAI’s Energy Policy Statistical Support Unit (EPSSU) will be tasked with developing this work package. Chaired by: EPSSU Delivery timeframe: Ongoing Relevant Action Number: 25 – 32 Work Package 5: Communications and Referrals Effective communications are essential in the mitigation of energy poverty. The timely provision of information can help consumers to use energy more efficiently, guide them on what energy saving measures to install and inform them about available supports. Likewise, bodies active in this area need to be informed of potential recipients of mitigation measures. This work package will involve the preparation of a communications strategy and a review of the existing referral system, which will help inform the development of an area-based approach (work package 3).

Chaired by: IPH Delivery timeframe: 12 months Relevant Action Number: 33 – 34

62 Warmer Homes A Strategy for Affordable Energy in Ireland 5.4  Introducing an Area-based Approach to Energy Poverty Mitigation While it is possible to estimate the overall number of households affected by energy poverty and to identify the at-risk groups, the real challenge is how to locate the energy-poor on the ground in order to more cost-effectively deliver supports and measures. The experience from other jurisdictions suggests that a targeted, geographic or area-based approach can provide the greatest return to households, communities and the State. Energy efficiency investments are based on the location of the least energy efficient housing, which frequently correlates with low-income households. Census 2011 data will assist in supporting an area-based approach, at least in so far as the data may highlight areas where houses tend to be older and lack central heating, at a high level of geographic resolution. This strategy proposes a number of steps for implementing an area-based approach to address energy poverty through energy efficiency investments; although it should be noted that moving to an area-based approach will require substantial work in order to overcome the significant informational gaps and target suitable communities.

An Area-based Approach to Addressing Energy Poverty An area-based approach to identification of households most critically affected by energy poverty will: 1. Draw on the experience in the design of such approaches internationally – including the Warm Zones, Community Energy Saving Programme and Scottish Energy Assessment Package in the UK. 2. Entail initially identifying, on the basis of suitable data such as the Census of Population, DSP and local authority data, a small number of ‘low-carbon’ zones. 3. Require a survey of all households within each zone, with the objective of identifying information on the key structural features of each dwelling and whether householders are in receipt of a means-tested state benefit, followed by the calculation of a preliminary BER rating.

4. Involve offering householders a ‘benefit entitlement assessment’ to establish what state benefits they are entitled to, and providing them with clear information and guidance on how to apply for them. 5. Depending on the outcome of the preliminary survey, entail a full BER survey which will inform judgment on the most effective energy efficiency retrofit package to be offered to the householder. This could involve elements or appropriate combinations of Better Energy Homes or local authority-administered schemes.

6. Involve the prioritising of qualifying households within the zone for energy efficiency upgrade measures.

Looking Forward Chapter 5 63 The IDGAE will apply the above approach as a starting point from which to develop a more detailed approach to targeting energy poverty mitigation on a localised basis. Use of existing organisations, structures and networks will be invaluable in supporting the development and roll-out of an area- based approach, which will be informed by the SEAI trials undertaken in 2010 and 2011. It is important to note that an area-based approach will not be pursued in isolation; rather it will be used to complement the existing national network of community-based organisations and private contractors. This will ensure that resources will continue to be directed towards energy-poor households outside areas targeted under this approach. 5.5  Ensuring Greater Access to Energy Efficiency Measures As mentioned previously, energy efficiency is the single most cost-effective means to mitigate energy poverty, and also delivers considerable health and wellbeing benefits. Better Energy will ensure that energy saving in low-income households remains a key objective in the future. Central to this will be a number of developments, including the future development of a national pay-as-you-save (PAYS) scheme for Ireland and the role of energy suppliers in delivering energy savings in pursuit of their national targets.

To date, the majority of energy efficiency resources directed at low-income households have been funded by the Exchequer. While this has delivered improvements in over 65,000 homes, it is reliant upon scarce Exchequer resources. The DCENR is developing an innovative approach to financing energy efficiency retrofits, PAYS, which would ensure that there is no upfront cost to the recipient, but that they would pay the cost of the measures out of the energy savings realised from the measures installed. This model has the potential to remove, or greatly reduce, the need for state support and will be pursued with the intention of having a workable model in place by 2014.

