END-USE ENERGY EFFICIENCY
Energy efficiency and sustainable
36. Improving end-use energy efficiency and
promoting energy conservation has the potential to contribute
to all four of the Government's sustainable development objectives
as set out in its revised strategy for the UK, "A better
quality of life":
- addressing the energy efficiency dimension of
fuel poverty will contribute significantly to the achievement
of equitable social progress (and a more prudent use of
- reducing emissions of greenhouse gases and air
pollution from the energy consumption will contribute significantly
to the effective protection of the environment;
- reducing the use of non-renewable fossil fuels
will effect a more prudent use of natural resources; and
- improving productivity (although energy costs
are a small proportion of production costs for most goods and
services); creating employment opportunities (e.g. in the home
insulation industry); and developing new markets (eg in energy
efficiency technologies) will assist in the maintenance of
high and stable levels of economic growth and employment.
37. There is, however, a distinction between energy
efficiency and energy savings (conservation). The
former is a means to secure the latter without necessarily reducing
welfaregetting more from the same. But increased efficiency
may not always lead to reduced consumption. Clearly energy efficiency
measures are implemented to reduce energy costs. A key point is
how the savings are used. As we have said above, in the case of
efficiency measures installed to address fuel poverty, the objective
is affordable warmth, and a significant proportion of the energy-saved
will be taken in the form of greater "comfort", for
example by heating more of a house or heating a house more.
38. Even where greater comfort is not an objective,
resources released by increased energy efficiency may be invested
in further energy-consuming productive capacity (or goods with
high levels of embedded energy) that will act to maintain or increase
overall consumptionthis is known as the 'rebound effect'.
This effect has the potential to limit the effectiveness of increasing
the promotion of energy efficiency as a strategy on its own and
needs to be taken into account in making forecasts about the contribution
of energy efficiency to environmental targets. This effect points
to the need for a sustainable energy strategy to address both
cleaning up production (by moving away from fossil fuels) as well
as maximising efficiency of energy use.
39. There remains a substantial problem of fuel
poverty in the UK. This is the result of a combination
of low income and low levels of home energy efficiency. A fuel-poor
household is one where over 10 per cent of income needs to be
spent on maintaining satisfactory heating levels. The table below
shows the extent of the problem according to the Government's
Table 5Fuel poverty in the UK, 1991 and 1996
Total no. of households
No. of households spending x% of income on fuel:
No. of fuel poor
households (and % of total)
1. 1996 estimates include housing costs in calculation of household
income. The 1996 figures for fuel poor households calculated on
the 1991basis are 5,276,000 (26.8%).
Source: DETR, Fuel Poverty: The New HEES, May 1999
The problem of fuel poverty appears to be almost
unique to the British Isles and its persistence is a national
scandal. Research by National Energy Action (NEA) in 1997 observed
that virtually all households in the Netherlands and Germany claimed
to be able to adequately heat their homes while more than one
in 10 households in the UK and Ireland cannot. The report concluded
that more than five times as many homes in Ireland and the UK
as in Germany and the Netherlands suffer from fuel poverty.
A number of witnesses described the non-comprehension in comparable
European countries of the fact that in the UK people can die of
cold within their homes and this was borne out in our discussions
in Copenhagen and Bonn.
40. The implications of fuel poverty for equitable
social progress are serious. Damp cold housing causes chronic
health problems and contributes to the winter 'blip' in UK mortality
of 30,000 extra deaths.
The need to spend a disproportionate amount of income on energy
consumption imposes inequitable opportunity costs on those concerned.
There are estimates (though not by Government) of a burden on
the NHS of between £50 million to £1 billion per year.
The damp caused by poor heating also exacerbates property decay
and therefore maintenance bills.
The Government estimates the cost of personal subsidy (including
winter fuel supplements and cold weather payments) to be £3,615
million over the next three years. The energy efficiency component
of current plans for property improvement (including funds from
both central and local government) are estimated to be about £1,210
million over the same periodabout a third of the subsidy
41. This imbalance between alleviating symptoms (more
part of the problem than part of the solution) and addressing
the root cause does not seem to reflect a prudent use of public
resources under the long-term perspective which has become a hallmark
of the current Chancellor's pronouncements. We do not believe
that expenditure can simply be switched from subsidy to capital
investment given the extent of the existing problems but rather
that, over the longer term, an appropriate programme of capital
investment, in addressing fuel poverty and the quality of the
UK housing stock, is likely to yield substantial environmental,
social and public expenditure benefits.
42. The fall in energy prices flowing from liberalisation
and competition should assist those in fuel poverty. However,
witnesses such as the NEA and the LGA argue that this latter benefit
will be constrained in two ways. First, those in fuel poverty
are likely to be in receipt of benefits whose uprating is linked
to movement in the Retail Price Index (RPI) of which energy prices
form a part. Secondly, lown- income customers are unlikely to
be sought out by energy supply companies and thus the benefits
of competition may not accrue to those in most need.
