Causes of fuel poverty rarely discussed, often confused and never uniform

In the lead up to the federal budget, Gavin Dufty (Manager of Policy and Research, St Vincent de Paul Society, Victoria) and Erwin Jackson (Deputy CEO, The Climate Institute) write on an often overlooked aspect of poverty:

There has been much discussion around the need to address fuel poverty and the impact of rising energy costs on households, in particular low income and disadvantaged households. This is a serious issue with all states experiencing significant increases in households being disconnected from this essential service.

Fuel poverty has many contributing factors, these could be income levels, thermal performance of the house, the number, efficiency and type of appliances, the age and number of people in the house, where they live, access to assistance such as concessions and other things very difficult to measure like support networks such as family or friends. The causes of fuel poverty are rarely discussed, often confused and never uniform.

Organisations like The Climate Institute and the St Vincent de Paul Society, who engage with energy policy issues daily, welcome any meaningful debate on policy solutions for addressing fuel poverty and its detrimental impact on households.
However we are increasingly frustrated by the shallow writing of some commentators and policy makers, who suggest, simplistically, a change of the Renewable Energy Target (RET) will immediately solve the issue of fuel poverty. This is just not the case.

There are indeed difficult discussions ahead, as uncomfortable as it might be for many to admit, they can’t be addressed through ignoring facts about the RET’s impact on vulnerable households. We must engage in evidence based policy discussions that reflects the true cost of action or inaction and the physical reality within which we operate. We cannot ignore the realities of climate change nor the deepening response from nearly all major economies. Indeed, it is the most vulnerable in society who will be disproportionately impacted by climate impacts and/or the higher costs of ad hoc and delayed policies to reduce emissions.

So let us look coolly at the impact of the policies to encourage renewable energy on our electricity bills. The composition of an electricity bill is complex thanks to state specific variations. But we can use the AEMC national representative price as a reasonable if not conservative representation. Simply put, the RET currently accounts for about 4% of a consumer bill. Or from $1.00 - $1.40 a week today down to $0.63 - $0.90 a week in 2015/16.

Figure 1: Annual cost stack in notional cents per KWh.

Even if we (boldly) assume savings from a RET change would be passed through to households rather than increasing the margins of electricity retailers, the reduction will not alter a households circumstance. The RET plays a fringe role at best in the total cost of electricity. Suggesting that altering the RET will magically solve fuel poverty is misleading, a disservice to long serving community organisations and an insult to vulnerable households.

More meaningful discussion would be focused on delivering better outcomes for households and the community through a better energy market design and consistent and stable greenhouse emission policies.

Issues of facilitating innovative products and services with smart technologies, responding to issues of peak demand, or discussing the design of clear investment signals for low carbon investment. All allow business to invest efficiently and steadily in the transition a more dynamic and low (zero) emission power sector.

Sensible policy development can be complementary to positive societal and consumer outcomes. We need to avoid the recent history of knee jerk energy and clean energy policy responses. These increase the costs of investments and this is ultimately met by all consumers, including those least able to pay for foreseeable policy failures.

The essential but emission generating nature of electricity ensures it impacts social, economic and environmental policy. Policy change that will rarely be achievable within a parliamentary tenure and therefore requires a focus on evidence based, balanced and long term thinking.

We would argue that a change to the RET would serve as a distraction, one that will provide insignificant price relief for households. But will impede and defer enabling and meaningful reform underway by the Standing Council on Energy and Resources (SCER) as well as that to be delivered through a forward looking Energy White Paper process.

Posted by Gemma Carey