In advance of PAYS being rolled out on a national basis, energy suppliers have been allocated energy saving targets as part of the Better Energy programme. These targets can be met by installing energy saving measures in low-income households. Any energy efficiency measures installed in this area will complement the type of measures that have traditionally been installed as part of the Warmer Homes Scheme. A number of other measures targeting energy efficiency improvements will be pursued as part of this strategy, including: • Formalised relationships with voluntary housing associations.

• Continued improvement in the energy efficiency of the local authority-owned housing stock of 130,000 dwellings, with a particular focus on vacant stock and estate-wide initiatives. • Ongoing support for local and community- based organisation-delivered initiatives and schemes. 5.6  Reforming Eligibility Criteria for Energy Efficiency Schemes When resources are scarce it is imperative that they be directed at those most in need. Better Energy: Warmer Homes has traditionally been targeted at those in receipt of Fuel Scheme allowances. As demand for the scheme has grown to exceed available resources, it is timely to ensure that the resources available are directed at those who can benefit the most. In this regard, the IDGAE will work quickly with the community-based organisations and other relevant parties to finalise new eligibility criteria that ensure state resources are directed where they can deliver the greatest good.

64 Warmer Homes A Strategy for Affordable Energy in Ireland Factors that will be taken into account in reviewing the eligibility criteria for energy efficiency schemes will be the age of the home, the thermal efficiency, the number and age of occupants, health considerations and household income. This approach will be informed by a further in-depth analysis of those in severe and extreme energy poverty, with a view to maximising knowledge of how these households might be targeted through geographic and other criteria.

5.7  Review of the National Fuel Scheme and Household Benefits Scheme There is a strong relationship between households that are energy-poor and those on low incomes, although these terms are not synonymous. For households in the lowest income decile, the risk of energy poverty increases to almost 70%. In addition, evidence suggests that poorer households are more likely to occupy older and less energy efficient homes. Thus, the poorest households stand to benefit most from improvement in the energy efficiency performance of their homes. However, in the short term, when lower-income households – and particularly those on the margins of energy poverty – are most exposed to upward movements in energy prices, the availability of welfare-based income and other supports can be crucial in minimising the risk that these groups experience energy poverty. The evidence presented in this strategy indicates that substantial numbers of households are in receipt of energy-related welfare supports. However, data generated and analysed as part of this strategy suggests that these households account for less than half the estimated number of energy-poor households. This is consistent with the finding that over one-third of fuel-poor households in the UK are not income-poor (Palmer, MacInnes and Kenwau, 2008). This raises an important issue for policy in relation to ensuring that the incomes of households experiencing energy poverty are maximised through the supports available under the National Fuel Scheme and the Household Benefits Package. The Department of Social Protection, with appropriate input from the SEAI and the Department of Communications, Energy and Natural Resources, will undertake a review of the National Fuel Scheme and Household Benefits schemes, which will include the administration of the schemes and the feasibility of more closely aligning income supports with the energy efficiency and income of the home.

5.8 Other Activities Understanding the complexity of issues that interact in relation to energy poverty is an ongoing task. Research into an extensive array of topic areas is ongoing. As researchers look deeper at the underlying causes and effects of energy poverty, new ideas and mechanisms for mitigation will emerge. It is important that the IDGAE is actively engaged with the research community and aware of the latest thinking in this area in order to continue to inform policy decisions and future interventions. The role of information, education and communication in helping people to help themselves, is an important tool in improving the affordability of energy. We will actively seek to improve how we communicate with vulnerable consumers through engaging with new organisations, while the CER will work to ensure that customers have access to energy suppliers’ tariffs and can compare offers in a transparent and understandable way. This will include monitoring and regulating the way in which information is presented on tariff comparison websites. A further opportunity exists to work with local authorities more closely, providing guidance and support as they tackle energy poverty at a local level.

