How is energy poverty measured and why does it matter?
After energy prices skyrocketed during the recent energy crisis against the backdrop of a broader cost-of-living crisis, energy poverty grew as an issue for many households across Ireland.
What is energy poverty?
Someone is experiencing energy poverty if they cannot adequately heat and power their home at an affordable cost. Energy poverty is often thought of as a three-sided issue, made up of the energy efficiency of the home, household income, and the cost of energy.
If we are going to do something about energy poverty, we need to be able to measure it. Most measurements can be grouped into three types;
- expenditure-based
- subjective, and
- objective
While there are many ways to measure energy poverty, they all have their benefits and drawbacks, and researchers haven’t agreed yet on a standard measure.
Before now, it has been unclear how different measures of energy poverty relate to each other in Ireland, and which measure should be used in what context. The Behavioural Energy and Travel Tracker (BETT) has given us the opportunity to study energy poverty in depth and observe how different measures interact and overlap with each other.
Ireland's Behavioural Energy and Travel Tracker
The Behavioural Energy and Travel Tracker (BETT) is a nationally representative online survey designed by SEAI's Behavioural Economics Unit. The trackers uses a behavioural science technique known as the 'Day Reconstruction Method' to gather accurate and granular data about travel and home energy behaviours in Ireland. It also collects data on factors that may be related to energy behaviours such as psychological factors, energy poverty, dwelling and sociodemographic characteristics. BETT ran monthly from December 2022 to December 2023 and continues to run on a quarterly basis.
Measuring Energy Poverty
In Ireland and across Europe, energy poverty is mainly measured by the 10% expenditure indicator. By this measure, any household spending more than 10% of its disposable income on energy costs is said to be experiencing energy poverty. While this indicator is easy to calculate and understand, it is imprecise.
Firstly, the threshold of 10% is arbitrary. If we looked at two households with similar incomes, and one spent 10% of their income on energy while the other spent 9.5%, it is likely the households are having quite similar experiences of energy poverty, but only one is considered energy poor.
Secondly, expenditure measures include higher income households spending a large proportion of their income on energy but who can afford to do so comfortably. For example, 43% of BETT participants who spent 10% or more of their income on energy costs did not report having difficulty paying their energy bills.
Thirdly, and importantly, expenditure measures may not capture those who under-heat their homes to manage their monthly energy bills. We found that almost three in ten BETT participants who went without heating in the preceding month did so to ensure they were spending less than 10% of their income on energy costs.
Subjective measures capture instead someone’s experience of energy poverty and rely on self-reported survey data. These measures are more inclusive and acknowledge the reality of someone experiencing energy poverty. This type of measurement could include asking if someone has had difficulty paying their last energy bill, or whether they went without heating or other essentials due to the cost of energy.
For some, the subjectivity of these measures can be problematic. For example, we might be interested in whether someone can afford to keep their house adequately warm, but what is adequate for one person may not be so for someone else.
Objective measures consider household income, energy efficiency, and the costs associated with heating the home to a “basic standard”. More information is needed to calculate these objective measurements, like the temperature inside the home, its energy rating, and energy prices.
Therefore, the term “objective” gives an authority to these kinds of metrics which may be unearned. The additional information required for these measurements make it difficult and expensive to collect energy poverty data, and this type of data lacks sensitivity of the different energy needs for different groups. For example, in a separate SEAI report looking at people’s heating behaviour we found households that have children, older people, or someone with a disability may have greater heating needs than other households.
Why does measurement matter?
How we measure energy poverty influences and informs the tools policy makers might use to address that poverty. For example, the UK uses the Low Income Low Energy Efficiency (LILEE) measure, which considers energy poverty to be made up of income and energy efficiency of the home. This measure stabilises energy poverty in comparison to expenditure and subjective measurements by concealing the impact of energy prices. Measurements can be viewed as breaking down a problem to its components, which set the parameters for which policy levers can be pulled – or, at the very least, strongly frames them. When we remove energy prices from the equation, we imply a neutrality of markets and absolve energy companies from their role in proliferating and exacerbating energy poverty (all while reporting record profits), and, crucially, undermine market regulation as an avenue for combatting energy poverty.
How we measure energy poverty informs who we might target supports to, but different groups come to the fore depending on which measure we use. For example, older people are generally considered a highly vulnerable group, and this is likely in part due to the 10% expenditure measure. But while older people may have lower income in retirement, they also may have lower costs if they own their own home – which might mean they can afford to spend this amount on their energy costs. This is highlighted when we look at subjective measures, with older people being less likely to report experiencing energy poverty and younger people in rental accommodation coming out as vulnerable instead.
Through Ireland’s Behavioural Energy and Travel Tracker (BETT) we have highlighted the multi-dimensional nature of energy poverty, meaning people make different choices in line with their own preferences in how they manage energy poverty. For example, one household may choose to keep the home adequately heated and go into arrears on their energy bills, while another may cut back on heating their home to keep their energy costs low. Choosing to use only one measure risks overlooking people who are vulnerable and need support. By using BETT we can develop evidence-based, inclusive policy for tackling energy poverty in Ireland and delivering a just energy transition.
