Memorandum submitted by the Institution of Engineering and Technology (FP 41)
1. Energy prices will inevitably rise over the coming decades. This is due both to pressures on oil and gas supplies and to the exceptional level of investment required to meet CO2 reduction targets whilst also maintaining security of supply. This problem needs to be acknowledged and addressed and not allowed to put a break on the effort needed to transform the UK to a low carbon economy. Households will need to spend a greater proportion of their expenditure on energy than has been the case up to now.
2. In some ways this is a positive trend as it will encourage people to value energy more and to be more conscious of the way they use it. It will make pay back times on energy efficiency measures more attractive and bring greater savings - or even earnings - to households or communities who invest in micro generation technologies.
3. However, higher prices will have a disproportionate effect on households with lower disposable income and policy makers need to address this by understanding and addressing the multiple causes of fuel poverty.
4. Policy measures around energy efficiency, smart metering, smart grids and related subjects have the potential to make a significant impact on the fuel poor but it is no longer reasonable to expect energy policy to deliver solutions to fuel poverty on its own. When developing policy, recognition needs to be given to the diversity of the fuel poor demographic and, potentially, the difficulty significant numbers of this demographic may have in responding to incentives or other measures. In particular many people, particularly the elderly, may struggle with the domestic upheavals of insulation programmes and the implications of becoming engaged customers and taking an active role in the management or time-shifting of their consumption. Means need to be found to make these issues as transparent as possible to the individual end user.
5. The evidence in the succeeding pages follows the questions posed by the Committee.
Progress against Government targets
6. Not answered. There was insufficient time to provide a considered corporate response to this question.
The definition of households in fuel poverty commonly used - i.e. those households where more than 10% of income has to be spent on fuel for adequate heating
7. The definition is deceptively simple but actually acknowledges a wide range of components. Its usefulness as a policy tool therefore depends on the sophistication of understanding of the different elements that make it up.
· The income of the household
· The cost of fuel and ease or otherwise of fuel substitution
· The efficiency of the heating system, and the ability to do anything about it.
· The energy efficiency of the building fabric, and the ability to do anything about it
· Under-occupancy (a particular problem leading to fuel poverty in the elderly)
· The ability of the householders to use energy efficiently e.g. those without a garden will need to spend more on clothes drying (affects younger households)
· The attitude to energy use - though the fuel poor are often acutely (and dangerously) aware of the energy they use.
· The ability of the customer to respond to price and other signals.
· Ability to adopt new technologies.
8. Thus equating fuel poverty simply to the price of energy would lead to perverse policy decisions. However, as long as the multiple components underlying the definition are understood, it has the advantage of having been stable since its adoption in the 1980s and giving a genuine, if multi-faceted, window on household energy.
The coherence of the Government's initiatives on energy efficiency
9. A lot of progress has been made, especially over the last three years, in appreciating the role of energy efficiency and bringing forward policies to incentivise the desired outcomes.
10. From an engineering perspective, it makes more sense to pay for insulation and heating improvements than to subsidise energy use. However, we appreciate that the issue is much more complex than this and needs to be tackled holistically. In the space available we confine ourselves only to issues with a particular engineering perspective where we feel a deeper understanding is still required.
11. Many of the measures for improving energy efficiency are labour intensive and will only deliver the claimed reductions in energy use if installed expertly and with attention to detail. For example, a new condensing boiler will only save significant energy and money if it is properly installed and calibrated. Therefore training and certification of boiler installers - and monitoring of outcomes - is of critical importance.
12. The IET is strongly in favour of smart metering but only if it is done in a manner which facilitates the development over time of a smart grid, which is essential if demand is to become an active part of the electricity system.
13. Consumer awareness and understanding of energy use is valuable but the contribution of the proposed Smart Metering programme to energy efficiency may have been over-stated. The ability to reduce household bills can be expected to be less in households which are already acutely aware of the cost of the energy they use.
14. The design of meter displays needs careful consideration and is likely to vary by consumer demographic. Also the ability of households or communities in reasonably affluent areas to gain advantage from a particular technology is likely to differ, for a variety of reasons, from that of poorer households. When researching or running trials of such initiatives, it is therefore important to study a large sample and a mix of social groups.
15. Training in the use of the smart meter will be required. The training will need to address the concern that fuel poor users may see the arrival of the smart meter as necessitating their cutting back excessively and dangerously on their energy consumption.
16. Low income households also require reassurance that they will not be charged directly for installation of a smart meter. In addition any levy on energy bills to cover the costs should not fall disproportionately on the fuel poor who stand to recoup less in terms of reduced bills.
The methods used to target assistance at households which need it most
17. There is a wide range of technical, financial and human factors driving fuel poverty and the level of opportunity to make improvements through improved energy efficiency. It is hard to see how this can be addressed effectively other than by surveys at household level that explore technical opportunities to improve and also related social issues, and for solutions to be tailored appropriately.
18. A particular concern is likely to be private rented housing. Landlords will have little desire to deal with the cost and administration of energy efficiency investment.
Social tariffs and plans to put social price support on a statutory footing
19. Not answered - outside the expertise of the IET.
Winter fuel payments and cold weather payments
20. Not answered - outside the expertise of the IET.
Support for households which are not connected to the mains gas grid
21. This is a priority group in terms of fuel poverty as the price of alternatives to mains gas is currently significantly higher. As implementation of the renewable heat policy develops, such homes should receive help to install modern alternatives based on renewable energy such as ground or air source heat pumps or biofuels where the conditions are suitable and these are cost efficient.