A Snapshot of Energy Poverty

Millions of people in Spain are unable to pay their energy bills

Sergio Tirado Herrero
RMIT University Europe / Asociación de Ciencias Ambientales (Environmental Sciences Association – ACA)
José Luis López Fernández
Asociación de Ciencias Ambientales (Environmental Sciences Association – ACA)
Luis Jiménez Meneses
Asociación de Ciencias Ambientales (Environmental Sciences Association – ACA)

Energy poverty has been a growing reality in Spain since the start of the economic crisis in 2008. As a consequence of growing unemployment figures and energy prices, the number of households with excessive spending on domestic energy, a lack of thermal comfort in the dwelling and that have fallen behind on bill payments has grown significantly since 2007. In addition, a higher incidence of energy poverty has been confirmed in certain socioeconomic groups, such as single-parent families, the unemployed, pensioners, families with young children and families with a low level of education, among others. To tackle this situation, at the Asociación de Ciencias Ambientales (Environmental Sciences Association – ACA) we consider it necessary to promote a state-wide strategy with the involvement of all agents that favours palliative measures to support more vulnerable households effectively in the short term as well as structural solutions, such  as the energy rehabilitation of the country’s housing stock.

1. Poverty and Energy Vulnerability

Although the symbolic crash of United States investment bank Lehman Brothers in September 2008 is an increasingly distant memory, the effects of the economic crisis are still evident across broad layers of Spanish society. Despite positive rates of economic growth and the fall in unemployment figures registered since the end of 2013, the perception exists that there continues to be a persistent loss of purchasing power, wellbeing and social rights. This perception can be quantified, for example, in the fact that, since the start of the crisis, growing numbers of citizens have found themselves incapable of paying their household energy bills, which has led to a growing situation of energy poverty in Spain.

Published since 2012, the reports from the ACA describe energy poverty as a situation in which a household “is incapable of paying for an amount of energy sufficient to satisfy its domestic needs and/or when it is forced to assign an excessive part of its income to paying its own energy bill” (Tirado Herrero et al., 2012; 2014; 2016). This definition, like many other proposals from academic and institutional spheres of the EU, places emphasis on capacity to pay as the central idea of the energy poverty concept. This contrasts with others that focus on the lack of access to energy vectors of quality, such as the electricity or natural gas supply, a situation that occurs in broad areas of the countries in the global south.

The notion of energy poverty is associated commonly with the use of energy for heating, although it should be taken into account that the satisfaction of other domestic needs (provision of hot water and lighting, services provided by electrical appliances, cooking of food, etc.) is also an integral part of the definition. However normally not considered are transport costs (largely costs associated with fuel consumption), nor payments related with domestic water consumption. In other words, the concept is centred fundamentally around the energy services that are consumed in the space of the dwelling. This is, therefore, an eminently domestic phenomenon and one defined on a household scale.

A higher incidence of energy poverty is registered in households where the reference person has a low educational level, is single, widowed or divorced, or comes from a country outside of the EU, as well as in the case of single-parent families.

More recent  descriptions of this condition define energy vulnerability as the probability that a household is in a situation in which it does not have an adequate quantity of energy services (Bouzarovski and Petrova, 2015). This new concept allows for more dynamic comprehension of the phenomenon according to which households suffer from energy poverty at specific times as a consequence of internal changes in the family unit (loss of employment, birth/death of a family member, presence of a chronically ill person, etc.) or due to external changes (economic crisis, change in criteria for assignment of social tariffs, increase in prices of energy on a national or global scale, etc.). In this way, the focus is placed on the structural and contextual conditions that go beyond the triad of factors traditionally considered in the classical definitions of energy poverty (household income, prices of energy and household energy efficiency).

2. Crisis indicators and tendencies

All the indicators analysed over the course of recent years show that energy poverty is a problem that, far from having being solved, continues to affect millions of people living in Spain.