Looking Forward Chapter 5 65 5.9 Conclusions There are considerable challenges facing everyone working on the implementation of this strategy. Not only is it likely that energy prices will continue to rise on the back of increases in international energy markets; the capacity to offset these price increases through compensatory income-support payments will diminish. Inevitably, this will make our job more challenging. We will need to approach the problem from a different perspective, one that seeks to remove the institutional and structural barriers that negatively impact on the effectiveness of government and market interventions. This will ensure that where interventions take place, they do so to achieve the maximum return for the beneficiary, as well as the State. This thinking needs to permeate our future decision-making. It is clear that the new economic reality requires a different approach, one that is inclusive and actively looks for different voices. Energy poverty cannot be eradicated by government action alone; it needs energy suppliers and NGOs to contribute. This strategy is designed to provide the framework within which each of the identified actors can play their part. In this regard, the IDGAE will play a crucial role in ensuring that the strategy is delivered over the next three years.

66 Warmer Homes A Strategy for Affordable Energy in Ireland 5.10 Key Actions No. Action Responsibility Timeframe for Implementation Short term: 12 months Medium term: 18 months Long term: > 18 months Thermal Efficiency Measures 1. The EPBD Implementation Group will identify an implementation timeframe for the setting of minimum thermal efficiency standards for properties offered for rent. EPBD Implementation Group Short term 2. The IDGAE will commence work on implementing the area- based approach to energy poverty mitigation, aligning all actors to direct efforts towards priority areas. IDGAE Short term 3. Access to and provision of assistance under retrofit and other energy efficiency programmes/schemes will be prioritised based on energy poverty severity.

DCENR, DoECLG and SEAI Short term 4. Retrofit measures for low-income households will be expanded to include the voluntary housing sector. SEAI Short term 5. Under Better Energy SEAI will investigate the feasibility of introducing a voucher-based system for qualifying households. This will support local communities and protect local jobs. SEAI Medium term 6. Subject to budget availability building energy ratings will be undertaken on all dwellings benefitting from capital investment. SEAI Short term 7. The Local Authority retrofit programme will be extended to ensure that all social housing is considered for efficiency upgrades.

DoECLG and Local Authorities Medium term 8. Subject to budget constraints, DoECLG will seek to undertake a new national House Condition Survey in 2013. This survey would facilitate more accurate measurement of the extent and location of energy poverty and also assist wider housing, climate-change and other policy objectives. DoECLG Short term

Looking Forward Chapter 5 67 9. All new social housing units will achieve a BER of A3, or better. This will be revised upwards in accordance with revisions to the Building Regulations. DoECLG Short term 10. Informed by the work of the EPBD Implementation Group (Action 1), the DoECLG and DSP will work to introduce minimum efficiency standards in the Rent Supplement and Rental Accommodation Schemes. DoECLG & DSP Medium to long term 11. Better Energy will establish the protection of vulnerable households as a core objective.

DCENR Short term 12. Measures to promote fuel switching will be investigated in order to move households away from relatively more expensive, inefficient and environmentally damaging fuel sources. DCENR and SEAI Medium term 13. In support of an area-based approach we will investigate the feasibility of creating a GIS-referenced database of homes addressed under Better Energy: Warmer Homes. SEAI Medium to long term Income Support 14. The National Fuel Scheme and Household Benefits schemes will be reviewed to determine the feasibility of aligning income supports with the energy efficiency and income of the home.

DSP SEAI Medium term 15. DSP will work with energy utilities and CER to explore ways of sharing data on benefit receipt and energy use. DSP and CER Medium term 16. A review of the pre-payment meters scheme will be undertaken to ensure the most appropriate installation and use of such meters. CER Short term Regulatory Protection 17. The IDGAE will work with energy suppliers to strengthen consumer protections for low-income households. CER and IDGAE Short term 18. The CER will continue to work with natural-gas and electricity suppliers to consider how mechanisms to assist customers in genuine financial hardship in avoiding disconnection can be strengthened.

CER and energy suppliers Short term 19. The CER will consult on an appropriate definition for vulnerable customers in the energy market. CER Short term 20. The CER will actively promote switching and driving benefits for customers through competition. CER Short term 21. The CER will ensure that the switching process and access to information on switching are easily accessible for customers. CER Short term 22. The CER will review the manner in which energy suppliers report on their consumer protection obligations, contained in their codes of practice and customer charters. CER and energy suppliers Short term

68 Warmer Homes A Strategy for Affordable Energy in Ireland Non-Regulated Energy Suppliers 23. The IDGAE will develop a voluntary code of practice regarding services to vulnerable customers by non-regulated fuel providers. IDGAE Short term 24. Energy suppliers who have signed up to the voluntary code will be asked to report annually to the IDGAE. IDGAE Short term Data and Information 25. SEAI will develop a formal energy poverty modelling framework that will: SEAI Long term (a) facilitate the precise estimation and monitoring of the numbers and types of households experiencing energy poverty and the movements in the affordability of household energy requirements on an ongoing basis; (b) support policy-making by enabling modelling of the likely effectiveness of different measures/interventions (e.g. energy efficiency retrofit programmes) in addressing energy poverty and assessing the impacts of measures following implementation.

