I’m currently doing some work with the Coalition for Community Energy and the Conservation Council to explore opportunities for those who can’t readily access renewable energy. This is typically people who rent, those on low income or those who live in apartments without roof space.
In the context of the State Government’s consultation for the upcoming climate change strategy, this short piece focuses on the low income sector and why the intersection between social policy and energy policy should be a priority area for government.
The thesis is that many Australian households are benefiting from installing renewables – solar energy in particular. However the size of the capital investment or the terms of a solar lease are enough to put such an investment out of reach for some low income households. Therefore households who could benefit the most from *cheaper* energy are missing out. Householders are also investing in solar energy because it empowers them to take significant personal action on climate change – and no demographic should be denied that opportunity.
It is clear that energy costs are crippling some households. At around 10% of gross weekly income, energy (including transport fuel) has about three times the impact for low income when compared to high income. AGL report that almost half of their 30,000 customers on hardship payment plans are unable to meet the costs of their ongoing energy consumption. So renewable energy is not going to be a useful priority for these customers unless it can effectively address energy affordability.
A key reason that customers find themselves on hardship plans might be that they are higher than average users – using almost twice as much as average concession customers in Victoria, according to this AGL graph. We know that some low income users are home-bound and have health needs that contribute to additional energy consumption.
We don’t know the extent to which the quality of housing contributes to higher energy consumption but this graph from the ABS Household Energy Consumption data suggests that renters have much less insulation and solar energy than home owners.
This is the national snapshot, so I had a look at the South Australian statistics. Here are the renters and owners sprinkled across different income bands. In the lowest band we see the highest proportion of renters – almost half. Not only might this group find it harder to make a capital investment in solar energy or energy efficiency, renters have much less incentive to invest in a home they don’t own.
We can’t assume too much about people by their income. The AGL data above is based on consumer segmentation by Mosaic that starts to describe the diversity of people in any income group. Much of people’s circumstances relate to other factors such as life stage, health and culture. Not everyone in the lowest income bands are considered vulnerable energy consumers, and the ABS also use a second “wealth” measure when reporting their energy statistics.
One of the interesting stories this year has been from the solar uptake statistics. Even though the data can only be compared at a postcode level (and therefore relies on the average income by postcode), this graph from ESAA shows which suburbs have invested the most in solar energy – the second income quintile and regional/rural areas are most heavily represented. The lowest income postcodes fall way behind everyone else.
We can also see the leading postcodes for South Australia. Although this data from the REC agents report of April 2014 is ‘old’ in solar terms:
What should we do?
The social sector have been talking about energy poverty for a long time and a range of Government energy programs include a dedicated low income focus, including South Australia’s Retailer Energy Efficiency Scheme which delivers energy audits and energy savings products. There have a been a worrying number of disconnections and consumer advocates have highlighted problems in the system – when smart meter roll outs and solar feed-in schemes cost all electricity consumers and deliver benefits only to some, low income consumers are hit proportionally more by cost increases.* In response, energy retailers have improved their hardship programs.
The opportunity for solar energy to play a role in alleviating energy poverty is only just starting to emerge. According to this AGL blog (it’s worth a read), the NSW Government has committed $26.8 million to deliver better technologies to low-income households. And AGL themselves have a $1.5million fund which will support renewable energy and energy savings for their vulnerable customers. This week South Australia’s social sector will hear from the Clean Energy Finance Corporation about their decision to provide up to $60million to social housing in NSW.
The work of the Renewables for All project is focused beyond vulnerable consumers, nevertheless this discussion paper gives a great summary of international and Australian initiatives to increase access to renewable energy technologies. In particular it looks at:
- solar gardens
- community owned renewable energy
- tax incentives
- power purchase agreements, loans and leases
- rent based finance
- rates based finance
- on-bill finance
An added dilemma for the solar industry is that tariffs are changing and could add complexity to electricity bills and reduce the savings solar panels can offer.
These are issues we will grapple with at our workshop on the 27th October.
My personal RECOMMENDATIONS for Government are:
- Work with the social sector to develop a package of energy efficiency, solar energy and demand management which will guarantee an overall reduction in energy costs and not compromise the needs (health etc) of low income consumers.
- Create a financing solution, in concert with energy retailers and financial counsellors that is generous (eg No interest) and manageable (eg bill smoothing) and minimises financial risk for consumers. [I recommend a read of the book Scarcity for a bunch of ideas on how financing can help, rather than stress out, vulnerable consumers]
- Ensure that energy solutions are also generated for consumers without suitable solar access.
- Investigate if the assets of some consumers could provide additional value to the electricity system, eg steady loads, willingness to manage demand, offer of roof space or to host storage systems. Install systems and advocate for tariffs that might appropriately reward such assets.
- Reverse the impact of regressive energy policies by treating the social sector as a priority for affordable energy solutions that are also part of the inevitable energy transition.