Ensuring efficient goverment expenditure on alleviating fuel poverty in Ireland

Panel: 5B. Cutting the energy use of buildings: Policy and programmes

This is a peer-reviewed paper.

Author:
Jim Scheer, Sustainable Energy Authority of Ireland, Ireland

Abstract

Given rising energy prices and the continuing economic malaise, governments across Europe need to find new ways to alleviate energy poverty. In 2011 the Irish Government provided over €465 million in energy subsidies to over 600,000 households with the aim of alleviating energy poverty. In the context of high unemployment, likely future energy price rises and the poor quality (inefficient) dwelling stock, this level of expenditure is likely to increase in coming years. In contrast, an average of €20 million per year has been spent over the last three years on dwelling upgrades for improved energy efficiency - a measure that offers a more permanent solution to energy poverty alleviation. The first stage of this analysis presents an alternative (reallocated) subsidy scheme based on the recipient’s income and dwelling energy efficiency which contrasts with the flat-rate nature of the current scheme. The second stage uses cost-benefit analysis to investigate the potential for welfare gains through dwelling upgrades for improved energy efficiency in the context of both the existing and the reallocated subsidy schemes. By reallocating the available funds (i.e. without additional annual expenditure) it is demonstrated that both the overall severity of energy poverty and the number of households in energy poverty can be significantly reduced. A strongly positive NPV is indicated for all dwelling upgrade scenarios when the cost of upgrades is equated with benefits including energy and emissions reductions, comfort gains and health improvements.The greater the improvement to the energy efficiency of a dwelling, the higher the total costs, however even for the deepest retrofit modelled the benefits strongly outweigh the additional costs. When the reallocation scheme is implemented these results are enhanced - by more than 60%. Cumulative subsidy savings of €2.9 billion are available to the exchequer over a 35 year period if a strong upgrade investment programme is undertaken.