26. SEAI will maintain a complementary Energy Affordability Index, which will enable an assessment of the impact of movements in energy prices and incomes on energy poverty rates over time. SEAI Long term 27. SEAI will maintain a Composite Index of Energy Prices, which will track residential energy prices annually through a composite index of SEAI residential energy prices. SEAI Long term 28. SEAI will measure the extent of Cold-related Mortality, which will track the excess rate of winter deaths on an annual basis, using CSO vital statistics.

SEAI Long term 29. The CER will monitor the annual number of electricity and gas disconnections due to payment arrears, using energy supplier data. CER Long term 30. IDGAE and the CSO will work together to examine the feasibility of updating the Household Budget Survey on a more frequent (ideally annual) basis. IDGAE and the CSO Medium term 31. The DSP will work with SEAI to identify opportunities for data sharing in order to assist in better targeting low-income households. DSP and the SEAI Medium term 32. IDGAE will monitor the annual expenditure and numbers of households assisted through SEAI and DoECLG-administered energy efficiency schemes targeting low-income housing. IDGAE Long term

Looking Forward Chapter 5 69 Communication and Referrals 33. The Inter-Departmental/Agency Group on Affordable Energy will work to ensure consistency of content and ease of access to information that assist in the mitigation of energy poverty. IDGAE Short term 34. Targeted information and awareness initiatives will be implemented to raise awareness of the Warmer Homes Scheme for those receiving state benefits and others in energy poverty. In this regard we will develop a comprehensive communication strategy to ensure that appropriate information is transmitted to vulnerable households.

IDGAE and SEAI Medium term 35. SEAI will continue to periodically update, reprint and distribute the Keep Well and Warm information booklet. SEAI Short term 36. SEAI will further develop www.wellandwarm.ie to make it the primary online repository of affordable energy information for householders in Ireland. SEAI Short term 37. The CER will be designated as the single point of contact for all matters related to customer protection in respect of energy. CER Short term 38. A single point of contact (one-stop shop) approach to energy efficiency retrofit assistance will be developed as part of Better Energy.

SEAI Short term 39. It will be ensured that all contact points at which low-income households interact with the State are able to provide information on state benefits and energy efficiency supports. DSP, SEAI, DoECLG and energy suppliers Short term 40. SEAI will recognise excellence in energy poverty mitigation through its Sustainable Energy Awards. SEAI Short term

70 Warmer Homes A Strategy for Affordable Energy in Ireland Coordination, Reporting and Measurement 41. The IDGAE will continue to act as the primary body to coordinate Government policy on affordable energy. We will review membership of the Group on an ongoing basis to ensure an appropriate representation is maintained. IDGAE Short term 42. In accordance with the National Energy Efficiency Action Plan, the IDGAE will work with Local and Regional Authorities to develop local responses to energy poverty. IDGAE, Local Authorities Medium term 43. SEAI will report annually to the Inter-Departmental/Agency Group on Affordable Energy on its thermal efficiency programmes targeted at vulnerable households. SEAI Short term 44. SEAI will publish a comprehensive report every five years on numbers in energy poverty. In the interim, every two years the SEAI will produce a report based on the core set of indicators outlined in this report and review developments in relation to policy measures and relevant issues.

SEAI Long term 45. All energy suppliers who serve domestic customers will be asked to report annually to the Inter-Departmental/Agency Group on Affordable Energy on efforts to protect vulnerable customers. CER, energy companies Short term Research 46. The Inter-Departmental/Agency Group on Affordable Energy will actively engage with the research community in order to ensure that Government policy is informed by research developments. IDGAE Short term 47. Researchers active in the affordable energy area will be invited to present their findings to the Inter-Departmental/ Agency Group on Affordable Energy and discuss the implications for Government policy. IDGAE Short term 48. DCENR will continue to work closely with the International Energy Agency to develop its work and research into energy poverty.

