- A new way to define and measure which households in the UK are vulnerable to the prolonged energy price hikes has been published by researchers, including economic experts from the University of Sheffield
- The measure will help policymakers target interventions and support for those struggling to keep their homes warm and in debt to their energy suppliers
- Households with low levels of resilience to the ongoing energy price crisis are more likely to have worse outcomes in health, disability, and wellbeing
- Nearly one third of households who are unable to manage high energy prices, an increase from one quarter prior to the energy price crisis
A new way to define and measure which households are most vulnerable to the energy price crisis has been published to help policy makers better identify those who will struggle to withstand the ongoing challenges in the UK energy market.
The study, from the University of Sheffield, the UK Energy Research Centre, and Universities of Nottingham, East Anglia and Macedonia in Greece, found that employment status, housing tenure, inability to save, energy prepayment methods, and household composition are indicators of households that may struggle to withstand high energy prices and heat their homes effectively whilst maintaining their financial solvency.
Low energy price resilience (LENRES) is also associated with worse health, disability, and wellbeing outcomes for adults. This is mainly driven by the stresses of falling behind on energy bills.
The recent energy price crisis initiated “epidemic levels” of hardship in the UK, according to the recent Marmot Review and the most recent UK Government estimates show that about 37 per cent of households now spend more than 10 per cent of their residual income on energy, after deducting housing costs, a threefold increase compared to pre-pandemic levels. Millions of households therefore face energy-related deprivation for the first time, while millions more have become vulnerable to the escalating debt crisis - with energy-related debt rising to record levels (£3.1 billion).
This new indicator is intended to provide the Government with data to identify which households are most likely to struggle with energy affordability and financial solvency, while helping to plan support and interventions for those struggling to keep a warm home.
Dr Andrew Burlinson, from the University of Sheffield’s Department of Economics and UK Energy Research Centre, said: “Our study puts forward a definition and a quantifiable measure of low energy price resilience that can be used to inform policy making aimed at preventing the worst economic, health and wellbeing consequences of high and prolonged energy price events on households in the UK.”
Drawing on a representative sample of households in the UK between 2016 and 2022, LENRES was developed to provide a way for policymakers to look at the channels underpinning low energy price resilience and how LENRES affects key health and wellbeing outcomes for both adults and children who are living in cold homes.
Dr Davillas from the University of Macedonia, said: “Households with adults that are unemployed, retired, struggling to save, or currently on energy prepayment methods are systematically correlated with low energy resilience, and the numbers of these households are increasing over time.”
However, the research found that for children, household low energy resilience was mainly associated with poor life satisfaction. The researchers believe this was because adults try to shield children in the household from the problem, compounding associated wellbeing and mental health issues in the process.
The team say the research will not only help policymakers introduce more targeted energy interventions for those most in need, but help the Government introduce benefits for society as a whole.
Professor Giulietti from Nottingham University Business School, added: “The UK Government has already attempted to mitigate the impact of the crisis with measures such as the universal energy price guarantee, which has allowed for speed of action in the intervention. However this was a temporary measure for most consumers and potentially failed to support the most vulnerable.”
“As price volatility and uncertainty persist, policy interventions in the energy market will need to be better targeted to avoid further detriment to the most vulnerable households. This could include measures targeted at improving supply resilience as well as demand, more specifically individual household resilience in the longer-term.”
Professor Waddams Price from the University of East Anglia, said: “Ofgem’s rebalancing of the prepayment price premiums is a welcome announcement, however more is needed to tackle the long-term effects of the energy price crisis including a large-scale roll-out of energy efficiency measures targeting those most in need - as identified by our indicator of low resilience - as well as further exploring the reintroduction of social tariffs for those most vulnerable to current and future volatile energy prices.”
Matthew Scott, policy lead for net zero and fuel poverty at Chartered Institute of Housing, said: “This research breaks vital new ground providing a clearer picture of who has been most impacted by soaring energy costs to date, and a way of understanding who is potentially more likely to continue to struggle in the future.
With high energy prices here to stay for the rest of the decade and public finances tight, it is crucial that policymakers and practitioners engage with this research and continue to explore innovative ways of targeting financial support at people who need it most.”
Matt Copeland, Head of Policy and Public Affairs at National Energy Action, said: “Despite significant government support, this prolonged energy crisis has shattered the finances of millions of people in fuel poverty. Energy bill debt has risen to record levels, meaning our figures show 6 million UK households are struggling to meet their ongoing energy costs while being asked to pay for last winter.
“Identifying those households who no longer have any resilience to price shocks is crucial. As high prices continue and with volatile geopolitics impacting energy prices, targeting support to those who most need it is vital.”
