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Cool poverty

They’ve never had it so cold. The British have just shivered through another long, centrally heated winter, and people are receiving enormous gas bills. Social campaigners and parliamentarians are rightly concerned that a clutch of harsher winters and rising energy costs could reverse gains made in tackling fuel poverty. The UK Government’s recent Budget announcement to reduce fuel poverty assistance payments is another blow to maintaining decent and warm homes for the vulnerable, the elderly and children. Proposals to cap the amount that energy companies can charge people in their bills is welcomed by some, but feared by others – as it could jeopardise energy company funding for the Green Deal – a free-to-the-consumer loan scheme for insulation and renewable energy installation. And there’s another problem waiting in the wings. Unlike the United States and Australia, the average British home doesn’t have air conditioning, and it costs real money to install it. If outsized summer heatwaves continue to pop up more frequently in Europe, UK households will face “cool poverty” in summer – a lack of cooling.

Throwing more logs on the poverty fire. Britain is an unequal society, and likely to get more polarised with cuts in the social budget and job losses. Somewhere between a fifth and a third of all households are classed as “low income”, including around 2.8 million children and around 2.3 million pensioners, and the number of households in fuel poverty in 2008 is reckoned to be 4.5 million or higher (more information from here, here, here and here.) The trend in energy prices is upward, due to global market circumstances and new energy sector investment needed nationally. Rising costs of energy, both in home energy and vehicle fuel, are going to affect the less well off more than the comfortably off – although the poorer use less energy, it demands a higher percentage of their income.

It’s “peaky”, up North. The UK is losing productivity from North Sea Oil and Gas. The Government is seeking to increase production by opening up the current fields to third party operators, and the UK Continental Shelf, including two little patches of sea contested with the Irish, to new exploration. However, a definitive peak in oil and Natural Gas may have arrived in the North Sea, and this means less energy industry tax revenue for the UK social budget (despite a new windfall tax), and so makes higher energy bills likely as the UK has to import more fuel.

Selling energy services instead of energy. In trying to pursue a green agenda, there have been a number of attempts at government policy level in encouraging energy companies to sell more energy services, such as insulation, instead of more energy, which has a high carbon content. The latest of these is the proposed Energy Company Obligation (ECO). This could function in a similar way to the American ESCO model, with energy companies financing domestic renewable energy, “smart” energy and home insulation products, providing them with an income stream to offset lowered energy sales (For more information, click here, here, and here.)

Follow the rotten money. Many financial vehicles are invested in energy, and so the powers-that-be naturally want to avoid profit warnings for energy companies. This is why the Green Deal has to obey not just one, but two golden rules – it mustn’t cost the energy bill payers, and it shouldn’t dent energy company profitability. How the Green Deal is going to get adequate financing remains an open question. Without it, vulnerable people are going to suffer.

Baking breeze. Another energy cost is likely to add extra burden to the poor. Research has shown that the hot Russian summer of 2010 was off the statistical charts, which beat the previous mathematicians’ favourite of 2003. Currently, very few UK households have air conditioning units. Demand will increase, which will be a great economic stimulus, but negatively affect carbon dioxide emissions control. As the Earth’s surface heats up, as ever, the poor and vulnerable will suffer as they won’t be able to afford air conditioning installations or the power to run them. Perhaps “cool poverty” should be added to the fuel poverty campaign. And perhaps ensuring customers’ cool by paying for domestic air conditioning should be a financial responsibility placed on energy companies – after all, they would gain from the sales of the electricity to operate the units. It could also have the bonus for energy companies of balancing out profits over the year, since there will be much less Natural Gas sold in summer in future.

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