Fuel Poverty Strategy Published

BEIS has finally published the updated Fuel Poverty Strategy called “Sustainable Warmth: Protecting Vulnerable Households in England.”

The new strategy makes 21 commitments to “ensure everyone can afford the energy required to keep their lights and heating on.”

It sets out how it will meet the UK’s legal target to “improve as many fuel poor homes as is reasonably practicable to a minimum energy efficiency rating of EPC Band C, by the end of 2030.”

The first question to ask is if the strategy commits to the resources needed to address fuel poverty.

Key announcements:

  • Extending the Energy Company Obligation (ECO) to £1bn per annum to install heating, insulation, or other energy saving measures in the homes of people who are living on a low-income, are vulnerable or fuel poor.
  • Investing £150 million in the Home Upgrade Grant from 2022 to support low-income households off the gas network.
  • The continuation of the Green Home Grant (GHG), and the Local Authority Delivery (LAD) and evaluation of the scheme.
  • Extending the Warm Home Discount to provide rebates and wider support to reduce energy bills for low-income pensioners and other low-income households with high energy bills.
  • Higher regulatory standards in the private rented sector driving over ‘£10 billion of investment in energy efficiency.’

Definition of fuel poverty

The strategy alters the definition of fuel poverty moving away from the Low Income High Costs (LIHC) definition of fuel poverty. That is a relative indicator which has not allowed Government to reduce the overall number of households in fuel poverty despite action taken. The new indicator will be Low Income Low Energy Efficiency (LILEE). It will capture households that have a residual income below the poverty line (after accounting for fuel costs) and live in a home that has an energy efficiency rating below Band C. Consequently, the numbers recorded as in fuel poverty will fall as the energy efficiency rating of the homes of low-income households reaches Band C.

Benefits which are not means tested are excluded as residual income as the income of those receiving the benefits is artificially inflated and therefore not accurately portraying their likely income versus expenditure, including whether they are likely to be vulnerable to living in a cold home.

The strategy recognises that there are important questions regarding households that fall outside of the definition. For example, a low-income household living in an A-C rated home who would not be classed as fuel poor under the LILEE definition and would therefore not qualify for energy efficiency improvements.

There is a strong case for continuing to monitor whether low income and vulnerable households who live in reasonably efficient homes continue to receive support to heat their homes.

Fuel Poverty Targets

The fuel poverty target remains the same – to ensure that as many fuel poor homes as is reasonably practicable achieve a minimum energy efficiency rating of Band C, by 2030. Milestones also remain unchanged, “as many fuel poor homes as is reasonably practicable to Band E by 2020 and as many fuel poor homes as is reasonably practicable to Band D by 2025.”

The strategy is less clear about actions to be taken if fuel poverty schemes fail to achieve these milestones.

Strategic Principles

The updated strategy confirms four guiding principles for tackling fuel poverty:

The ‘Worst First’ principle has been retained, prioritising upgrades to the least efficient homes.

The cost-effectiveness principle is retained seeking the best return from investment but emphasises that landlords will need to make ‘significant up-front investments’ in housing stock.

The vulnerability principle updates the view of vulnerability explicitly referring to older people, younger people, those with certain cold related health conditions and those with conditions that require more time to be spent at home.

A new sustainability principle ensures fuel poverty policies are aligned with the need to reach net zero, making it a central part of work to achieve a just energy transition.

Key commitments to deliver change.

