4 December 2015

FOI studies energy poverty

Energy and security are an area that has long been studied within FOI. The report “Energy poverty, security of supply and public action” describes the concept of energy poverty and the role that energy, distribution and social policy can play in ensuring a secure energy supply for particularly vulnerable consumers.

In recent years the EU’s energy policy has embodied a sharper focus on how current policies affect individual consumers. Concepts such as energy poverty and vulnerable consumers have featured increasingly in discussion of a situation in which, for reasons of increased costs or other difficulties, certain population groups in some countries find it very hard to obtain sufficient energy to support a normal standard of living. This in turn has led to increasing pressure on the authorities to act.

The concept of energy poverty is not entirely clear-cut but is used in a variety of ways with different connotations depending on concept. The aim of this report, which is funded by grants from the energy authorities, is to increase the understanding of this concept and how it relates to the wider concept of poverty, to explore the synergies and conflicts affecting what can be done to reduce energy poverty and ensure security of supply, and to examine the extent to which energy poverty can lead to an increased demand for changes in public policy.

“There are many factors which can affect the spread of energy poverty in the community and what households can do to manage their energy costs. Energy efficiency, the functioning of the energy market, the level of energy taxes, unemployment and the structure of the social welfare system, are examples of such factors which extend over a number of policy areas,” says Eva Mittermaier, a scientist at FOI.

“A secure long-term supply system, with a balance between supply and demand, increases the possibility of avoiding the need for sudden large increases in energy prices. Such price increases would be a particularly serious problem for households with limited financial resources. Here there is a clear synergy between the aim of achieving a secure energy supply and the aim of protecting financially vulnerable households,” says FOI scientist Ester Veibäck.

According to the report, however, there can also be conflicts. If large sums are invested in avoiding power supply interruptions, for example by building redundancy into the energy production and distribution systems, this can lead to increased system costs which have to be retrieved through higher energy prices. This could be especially problematic for resource-poor consumers who, moreover, are unlikely to be among those who will benefit most from the increased security of supply.

“The concept of energy poverty has hitherto not been used in Sweden to any appreciable extent, largely because of the nature of the Swedish welfare system. Nor is it obvious why one should talk about energy poverty when poverty in other consumer areas, such as food or transport, is not defined. In an international context, energy poverty is primarily about the ability of households to heat their homes. This is a problematic distinction since access to energy for transport is at least as important in ensuring that resource-poor groups are able to take part in the life of the community and, not least, its labour market. Thus if one is to begin to see energy poverty as an important part of energy policy, energy for transport should be included,” says FOI scientist Bengt Johansson.

The FOI research team believe that, irrespective of whether or not energy poverty is a relevant concept for Sweden, it is important to be conscious of the role that this aspect of poverty plays within the EU’s energy policy and it is therefore important to follow developments there since they will inevitably have an effect on Swedish energy policy. The concept also brings into focus aspects of energy distribution policy, which in turn is important in deciding which policy moves are both feasible and appropriate.