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Opinion: Fuel poverty Vs carbon reduction and the soaring cost of energy

In her blog, Margarate Corrigan, Operations Manager, Lemon Aid/Fuel Poverty Services at Cunninghame Housing Association discusses low-carbon heating solutions and affordability for tenants.

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By Margarate Corrigan, Operations Manager, Lemon Aid/Fuel Poverty Services at Cunninghame Housing Association 

Energy prices have risen at unprecedented rates in the past year, and it is estimated that a further 800,000 households have or will fall into fuel poverty in Scotland since the last increase of 54% in April 2022. It is not just the burden of the actual unit costs increasing, standing charges have increased, too, as a levy on households to help pay for all the failed suppliers during the crisis.

Many believe that this should be done through general taxation and should not be a burden on those already struggling to pay higher costs.

The reality for households is bleak.

Below is a table of historical price per kWh on OFGEM price cap standard variable tariff and the cost today on OFGEM price cap standard variable tariff. There will be another significant rise again in October and again in February as OFGEM have changed the time frame in which they review the price cap (the maximum that can be charged on a standard variable tariff). 

Average standard rate unit cost gas July 2019

Average standard rate unit cost gas July 2022

Average standard rate unit cost single rate electricity July 2019

Average standard rate unit cost single rate electricity July 2022

Average Standing Charge daily July 2019

Average Standing Charge daily July 2022

3.694p

7.37p

18.380p

28.34p

26p

43p

Average standard rate,  

multi-rate meter unit cost peak July 2019

Average standard rate, multi-rate unit cost off peak 2019

Standing Charge daily 2019

Average standard rate multi rate meter unit cost peak July 2022

Average standard rate, multi-Rate meter unit cost off peak July 2022

Standing Charge daily 2022

20.456p

18.462p

28.150p

34.33p

25.12p

56.20p

An average household using 14000 kWh gas per annum would be circa £663 per year. Average household using 3200 kWh electricity per year would be circa £708 per year. Both include standing charge.

Multi-rate meters are designed for historic all-electric storage heating. They give two or three rates. A peak-day rate, an off-peak rate, and, if there are three rates, there is a control rate which heating and hot water come from. Historically, the off-peak and control rate were much lower than the peak rate to allow old-style storage heaters to charge up overnight or in some cases set hours during the day. Now, there is little difference at all between the cost of the rates, and it is a very expensive option for all electric properties. Many of these meters are left in place when heating has been upgraded and this meter type is no longer required.

The national average consumption is circa 5000 kWhs a year, however, that does not take into account Scottish consumption for rural and island communities, where consumption is higher due to weather conditions and the fabric of buildings. A more realistic average for Scotland, from experience, is circa 7000 kWh a year, however, it is not uncommon to see consumption of circa 10,000 kWh per year. Average cost pre-price increase was £2,000 a year, but a more realistic figure for Scotland was £2,500 and up to £3,000 per year in island communities.

In October it is expected that the possible increase of a further £800 has been substantially underestimated. Households were spending this amount of money with storage heaters, without having a warm home as the old storage heating systems were inefficient.

Many social landlords in off-gas grid or high-rise city center dwellings upgraded heating systems in the early 2000s to wet electric heating systems, and while the thermal comfort was improved, the cost escalated for tenants, making them unaffordable. Many social landlords changed the heating but were unaware that the meter also needed to be changed to a compatible meter for the heating system which escalated costs further.

Currently, many all-electric heating systems are being replaced with air source heat pumps (ASHPs) which contribute towards carbon reduction and net zero.  The issue is that, although they give excellent thermal comfort within the home, the actual annual consumption is not reduced, and they cost as much to run as old storage heating. It requires a single-rate meter and, again, many upgrades are not accompanied with advice to the tenant as to the correct meter type for the property, and tenants are often left with historical metering for storage heating which makes the cost of heating their home prohibitive. At present average annual cost to run ASHP is circa £3,000.

With EESSH2 imminent, and the obligation to contribute to net zero, there is a conflict now for landlords between low-carbon versus affordability and tenancy sustainability for tenants.

There is conflict between achieving net zero and tackling fuel poverty, and, at present, there is not much thought being given to affordability for normal people and instead of “a just transition” and “nobody left behind” many households on medium to low incomes or tthose who are benefits dependent may be left either unable to use heating at all or be pushed further and further into debt and fuel poverty.

At present, there is a global shortage of smart metering, and suppliers are being too slow to offer time of use tariffs based on demand on the grid. 

Lemon Aid, Cunninghame Housing Association's fuel poverty service, was involved in a project in Dumfries with Warmworks installing Tesla Batteries. The project was a virtual network and was dependent on suppliers giving a compatible tariff, so the batteries would charge at times of low demand and discharge and power the property at times of high demand.  A well-known energy supplier provided a tariff, but, once it was seen how much the households were benefitting from this and how little the supplier would make in revenue, they raised the price of that tariff prior to any price increases and made it as unaffordable as the tenants’ original heating source had been.

Therefore, unless suppliers are obliged to offer time of use low-demand tariffs for renewable sources at affordable prices, then the move towards renewable innovative projects must be paused to consider affordability for households.

Views expressed by organisations/individuals in blogs published by SFHA on its website do not necessarily represent SFHA's views. To have your say on an issue, email features@sfha.co.uk

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