The most recent report by the ACA has been produced based on microdata from the surveys on Family Budgets (EPF) and Living Conditions (ECV) by Spain’s National Institute of Statistics (INE) corresponding to the year 2014 (the latest with microdata available at the date this document is produced). According to the results of this report, 11% of Spanish households (equivalent to 5.1 million people) stated they were unable to maintain their home at an adequate temperature during the coldest months. Furthermore, 8% of households (4.2 million people) stated they had fallen behind on paying for their household bills, including domestic energy bills; and 15% (6.2 million people) stated they had to allocate more than 10% of their annual income to paying for energy for their dwelling.

The data indicate that vulnerable households are finding it increasingly difficult to pay domestic energy needs and that their energy consumption has decreased.

If the United Kingdom’s official energy poverty rating is applied to the Spanish case, then 10% of households (4.9 million people) are experiencing difficulties. This means that, once housing and domestic energy costs have been paid, their income lies below the monetary poverty line and that simultaneously their spending on domestic energy is above the average per equivalised person for the whole of Spain. Moreover, the percentage of people in difficulty rises to account for 21% of households (12.1 million people) if the Minimum Income Standard indicator is applied to Spain. In line with this methodology, and again after discounting energy and household running costs, the incomes of these households stand below the highest Guaranteed Minimum Income in Spain (that of the Basque Country).

In addition, in 2012 nearly 25% of households stated they were incapable of maintaining their home at a sufficiently cool temperature in summer, according to microdata from the ECV. This is an aspect of thermal comfort that has not received sufficient attention to date, despite it being especially relevant for large areas of Spain and of other countries in Southern Europe.

Despite improvements in the key macroeconomic factors (economic growth, unemployment and occupation) in the years 2013 and 2014, the evolution over time of the two most significant indicators relating to energy poverty (adequate temperature in winter and falling behind on payments of bills) maintain their upwards trend in a sustained manner until 2014 (Graph 1). Especially significant is the fact that in 2014, the recorded percentage of people incapable of maintaining an adequate temperature in winter was higher than the EU average. The figure was also higher than in countries in the centre and north of Europe such as Germany and Sweden, with cooler climates.

For their part, the indicators based on expenditure and income show an increase in the energy expenditure per household in parallel with a reduction in nominal income. Thus, whereas in 2008 an average household had an income of 20,500 euros, in 2014 this figure had fallen to 19,200 euros. That same average household increased its energy bill from 611 euros in 2006 to 960 euros in 2012, although from 2012 to 2014, the average domestic energy bill in Spain fell to 882 euros per year (see Graph 2). Given that this downwards tendency cannot be explained by a decrease in energy prices, the data could be indicating that, far from being an improvement in the situation, vulnerable households are finding it increasingly difficult to pay for their domestic energy needs and that their energy consumption has decreased.

 

3. Energy inequality is increasing

Analysis of the data from the INE’s EPF survey has also allowed an upwards tendency to be detected in levels of energy inequality. Initially proposed to analyse differences in levels of access to energy on a global scale, this concept has made evident the substantial differences in energy consumption per person between different parts of the world. According to estimates from the International Institute for Applied System Analysis (IIASA), energy consumption per capita in OECD countries such as the United States, Canada, Australia and many EU members is two or three times that of countries in the south. Thus, it is estimated that the richest third of the population is consuming two thirds of all the energy produced in the world (Pachauri and Rao, 2014).

In the case of Spain, the concept of energy inequality has been used to explore the differences between households with different purchasing power in key variables. Thus, as can be seen in Graph 3, in 2014 spending on domestic energy of an average household belonging to the 10% of the highest-income households in Spain was 9 euros per square metre and person, an expenditure figure that represents 3% of their annual income. In contrast, in the same year an average household of the 10% of poorest households spent 6 euros per square metre and person, some 12% of their annual income. Thus, the homes with the lowest incomes spend a third less on energy than those with the greatest purchasing power, but also have to make an effort four times greater (in proportion to their annual income) to be able to pay their domestic energy bills. These disparities grew more pronounced between 2007 and 2014, as shown by Graph 3. Here we see a tendency similar to indicators of income inequality: in accordance with data from the World Bank, the Gini index in Spain grew from 33.9 to 35.9 between 2007 and 2012.

