Stronger consideration of the fight against energy poverty in energy efficiency policy

February 22, 2017

In order to combat energy poverty in low-income households, alongside classical social policy measures, it makes sense to consider this target group more strongly in energy efficiency policy. If the ambitious energy and climate targets in Europe are to be met, it is essential that all end-users save energy. Commissioned by the European Parliament, the Fraunhofer Institute for Systems and Innovation Research ISI, SQ Consult and the Universitat Politècnica de Catalunya have put forward proposals for how to better integrate low-income households in current energy efficiency policy. The study “Energy Efficiency for Low-Income Households“ describes the positive influences of improving energy efficiency on both low-income households and the economy as a whole.

High energy costs represent a poverty risk for low-income households in particular – because they have to spend too much of their income on energy or because they can no longer afford to pay these costs at all. To combat this so called energy poverty while not losing sight of the overarching objectives of energy and climate policy, it necessary to strike the right balance between energy efficiency and social policy measures. A particular challenge is that energy efficiency policy and social policy have different time horizons and ranges: While social policies primarily target alleviation of financial distress in the short term, energy efficiency policies also have positive ecological, economic and social effects in the medium and long term – the so called multiple benefits of energy efficiency.

To specifically address these challenges, the European Parliament commissioned the Fraunhofer Institute for Systems and Innovation Research ISI, SQ Consult (the Netherlands) and the Universitat Politècnica de Catalunya (Spain) to examine the relevance of energy efficiency for low-income households and to develop proposals for how to design policies targeting specific groups.

Improved health and greater social inclusion

The study “Energy Efficiency for Low-Income Households” cites the most important positive effects that improving energy efficiency has on low-income households – apart from the obvious reduction of energy consumption and the associated energy costs: For example, adequate heating in all rooms improves well-being and health as well as helping to maintain the property value of the building. In addition, due to their lower energy costs, households have a bigger budget to spend elsewhere and therefore the possibility of greater social inclusion.

These positive effects can only be achieved if the specific barriers in low-income households are dismantled. These include the lack of capital for investments in energy efficiency, missing or insufficient information and the landlord-tenant dilemma.

Policy measures supporting energy efficiency can remove investment barriers. So far, only a few EU member states have implemented targeted measures to promote efficiency in low-income households – but the typical barriers in these households can only be eliminated if this target group is explicitly addressed by policies. First of all, it is important to arrive at a common definition of energy poverty in the EU because a common understanding can make it easier to develop effective measures.

Actively communicate the positive effects and use multiplicators

A major recommendation of the study is to design energy efficiency measures so that they have additional social or economic effects besides saving energy – for the target group of low-income households among others. To overcome the landlord-tenant dilemma, for example, it has proven very efficient to combine energy audits with financial instruments that provide loans and subsidies for building renovations – this has overall positive impacts on landlords, tenants and construction companies.

Jose Antonio Ordonez from the Fraunhofer ISI team emphasizes how important it is to actively communicate these positive effects of energy efficiency policy: “It is worthwhile to better inform not only those who have to provide the funds, but also those who stand to profit indirectly from the positive effects. One example are health insurance organizations, because they incur lower costs due to improved health. These stakeholders can then act as multiplicators to spread information about the positive effects of greater energy efficiency to low-income households“.

Dr. Barbara Schlomann, head of energy policy at the Fraunhofer ISI, adds: “Energy efficiency improvements have many positive impacts that go beyond a reduction in energy use, e.g. improvements in health and social inclusion, reduced investments in infrastructure. That’s why, we also recommend that Member States use infrastructure funds from other sectors benefiting from the positive impacts of energy efficiency, for example health and social welfare funds. They should also tie their energy efficiency policies to European social funds or investment funds to enhance policy implementation in low-income households“.

More information and the study can be found at the projec's website.

The Fraunhofer Institute for Systems and Innovation Research ISI analyzes the origins and impacts of innovations. We research the short- and long-term developments of innovation processes and the impacts of new technologies and services on society. On this basis, we are able to provide our clients from industry, politics and science with recommendations for action and perspectives for key decisions. Our expertise is founded on our scientific competence as well as an interdisciplinary and systemic research approach.