Is the cost of renewable energy pushing households into fuel poverty?
15th Mar 2013
You might have thought that Spring had arrived. But after a chilly week of snow flurries, winter appears to have returned and many of us have cranked up the heating again.
And the debate on fuel poverty has also resumed, with the political parties still unable to agree on what's happened to the prevalence of fuel poverty in the UK.
As it stands, a household is officially 'fuel poor' it it spends more than 10% of its income to maintain "an adequate level of warmth" (considered to be 21 degrees in the living room and 18 degrees for other occupied rooms).
We've already factchecked Labour's claim, which crops up as regularly as the seasons, that during its time in government it lifted one million families out of fuel poverty.
However, yesterday in Parliament, Labour MP Andrew Gwynne insisted that the last Labour Government had helped 1.75 million people out of fuel poverty. We contacted his office to ask where he had sourced his figure from, but we're still waiting to hear back.
As we noted in our previous article, the claim that one million families are better off is a reasonable interpretation of the data that's available, although we can't be sure that the Labour government deserves the credit. As Ed Davey, the Secretary of State for Energy and Climate Change, has argued, energy prices were falling between 1996 and 2004, during most of which Labour were in office.
Is it a helpful measure?
The Government is considering changing the definition of fuel poverty, after an official review described the metric as "misleading". The author of the review, John Hills, concluded that the 10 per cent threshold means that the measure is "unduly sensitive to price changes", which means that "its definition can encompass households that clearly are not poor".
Or, as Ed Davey put it yesterday, "According to the old measurement, the Queen was sometimes in fuel poverty."
In other words, as energy prices have increased we would expect most people to be spending a greater proportion of their budget on heating their home. This Ofgem graph shows how fluctuating gas prices have impacted on the average consumer bill since 2006:
What about the claim that wind farms are driving up energy costs?
During yesterday's debate on fuel poverty, the Conservative MP Chris Heaton-Harris argued that the Government's wind farm subsidy had increased household energy bills. He asked Mr Davey to confirm that:
"the figures suggested that the renewables obligation could have pushed 100,000 people into fuel poverty, in 40,000 to 50,000 cases because of the wind element?"
The claim that up to 100,000 households per year are being forced into fuel poverty by renewable energy subsidies is not a new one. It originally appeared in a Sunday Telegraph article back in June 2012. The Guardian, which then cast doubt on the number, suggested that the figure originated with Mr Heaton-Harris.
As the Guardian's article notes, it looks like Mr Heaton-Harris made enquiries of the House of Commons Library about "the impact of subsidies for wind power on fuel bills, people in fuel poverty and the impact on this of the higher fuel bills connected to wind power". Helpfully, the Guardian includes the text of the briefing at the end of its article.
The House of Commons Library explains that households subsidise wind farms through the Renewables Obligation (RO) by paying higher bills. It adds that the Department of Energy and Climate Change estimates that in 2011 the RO added around £20 to a typical annual bill (or 0.5 pence per kilowatt hour). Considering that wind farms received approximately half of the total RO subsidy in 2010-11, it's safe to assume that wind energy was responsible for £10 of the extra £20 on a household's annual bill.
Official estimates suggest that in 2012 there were 3.5 million households in England and 4.75 million across the UK living in fuel poverty. But, according to the House of Commons Library, we need to use data from 2009 to estimate the impact of changes to energy prices. Its authors conclude:
"This suggests that the increase cost of electricity due to the RO may have pushed around 100,000 households into fuel poverty, and the wind element 40-50,000".
However, they issue the following caveat:
"In virtually all these cases the proportion of their income needed to keep a comfortable heating/lighting environment goes from just below to just above 10% and the material impact is generally less than £10 per year." [emphasis added]
In other words, a very slight increase in their bill will send these households over the 10 per cent threshold and into 'poverty'.
In comparing figures from different years, any analysis is likely to be approximate. Furthermore, it's already accepted that there are problems with the current fuel poverty measure. Until the Government adopts a new measure for calculating fuel poverty, which is likely to take into account the fact that with rising energy prices the "10 per cent of income" threshold may need to be flexible, there's a lack of reliable evidence in the debate.
Flickr image courtesy of marie-ll