4. Territorial differences and impact of unemployment

The studies carried out by ACA since 2012 show a broad diversity of values for different energy poverty indicators in each autonomous community. These disparities in the figures obtained suggest that different measuring methods capture different types of households, and even different types of vulnerabilities.

In the latest energy poverty report published by ACA in 2016, it is observed that despite the territorial complexity of the data, there are four regions that are more greatly affected in both 2007 and 2014, and three autonomous communities that are affected to a lesser degree. These results suggest that climate conditions are not determining factors for explaining the regional differences in energy poverty rates. Furthermore, results broken down by population density of the place of residence indicate a higher proportion of homes affected in rural or semi-urban areas.

Energy poverty could be causing over 7,000 premature deaths per year in Spain.

For its part, analysis of household socio-demographic conditions proposes the existence of certain vulnerability factors. The comparison conducted in the aforementioned report reveals a higher incidence of energy poverty as much in households where the reference person has a low level of education, is single, widowed or divorced, or originates from a country outside of the EU, as in households with single-parent families.

Employment status is also shown as a vulnerability factor. Households suffering joblessness and depending on unemployment subsidies or other benefits have a greater probability of suffering energy poverty according to EPF and ECV indicators. In households with employment, there is also a higher rate of energy poverty when temporary or fixed term contracts are present in comparison with permanent job contracts (Table 1).


5. Impacts on health: additional winter mortality

The effects of energy poverty on health have been studied and documented widely for several decades. It is related with a higher prevalence of certain diseases that affect vulnerable groups, such as the elderly and children, more intensely. Specifically, it has been associated with breathing problems, difficulties gaining weight in children, greater incidence of mental health problems in adolescents, greater prevalence of influenza and colds, worse physical conditions in individuals with arthritis and rheumatism and worsening of the diet due to restrictions imposed by energy bills in the household budget (Marmot Review Team, 2011).

However, the best known and most debated impact of energy poverty is the increase in the risk of premature death among elderly people. It is known that living in a dwelling with temperatures below recommended levels (between 18°C and 20°C according to the World Health Organisation) is related with an increase in mortality associated with respiratory and cardiovascular diseases. This is what is known as excess winter mortality. Although only a fraction of excess deaths occurring in the cold season are strictly attributable to energy poverty, their correlation with energy efficiency of residential buildings and dwelling temperatures is sufficiently well established (The Eurowinter Group, 1997). For example, data on the mortality and interior temperature of homes in the United Kingdome indicate that the excess winter mortality registered in 25% of the coldest households is three times greater than that registered in the 25% of dwellings with better thermal comfort (Marmot Review Team, 2011).

Households with lower incomes spend a third less on energy than those with higher purchasing power, but they have to make an effort four times greater to be able to pay their domestic energy bills.

In accordance with mortality data from the INE, it is calculated that every year in Spain around 24,000 more people die in the cold months (from November to March) than in the rest of the year. This figure is what is known as the absolute excess winter mortality rate (EWMR), and only a fraction of this rate is strictly attributable to energy poverty. Specifically, initial estimates with data for Europe from the WHO (Braubach et al., 2011) indicate that energy poverty could be causing some 7,100 premature deaths per year in Spain (some 30% of the absolute EWMR), with a possible range of uncertainty of between 2,400 and 9,500 deaths per year (corresponding to between 10% and 40% of the absolute EWMR). In comparison, some 4,000 people died per year in traffic accidents on average in the period 1996-2014; moreover, it is estimated that atmospheric contamination causes close to 33,000 early deaths per year in Spain.

6. In search of jointly agreed solutions

In light of the facts presented in this article, the Environmental Sciences Association (ACA) believes it is necessary to promote a state-wide strategy to fight energy poverty and proposes coordinated action between the different actors and levels of the administration. The aforementioned strategy should be proposed as a tool for intervention and as a process for reaching agreement between actors with contrasting interests and views.

