Committee on Climate Change

Independent advisors to the UK Government on tackling and preparing for climate change

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Fuel Poverty

A household is considered to be ‘fuel poor’ if it must spend more than 10% of its income on fuel to maintain an adequate level of warmth. Fuel poverty is driven by levels of energy prices, energy consumption/energy efficiency and household income.

Fuel poverty impacts from meeting carbon budgets work in two offsetting ways:

  1. Fuel poverty increases due to higher energy prices to support low carbon power generation.
  2. Fuel poverty is mitigated by support for energy efficiency measures (e.g. loft and cavity wall insulation) and potentially also by renewable heat.
In our 2008 report, we suggested that higher energy prices in 2020 were broadly offset by energy efficiency improvements such that there would be a similar number (3.5 million, based on the Government’s estimates for 2006) of households in fuel poverty at the end of the third budget period as before the first budget period.

Since then, rising energy prices have resulted in a significant increase in the number of fuel poor; the Government’s most recent estimate is that there were 4.5 million fuel poor households in 2008, with a projection that this is likely to have risen to 5.4 million in 2010.

Energy efficiency improvement -  Improving the insulation of older, especially solid-walled, properties over the next 20 years could significantly benefit fuel poor households. However, targeted support mechanisms for fuel poor households will be necessary to allow them to take up solid wall insulation which has high upfront costs.

Low carbon heat - We envisage significant penetration of low carbon heat through the by 2030. Given rising fossil fuel prices, low carbon heat options and district heating can offer cost savings relative to conventional gas or oil boilers. However, low income homes are likely to require financial support to cover capital costs which will remain higher than for conventional boilers.

Electricity market arrangements -  New arrangements to reduce the risks (and therefore costs) of low carbon plant and to break the link between rising carbon prices and electricity prices would limit the fuel poverty impacts of power sector decarbonisation through the 2020s

Fuel poverty programmes which include targeted mechanisms for energy efficiency and low carbon heat, together with ongoing social tariffs and income transfers (such as winter fuel payments) should mitigate any incremental fuel poverty impacts from meeting carbon budgets.

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