Lessons learnt from using energy poverty expenditure-based indicators in a mild winter climate

Abstract

Several Southern European countries are paradoxical examples of high energy poverty, revealed by multiple indicators, despite their mild winter climates. Energy poverty may be quantified by using expenditure-based indicators that compare energy expenditure to net income, as a measure of how elastic is the net income to pay for energy. Because of the mild winter season and low efficient buildings, paying for space heating is not a top priority expense for most of the households. This cultural behavior exposes people to continuous cold conditions. This paper aims at a better understanding of the performance of energy poverty expenditure-based indicators in the Portuguese case-study, using national statistics raw data from 2015. The main conclusions of this study are twofold. First, a moderate heating cost is calculated by the difference between the median actual energy expenditure for households with a central heating system and those without any. Calculated equivalised values range from 116 (Lisbon region area) and 202€ (central region). The same order of magnitude is found for the difference between very low and very high incomes total energy expenses, which is 285€. Therefore, a reliable energy poverty indicator should rely on its capacity to evaluate net-income elasticity to pay for expected energy expenditure. From the evaluated indicators, the minimum income standard (MIS) is the more stable, identifying 27.8% households potential energy-poor. Still, this figure should be complemented with tracking MIS households where actual is significantly below expected energy expenditure (15.6%). Regarding energy policies the MIS energy-poor households should be the target to implement: (i) subsidised acquisition of heating equipment and (ii) subsidised energy during the winter season (mainly during cold spells). Further energy policies should mitigate the potential energy poverty of median-income households by boosting the refurbishment of the energy-inefficient buildings. Those households are particularly critical since they do not have sufficiently high incomes to fulfill the required house improvements, and, because of their low energy expenditure, payback returns are remarkably high.