The state-wide strategy to combat energy poverty should consider three priority questions, the first of which would consist of recognising the energy rehabilitation of buildings as a preventive measure for reducing the present and future vulnerability of the population. The reform of policies for financing energy efficiency is urgent, with the aim of benefiting primarily vulnerable households that have difficulties in investing in their dwellings. Similarly, analysis is recommended of the possibilities offered by renewable technologies, especially photovoltaic solar energy under a self-supply system, to reduce the dependency and the bills of vulnerable consumers.

The second priority question consists of adequately defining what is meant by vulnerable consumer in energy terms, a question that at present is associated with possible beneficiaries of the social electricity tariff. A review needs to be tackled of the criteria for assigning this measure, almost the only one that exists at present to reduce household energy bills.

Finally, imperative action is needed in the field of cuts in supply due to inability to pay the bills. For this it is recommended that a new legislative framework be established based on the experiences that exist (such as Law 24/2015 of Catalonia) that guarantee that no vulnerable household is left without an energy supply to the home, above all given the serious consequences that this has for people’s health, social integration and quality of life.

Sergio Tirado Herrero
RMIT University Europe / Asociación de Ciencias Ambientales (Environmental Sciences Association – ACA)

José Luis López Fernández
Asociación de Ciencias Ambientales (Environmental Sciences Association – ACA)

Luis Jiménez Meneses
Asociación de Ciencias Ambientales (Environmental Sciences Association – ACA)

 

7. References

Bouzarovski, S., and S. Petrova (2015): “A global perspective on domestic energy deprivation: overcoming the energy poverty-fuel poverty binary”, Energy Research and Social Science, 10.

Braubach, M., D.E. Jacobs and D. Ormandy (eds.) (2011): Environmental burden of disease associated with inadequate housing. A method guide to the quantification of health effects of selected housing risks in the WHO European Region, Copenhagen: World Health Organization, Regional Office for Europe.

Lawrence, S., Q. Liu and V. Yakovlenko (2013): «Global inequality in energy consumption from 1980 to 2010», Entropy, 15.

Marmot Review Team (2011): The health impacts of cold homes and fuel poverty, London: Friends of the Earth & the Marmot Review Team.

Pachauri, S., and N. Rao (2014): Energy inequality, Laxenburg: International Institute for Applied Systems Analysis (IIASA) [http://www.iiasa.ac.at/web/home/research/alg/energy-inequality.html].

The Eurowinter Group (1997): «Cold exposure and winter mortality from ischaemic heart disease, cerebrovascular disease, respiratory disease, and all causes in warm and cold regions of Europe», The Lancet, 349(9062).

Tirado-Herrero, S., L. Jiménez-Meneses, J.L. López-Fernández, J. Martín-García and E. Perero-Van-Hove (2014): Pobreza energética en España. Análisis de tendencias, Madrid: Asociación de Ciencias Ambientales.

Tirado Herrero, S., L. Jiménez Meneses, J.L. López Fernández, E. Perero Van Hove, V.M. Irigoyen Hidalgo and P. Savary (2016): Pobreza, vulnerabilidad y desigualdad energética. Nuevos enfoques de análisis, Madrid: Asociación de Ciencias Ambientales.

Tirado Herrero, S., J.L. López Fernández and P. Martín García (2012): Pobreza energética en España. Potencial de generación de empleo directo de la pobreza derivado de la rehabilitación energética de viviendas, Madrid: Asociación de Ciencias Ambientales.

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Authors

Sergio Tirado Herrero
RMIT University Europe / Asociación de Ciencias Ambientales (Environmental Sciences Association – ACA)
José Luis López Fernández
Asociación de Ciencias Ambientales (Environmental Sciences Association – ACA)
Luis Jiménez Meneses
Asociación de Ciencias Ambientales (Environmental Sciences Association – ACA)

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