Furthermore, as the Government itself stresses, fuel poverty
is the result of low energy efficiency, as well as low income,
resulting in an excessive proportion of income being needed to
achieve, most importantly, an adequate heating regime.
Fuel poverty and environmental
43. The extent to which the incidence of fuel
poverty represents potential energy savings that could yield emissions
reductions is unclear. Obviously the objective of policies on
fuel poverty is to provide 'affordable warmth' which does not
necessarily mean a reduction in consumption. The Energy Saving
Trust however points to the achievement of energy savings from
the Energy Efficiency Standards of Performance scheme despite
60 per cent. of expenditure being on low income households.
44. Whatever the balance of benefits, there should
be both social and environmental gains and we believe that addressing
fuel poverty will also have a significant long term advantage
in freeing the Government to consider other means of addressing
domestic energy consumption when appropriate to do so. Currently,
the Government has given commitments not to tax domestic fuel
and power and has reduced the relevant rate of VAT to the lowest
possible rate consistent with European Community law (5 per cent).
The imperative to avoid increasing the burden on those in fuel
poverty has what we regard as an unfortunate effect of exempting
households of higher income, and higher energy use, from being
presented with the wider implications of their consumption. This
does not seem to be entirely equitable, nor sustainable over the
longer term, in view of the magnitude of the emissions reductions
required. However, fuel poverty must be addressed first.
45. The main Government programme for directly addressing
fuel poverty has been the Home Energy Efficiency Scheme (HEES)
which directly funds the provision of energy saving measures for
low income households. Witnesses were at pains to stress that
the scheme has been implemented well and has met the objectives
as defined previously by Ministers. The criticisms that we heard
from the Energy Saving Trust (EST) and the Association for the
Conservation of Energy (ACE) were aimed at those objectives. Dr
Eoin Lees of the Trust described the second manifestation of the
scheme as an "unmitigated disaster" in that it did not
reach those in the most need and was limited to the installation
of one measure per property.
Since a large proportion of costs and effort is involved in getting
installers on site in the first place, it was not cost- effective
to limit what could be done in this window of opportunity.
We welcome the allocation of increased funds for the alleviation
of fuel poverty set to rise to £150m in 2001-02 (representing
a doubling of its current level). We also welcome the issue of
the Government's proposals for "new HEES" which in essence
tighten the focus of the scheme to identify those in priority
need and without recourse to other sources of funding (such as
local authorities and other social landlords) and raise the maximum
grant for an individual property.
This would appear to begin to address the criticisms we heard.
It seems therefore against the trend of these reforms to set a
target for the scheme in terms of the numbers of buildings dealt
with rather than in terms of actual achievements.
46. The persistent problem of fuel poverty in
the UK is a continuing national scandal. Its contribution to 30,000
extra winter deaths (including some caused by cold within the
home), and the fact that up to four and a half million people
are significantly affected, should be addressed with the sort
of urgency and determination usually reserved for more sudden
crises here and abroad.
- In terms of public expenditure alone we believe
it would be most prudent and effective to address the underlying
causes of fuel poverty with a substantial and specific programme
of capital investment to raise energy efficiency standards.
- We are concerned at the way the target for
HEES is expressed in the Sustainable Development Strategy in terms
of the installation of "energy efficiency measures"
in a headline number of buildingsone millionby 2002.
We would prefer a more meaningful measure of the outcomes achieved
in terms of a reduction in the incidence of fuel poverty and some
assessment of associated emissions reductions.
- We believe that until fuel poverty is addressed,
taxes on domestic fuel and power are difficult to countenance.
However, if the UK is to deliver the necessary reductions in greenhouse
gas emissions (by 2010 and beyond) we do not believe that the
domestic sector can be permanently exempt from the environmental
consequences of its energy consumption. Therefore addressing fuel
poverty is both a social and environmental imperative.
52 Cm 4345 Back
a better quality of life - a strategy for the sustainable development
of the UK, Cm. 4345, and briefing for the Committee from the
Parliamentary Office of Science and Technology (POST), Appendix
1, HC159n- II. Back
Report, No. 074, Does energy efficiency save energy, Herring,
OU, July 1998 Back
pp 230ff Back
p 328 Back
p 233-4 Back
p 328 and Q566 Back
p 228 Back
p 16 Back
64 Q54 Back
65 Q137 Back
Poverty: The New HEES - a programme for warmer, healthier homes,
DETR, May 1999 Back
UK Sustainable Development Strategy, A better quality of life,
Cm 4345, p 61. Back