Will the Green Deal leave the fuel poor out in the cold?

Confused.com has revealed that millions are now rationing heat and power. As another harsh winter looms, fuel poverty is spiralling to record levels. The government should reaffirm its commitment to ending fuel poverty. Yet the last two weeks have seen a series of indications that they are moving in the opposite direction.

The Hills Report instead proposes to narrow the definition of fuel poverty. This will mean that millions will be taken out of the official definition and won’t qualify for any assistance.

In our recent report Solving Fuel Poverty: Opportunities for Green Deal and Localisation, we at Localise West Midlands argue that Green Deal will be of limited use to the fuel poor unless urgent action is taken to address two key challenges.

The first challenge is the way homes are assessed for Green Deal measures. Current methodology for assessing a home for an Energy Performance Certificate is based on a mathematical model of what your household energy consumption should be. The problem is that the difference between actual and modelled consumption could be as much as 500% depending on your lifestyle and habits, which makes modelling meaningless.

The fuel poor tend to underheat their homes. This is a critical issue in meeting the Green Deal’s ‘Golden Rule’, which says that the financial savings from the Green Deal package must be greater than the cost of the energy saving measures repaid over 25 years. If a fuel-poor home uses significantly less heating fuel than predicted, it will be virtually impossible to meet the Golden Rule and the household will be worse off.

At the Energy Efficiency Partnership for Homes conference last week, it was revealed that the Green Deal assessment will be based solely on modelled consumption and not on actual consumption or lifestyle. Andrew Stunell, at this same conference, justified this by saying that if a Green Deal package was based on the lifestyle of a fuel-poor household, and then there was a change of occupancy, then you would be unable to turn the clock back and redo the Green Deal package.

In reality, a three-bed, draughty, solid-wall house inhabited by a low-income family in a disadvantaged area, is likely to end up in the hands of another low-income family if there is a change of occupancy, not an affluent professional couple who barely turn on the lights because after a day at the office they spend their evenings at book launches and Ceroc dancing classes.

The second challenge is the need for capital subsidy for homes and households that need most help because the home is ‘hard to treat’ due to being off the gas network or having solid walls, or because the household is vulnerable and at greatest risk of fuel poverty. The government has partly responded by announcing an Energy Company Obligation – ECO – with one stream of subsidy for hard-to-treat homes and another for affordable warmth.

Yet the government announced recently that social landlords whose tenants are suffering disproportionately from rising fuel poverty due to falling incomes and housing benefit reform won’t qualify for the affordable warmth component of ECO.

As Green Deal is a market mechanism, then by the rule of ‘first-come first-served’, ECO will end up mostly in the hands of the educated and affluent middle classes in Islington or Moseley rather than those who risk becoming one of the 25,000 people who die prematurely due to cold and damp-related medical conditions each winter.

Another threat to the fuel poor is the likelihood that Green Deal providers will seek to deliver one-size-fits-all national solutions. The experience of pay-as-you-save pilots shows that a diversity of approaches is required to meet the needs not only of different property archetypes but also different household needs.

This triple whammy of setbacks for the fuel poor needs to be reversed. There should be a tradeable fuel poverty obligation on Green Deal providers, backed up by a commitment to prioritise the poor and vulnerable for ECO subsidy. The industry working group responsible for the Green Deal assessment methodology needs to find a solution that enables Green Deal assessors to take lifestyle, occupancy and actual consumption into account. Otherwise the fuel poor could be left out in the cold by Green Deal.