  • Improved energy efficiency standards through the Future Homes Standard, and review of the Decent Homes Standard.
  • MHCLG is currently reviewing the Housing Health and Safety Rating System (HHSRS). BEIS and MHCLG will work together to ensure the HHSRS review takes account of evidence on cold homes and aligns with wider Government aims on energy efficiency and fuel poverty.
  • Warm Home Discount – consultation on reforms, to improve the fuel poverty targeting of the scheme and expand automatic bill rebates will be held later in 2021.
  • Minimum Energy Efficiency Standards – increased regulation of the private rented sector will play an important role in meeting the fuel poverty target and in making a major contribution towards wider energy efficiency and decarbonisation objectives.
  • New guidance for landlords of HMOs will be published to clarify when an EPC is required and when the PRS Regulations 2015 apply to HMOs.
  • Energy Company Obligation – the next iteration of ECO (2022-26) will increase in value from £640m to £1bn per year. It will be designed to align with other domestic energy efficiency policies in social housing and the private rented sector.
  • The Strategy commits to monitoring the delivery of energy efficiency schemes, such as ECO and parts of the Green Homes Grant Voucher and LAD schemes, to identify where delivery is at lower-than expected levels. BEIS is currently evaluating the targeting and impact of the ECO scheme. The results of these evaluations will be publicly available when complete.
  • Home Upgrade Grant – a commitment has been made to introduce HUG as a successor to the Green Homes Grant, with £150m in 2021/22. This is expected to rise significantly in the following years, in line with previous statements and the Conservative Manifesto commitment of £2.5bn.
  • Social Housing – grant recipients for the initial £50 million Social Housing Decarbonisation Fund demonstrators will be announced in February 2021. At SR20, a further £60 million was committed for the SHDF. We continue to call for the remainder of the £3.8bn earmarked for the Social Housing Decarbonisation Fund to be brought forward to assist economic recovery in Northern regions.
  • Local Partnerships – In March 2020 BEIS allocated each of the 5 Local Energy Hubs £75,000 for fuel poverty work in financial year 2020/2021. The Hubs are using this resource to employ an energy officer to support local authorities to develop their ECO Flexible Eligibility scheme and to develop bids for Local Area Delivery programmes of the Green Homes Grant.
  • Hard to Treat Homes – £7.7 million has been awarded to three organisations through the Whole House Retrofit Challenge Fund to explore innovative approaches to reducing the cost of whole house retrofit.

Consultations will take place early next financial year on both the future of ECO and the Warm Home Discount. In the short-term, BEIS are holding workshops on the development of HUG and will release the consultation response and draft regulations to next financial year’s 1-year extension to WHD in the coming weeks.

Targeting of fuel poor households

Meeting the statutory fuel poverty target in a cost-effective way requires support to be targeted at those living in fuel poverty. There is no single list of which households are fuel poor. The Committee on Fuel Poverty has called for better use of data to find the households most in need and eliminate the need for bureaucratic application processes. In our report, No Home Left Behind, we called for a local approach to the ECO scheme to allow better use of data, guided by local authorities and allowing for the blending of ECO with grant funding.

Consultation will be held on a reformed ECO Flexible Eligibility scheme, designed to allow local authorities to identify low income households, under any future successor ECO schemes.

Reaction to the Strategy

The updated strategy includes some welcome and enhanced resources to meet the challenge of ending fuel poverty.

We are pleased to see that the Government’s intention to focus on more intensive improvements to the worst homes will be backed up by an Energy Company Obligation that increases to £1bn a year from April 2022, and that stronger efforts will be made to identify households in need.

The opportunities and challenges that have emerged around the Green Homes Grant programme show just how much we need a long-term strategic approach to meeting the long-term goals. This strategy states that it does not set out the final path to meeting the 2030 target and is written as a ‘living document’ to be adapted. It is critical however that a  clear long-term plan should deliver the wider economic recovery and levelling up needed in some regions, including developing the jobs and skills needed to deliver energy efficiency works, as set out by IPPR North in Northern Powerhomes.

It is welcome that the strategy considers the interaction between different energy schemes and that they can be used alongside each other for the installation of measures at the same property.

A commitment to raise regulatory standards on private landlords is welcome but this must go hand in hand with increased capacity for local authorities to enforce the standards as we called for in our 2021 Budget Submission.

Building back greener will require embedding the principles set out in the strategy, linking energy efficiency directly to health, wellbeing, and job creation, and commitment to a Home Improvement Plan for the North.