DCENR Short term

Annexes Annex 1 Membership of the Inter-Departmental/Agency Group on Affordable Energy • Bord Gáis Eireann • Commission for Energy Regulation • Department of Communications, Energy and Natural Resources • Department of Environment, Community and Local Government • Department of Public Expenditure and Reform • Department of Social Protection • Electricity Supply Board • Institute of Public Health in Ireland • Energy Poverty Coalition • Sustainable Energy Authority of Ireland

72 Warmer Homes A Strategy for Affordable Energy in Ireland Annex 2 Respondees to Public Consultation Paper The following organisations responded to the IDAG consultation paper: • Age Action • Bord Gáis • Bord na Móna • DIT • Eaga • Endesa Ireland • The Fuel Poverty NGO Group • Irish Council for Social Housing • Irish Rural Link • Kore ICF • SVP • Waterford Insulation A copy of the consultation paper is archived on the Department of Energy’s website at: www.dcenr.gov.ie/energy.

Annexes 73 Annex 3 Income Support Eligibility National Fuel Scheme Eligibility is determined by being in receipt of one of the following: • State Pension (Contributory) or State Pension (Non-Contributory) • State Pension (Transition) • Widow’s, Widower’s or Surviving Civil Partner’s (Contributory) Pension or Widow’s, Widower’s or Surviving Civil Partner’s (Non-Contributory) Pension • Incapacity Supplement under the Occupational Injuries Benefit scheme • Blind Pension • Invalidity Pension • Disability Allowance • Deserted Wife’s Benefit or Allowance • One-Parent Family Payment • Guardian’s Payment (Contributory) or Guardian’s Payment (Non-Contributory) • Farm Assist • Pre-Retirement Allowance • Prisoner’s Wife’s Allowance • Long-term Jobseeker’s Allowance • Basic Supplementary Welfare Allowance • Social Security Pension from an EE/EEA country or a country with which Ireland has a bilateral social security agreement • Special Department of Defence Allowance • Back to Work Allowance (BTWA), Back to Work Enterprise Allowance (BTWEA), Rural Social Scheme, Revenue Job Assist or FÁS Community Employment, where the recipient is entitled to keep their secondary benefits.

Household Benefits Package Eligibility is determined by: Aged 70 or over OR In receipt of Carer’s Allowance OR Caring for a person who is receiving Prescribed Relative’s Allowance or Constant Attendance Allowance OR Aged between 66 and 70 and in receipt of: • State Pension (Contributory) • State Pension (Non-Contributory) • Widow’s, Widower’s or Surviving Civil Partner’s (Contributory) Pension • An ordinary Garda Widow’s Pension from the Department of Justice and Equality or • An equivalent Social Security Pension/Benefit from a country covered by EU Regulations or from a country with which Ireland has a Bilateral Social Security Agreement.

74 Warmer Homes A Strategy for Affordable Energy in Ireland and lives alone or only with certain excepted persons OR Aged under 66 and receiving: • Invalidity Pension • Blind Pension • Incapacity Supplement or Workmen’s Compensation with Disablement Pension (for at least 12 months) • Disability Allowance • An equivalent Social Security Pension/Benefit from a country covered by EU Regulations, or from a country with which Ireland has a Bilateral Social Security Agreement. and lives alone or only with certain excepted persons OR Aged between 66 and 70, satisfies a means test and lives alone or only with excepted persons Supplementary Welfare Allowance Eligibility is determined by: • Residence in the State • Satisfying the means test • Application for any other benefit/allowance the person may be entitled to • Satisfying the habitual residence test, except for the Exceptional Needs Payment. EU/EEA workers and Swiss nationals working here will satisfy the habitual residence condition. However, people from the EU/EEA or Switzerland who move to Ireland in search of employment are subject to the habitual residence test in the normal way while looking for work • Registered for work with FÁS if of working age.

A Technical Annex supports this document and can be downloaded from: http://www.dcenr.gov.ie/Energy/Energy+Efficiency+and+Affordability+Division /Affordable+Energy.htm Annexes 75

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