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The Origins of Energy Poverty in Europe

01 Dec 2022
By Dr Rachel Guyet
 In a debate with Council and the Commission on the October European Council, MEPs urged leaders to not waste any more time and take urgent action to tackle the energy crisis. Source: European Parliament /

The origins of energy poverty in Europe predate the February 2022 Russian invasion of Ukraine. To understand its development, we must consider the changing definitions of this phenomenon in Europe over the last 40 years.   

A household is considered “energy poor” if they face difficulties in obtaining the energy services necessary to meet their domestic energy needs. This means that energy poverty is a systemic and multidimensional issue at the crossroads of low income, high energy prices, and low housing quality. Its origins are often path-dependent institutional and market settings at the intersection of climate and energy policy, welfare and labour market policies, or housing and taxation policies. Inadequate domestic energy services have serious implications for adult and childhood physical and mental health, and for social cohesion more broadly. Studies show that deprivation of energy services prevents people from enjoying decent living conditions and taking part in the economic, social, and political activities in society. As this language implies, adequate definitions and metrics are still needed to capture true energy poverty in its structural dimensions if we are to design appropriate public policies to address it.

What is interesting is that most European countries continue to discuss energy poverty as an income issue and not as a specific matter of public policy. The EU does not have any specific mandate to regulate energy poverty supranationally. That said, European institutions do use energy directives that have been designed for the European energy market to frame collective norms, definitions, and indicators of energy poverty. To date, these norms have helped to encourage member states to recognise and address energy poverty nationally. What is important to understand is that while the pandemic and the current energy crisis has been aggravated by the Russian invasion of Ukraine, the origins of energy poverty in Europe have deeper, more consistent roots.

In 1979 in the UK the scholars B. C.  Isherwood and R. M. Hancock introduced the concept of “fuel poverty” to describe the increasing expense of fuel on income-stressed families. At the time, however, no consensus emerged on the definition. More than ten years later, Brenda Boardman added greater conceptual clarity by connecting fuel poverty to household wellbeing, noting that a household spending more than 10 percent of their income on energy expenditure was considered fuel poor. Ten more years elapsed until the new Labour government lead by Tony Blair established a legal definition of fuel poverty (Warm Homes and Conservation Act 2000) and a first fuel poverty strategy in 2001. Meanwhile, in France in 1993, Electricité de France (EDF), the main energy supplier, in an attempt to tackle the issue of bill arrears created a task force to support a “solidarity policy” and help vulnerable households pay their bills. This was before France introduced a legal definition for describing energy poverty in 2010. France is only the second country in the EU to properly consider the broader implications of energy poverty as a matter of public policy.

In 1996, the first EU directives liberalising the EU energy market didn’t take the energy vulnerabilities of consumers into account and it wasn’t until 2003 that these protections were first introduced. The process accelerated with the new energy directive package of 2009 that for the first time introduced the concept of energy poverty under the pressure of other EU institutions such as the European Parliament, the Committee of the Regions, and the European Economic and Social Committee.  This package marks the beginning of a form of EU ownership of the concept. Article 3 of chapter II of both 2009 directives on electricity and gas, for instance, encourages EU Member States to define and address energy poverty, not only through social policies but also through energy efficiency programs and the “prohibition of disconnection to such customers in critical times.” The invitation to define, measure, and mitigate energy poverty transformed into obligations imposed by the Electricity Directive in 2019. Finally, in 2020 the European Commission issued a recommendation proposing a uniform definition of energy poverty broad enough to include the diversity of European socio-economic situations. It identifies energy poverty as “a situation in which households are unable to access essential energy services.” Despite such efforts, in 2020, only nine countries out of EU27+UK had defined energy poverty under such rubric, illustrating that member states have been reluctant to recognise that energy poverty is more than an income-stress issue.

The scope of energy poverty in Europe

To better capture the reality and scope of energy poverty, the European Commission launched the EU Energy Poverty Observatory (EPOV) in 2016 with the aim to develop energy poverty indicators across the EU. EPOV established a set of 28 measures among which four primary indicators are based on two evaluative methods: expenditure-based and self-reported assessments of households regarding their inability to keep adequately warm and pay their utility bills. In 2018, up to 82.3 million households in the EU (27 member States + UK or 16.2 percent of households) were identified as having a high share of energy expenditure (twice the median). Comparatively, 74.2 million (14.6 percent) were spending less than half the national median (which may mean that they under-consume), 37.4 million (7.3 percent) experienced cold homes, and 33.8 million (6.6 percent) struggled with bill arrears. The Energy Poverty Advisory Hub, the successor to EPOV, showed that a rather favourable trend characterized the years 2019-2021 despite the pandemic: the percentage of population facing bill arrears decreased in 19 countries while the percentage of those reporting to be cold at home dropped in 17. Such an improvement may result from the intervention of most governments during the pandemic to ensure a continuous access to energy supply for households.

This relatively favourable situation did not last.  Since 2021, the numbers of energy-stressed families in the EU have skyrocketed as a result of the war in Ukraine. According to the OECD (Organisation for Economic Cooperation and Development), electricity prices have increased on average by 73 percent, natural gas by 122 percent, and petrol by 36 percent between January 2021 to May 2022 . If figures vary, all surveys show a converging trend toward a surge in the number of households exposed to the risk of energy stress, which have increased by 50 percent as of June 2022 in EU27+UK. Studies in the EU show that low-income households are disproportionately affected and pay 20 percent more than higher income households to meet their energy needs. Another worrying trend is the deterioration of the financial situation of lower middle-class households who have never had to struggle with their utility bills before. For instance, in Germany, it is expected that up to 40 percent of German lower middle-class households might be exposed to energy vulnerabilities in the upcoming winter. Soaring prices reduce the purchasing power of households and may result in an increased share of disposable income dedicated to energy expenditure, which can exacerbate negative expenditure spirals. Having to choose between heating and eating may have dire effects on the health of both adults and children.

This unprecedented situation is setting energy affordability high on the political agenda of both the EU and individual member states. In October 2021, when the energy prices started to climb in Europe, the European Commission published a toolbox to encourage member states to mitigate the consequences of the energy price hikes. However, concrete implementation remains in the hands of the member states. What should be seen as a positive takeaway from recent decisions is that all members have taken some form of action to alleviate the burden of high energy costs on households’ budgets, including those who don’t recognize energy poverty – although the scope, target, schemes, and budgets vary. A better articulation between the EU and national levels is deemed necessary to better protect citizens against price volatility and the risk of energy poverty in the long term.

Dr Rachel Guyet is the Master’s Program Manager for Global Energy Transition and Governance at CIFE, France. Her research focus intersects the fields of energy poverty and local governance and energy transition. She is a member of European network ENGAGER on energy poverty and of the research group Energy and Cohesion at CERI-Sciences Po, Paris. She is currently teaching Energy Transitions and Society at the Sciences Po, Dijon Campus.

This article is published under a Creative Commons Licence and may be republished with attribution.