Fuel Poverty in a Smart Energy System. Ian Preston, Senior Analyst Centre for Sustainable Energy 7 th February 2013

Transcription

1 Fuel Poverty in a Smart Energy System Ian Preston, Senior Analyst Centre for Sustainable Energy 7 th February 2013

2 Spatial variation Wide degree of variation Low income households and the energy market Lack of engagement Pre-payment meters Issues with self-disconnection, health and pressure on wider household finances Smart meters for low income Opportunities for new tariffs Ensuring the new PPM service is designed to help the householder Safeguarding the vulnerable

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6 Lack of engagement Currently the level of switching between energy suppliers is low (12% electricity and 10% gas in 2012) The majority of switching takes place online (55%) Furthermore this is confined to a relatively small set of customers For low income households there is a fear of switching to a worse tariff, alongside Distrust in energy suppliers (scepticism over any offer really being better than another) Previous bad experience of switching

7 Dumb pre-payment meters In 2013 there were 11 prepayment offers available in the British market These include standard prepay offers, affinity products with organisations such as Age UK By contrast, there were 63 monthly direct debit deals and 39 quarterly cash/cheque tariffs currently available The average estimated annual saving for customers who applied to switch suppliers through Which? in 2013 was just over 140 The average differential in annual household fuel bill in 2013 was 57 and 105 for electricity and gas respectively

8 Average annual household fuel bill Difference (highest to lowest average bill) Gas difference Elec. difference Gas PPM Home supplier Gas DD Non-home supplier Elec. PPM Home supplier Elec. DD Non-home supplier

9 Issues with self-disconnection Barnardo s staff reported that 90% of families they work with are cutting back financially on essentials 74% reporting cut backs on food and 84% cutting back on heating Work from CSE and DECC shows households typically under consume (generally higher for lower income) People with children tend to prioritise use of energy Low income households are far better at playing an active role in the food market Older people often choose to prioritise other areas of essential expenditure Exacerbates existing health conditions

10 Smart meters for low income The Government s vision is for every home and small business in Great Britain to have meters by the end of 2019 Domestic consumers also will be offered an IHD which will show the customer near real-time information on their energy use They will be able to operate in both credit and prepayment mode Costs to serve should decrease as separate meters and a completely separate infrastructure will no longer be required Smart metering has the potential to address many of the existing barriers to prepayment It is anticipated that they will facilitate the introduction of a range of tariff offers (and market offers from new suppliers)

11 Opportunities for new tariffs Demand side management tariffs Static time of use tariffs (TOU) Critical peak pricing tariffs (CPP) Direct load control (DLC) More progressive tariffs Rising block tariffs Opportunities for new services Enable third party services to act as trusted intermediaries and play an active role in the market for low income households

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13 Most interested Consumers on low incomes with flat load profiles ( ) The squeezed middle who are interested in financial saving ( ) Single person households ( ) Home workers ( ) The technologically savvy ( ) Settled households ( ) Homeowners (-) Electric heating with storage ( ) Least interested Consumers on low incomes who want certainty for financial planning and are loss averse ( ) Consumers on high incomes who are not interested in saving money ( ) Large families ( ) Families with young children ( ) Vulnerable older consumers ( ) People with medical conditions that require reliable supply (-) The technologically averse ( ) Households undergoing transition ( ) Tenants in the Private Rented Sector ( ) Electric heating without storage ( ) ( ) Arrows denote future trends in growth

14 Most interested Consumers on low incomes with flat load profiles ( ) The squeezed middle who are interested in financial saving ( ) Single person households ( ) Home workers ( ) The technologically savvy ( ) Settled households ( ) Homeowners (-) Electric heating with storage ( ) Least interested Consumers on low incomes who want certainty for financial planning and are loss averse ( ) Consumers on high incomes who are not interested in saving money ( ) Large families ( ) Families with young children ( ) Vulnerable older consumers ( ) People with medical conditions that require reliable supply (-) The technologically averse ( ) Households undergoing transition ( ) Tenants in the Private Rented Sector ( ) Electric heating without storage ( ) ( ) Arrows denote future trends in growth

15 Making smart work for the fuel poor Enabling top-up functionality that s offline AND INCLUDES CHOICE Designing an engaging IHD Visually Linguistically Financially Ensuring smart meters can interchange between payment methods Providing adequate advice at the installation stage Ensuring that the fuel poor (and those on PPM) aren t targeted last

16 Next generation intermediaries Enabling consumers to do better by doing less in the energy market NGIs would manage a customer s utilities by searching for the best deals and promotions on their behalf This effectively transform s their inertia to a force that works against them to one that s in their favour Particularly useful for those that do not have access to the internet or a high degree of financial literacy Safeguards would be needed to protect them from profiteering on the part of the delivery service

17 Working spatially to help the fuel poor Using an area based approach to tackle fuel poverty is an established policy ask Typically focuses on improved energy efficiency standards through focussed retrofit Working smarter to help the fuel poor Work with DNOs to help identify areas with high nos PSR Identify areas with

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19 Working spatially to help the fuel poor Using an area based approach to tackle fuel poverty is an established policy ask Typically focuses on improved energy efficiency standards through focussed retrofit Working smarter to help the fuel poor Work with DNOs to help identify areas with high numbers on the PSR Identify areas with sub-stations with little head space (can t show this map sorry) Overlay data on income domain (IMD) / DECC LIHC

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22 Working with DNOs to safeguard the PSR Feedback to customers via IHD (power outages) Alarms triggered by usage patterns Is this too big brother? Working with DNOs and their assets Strategically identify those areas where shifting / reducing low income consumers electricity demand can make a difference Need saturation which suggests community buy-in Local authority support essential