[31.08.22] In depth: energy poverty coverage in EED and EPBD recast proposals
An article by Emil Martini, UIPI
With the publication of the two batches of the ‘Fit for 55’ Climate Package, one of the key steps in delivering the European Green Deal, the Commission launched a set of revisions and recasts of energy and climate laws aimed at reaching the EU’s 2030 goal of cutting greenhouse gas emissions at least by 55% compared to 1990 levels, and putting it on track to hit net zero by 2050. However, it seems clear that these new targets cannot be the only driving force towards a more sustainable society. In fact, social inclusion considerations also need to guide the EU action. As Executive Vice-President for the European Green Deal, Frans Timmermans underlined that the Fit for 55’ Package needs to “spur the necessary changes, enable all citizens to experience the benefits of climate action as soon as possible, and provide support to the most vulnerable households”.
But how is this objective of social inclusion translated into practice? And how does the energy poverty matter fit into this purpose? Here below we will try to answer that by analysing how energy poverty is dealt with in the recast proposals of the two main directives which were already dealing with this issue, namely the Energy Performance of Buildings Directive (EPBD) and the Energy Efficiency Directive (EED).
Energy Performance of Buildings Directive (EPBD) Recast
Until now, the Energy Performance of Buildings Directive (EPBD) mainly required relevant actions to alleviate energy poverty to be outlined in national renovation strategies, and that the least efficient buildings should be first in line for renovation. Building on this last consideration, in the recast proposal the Commission explains that the alleviation of energy poverty is among the main considerations at the basis of the introduction of EU minimum energy performance standards to trigger the required transformation of the building sector.
According to the Commission, the benefits of lower energy bills are even more relevant in a context of high energy prices. People living in worst-performing buildings and those facing energy poverty would benefit from renovated and better buildings and from reduced energy costs, and be buffered from further market price increases and volatility. Member States will be required to support compliance with minimum energy performance standards with an adequate support framework that includes financial support, technical assistance, removal of barriers and monitoring of social impacts, in particular on the most vulnerable.
Given this framework, the Commission prefers now to refer not only to ‘households in energy poverty’, but rather to a wider new definition of ‘vulnerable households’ that include also households with lower middle-income that are particularly exposed to high energy costs and lack the means to renovate the building they occupy (see the table below).
| New concept of energy poverty in the EPBD recast proposal: ‘vulnerable households’ Article 2 Definitions 27. (new) ‘vulnerable households’ means households in energy poverty or households, including lower middle-income ones, that are particularly exposed to high energy costs and lack the means to renovate the building they occupy; Article 9 Minimum energy performance standards 3. (new) In accordance with Article 15, Member States shall support compliance with minimum energy performance standards by all the following measures: (a) providing appropriate financial measures, in particular those targeting vulnerable households, people affected by energy poverty or living in social housing, in line with Article 22 of Directive (EU) …/…. [recast EED]; (b) providing technical assistance, including through one-stop-shops; (c) designing integrated financing schemes; (d) removing non-economic barriers, including split incentives; and (e) monitoring social impacts, in particular on the most vulnerable. Article 15 Financial incentives and market barriers 12. (new) Financial incentives shall target as a priority vulnerable households, people affected by energy poverty and people living in social housing, in line with Article 22 of Directive (EU) …/…. [recast EED]. |
According to the Commission, the focus on the very lowest performing classes of the building stock ensures that efforts focus on buildings with the highest potential for decarbonisation, energy poverty alleviation and extended social and economic benefits. The renovation wave should leave no one behind and be seized as an opportunity to improve the situation of vulnerable households, and a fair transition towards climate neutrality should be ensured. Therefore, financial incentives and other policy measures should as a priority target vulnerable households, people affected by energy poverty and people living in social housing.
Energy Efficiency Directive (EED) Recast
The current Energy Efficiency Directive (EED) already requires a share of measures under Article 7 (energy efficiency obligations or alternative measures) to be implemented amongst vulnerable households, including those affected by energy poverty. The EED directive also specifies that Members States should create programmes at Member State level that will provide financial support for efficiency measures: energy poor households should have access to these schemes. However, a definition of energy poverty was missing, thus the inclusion of such definition is a big novelty of the EC proposal.
| Inclusion of a definition of energy poverty Article 2 Definitions (49) (new) ‘energy poverty’ means a household’s lack of access to essential energy services that underpin a decent standard of living and health, including adequate warmth, cooling, lighting, and energy to power appliances, in the relevant national context, existing social policy and other relevant policies. |
Moreover, since the EED energy savings obligations are an effective measure to improve energy efficiency in various sectors, the Commission recognises that they can be also an effective tool to support Member States in the alleviation of energy poverty. Thus, the energy savings obligations will require Member States to achieve an individually calculated share of the total amount of energy savings required towards vulnerable consumers, people affected by energy poverty and, where applicable, people living in social housing (see Article 8 below). The energy savings obligations retain full flexibility for Member States with regard to the types of policy measures, their size, scope and content. However, the national policy mix should not have adverse effects on these categories.
| Article 8 Energy Saving Obligation 3. (new) Member States shall implement energy efficiency obligation schemes, alternative policy measures, or a combination of both, or programmes or measures financed under an Energy Efficiency National Fund, as a priority among people affected by energy poverty, vulnerable customers and, where applicable, people living in social housing. Member States shall ensure that policy measures implemented pursuant to this Article have no adverse effect on those persons. Where applicable, Member States shall make the best possible use of funding, including public funding, funding facilities established at Union level, and revenues from allowances pursuant to Article 22(3)(b) with the aim of removing adverse effects and ensuring a just and inclusive energy transition. In designing such policy measures, Member States shall consider and promote the role of renewable energy communities and citizen energy communities in the contribution to the implementation towards these policy measures. Member States shall achieve a share of the required amount of cumulative end-use energy savings among people affected by energy poverty vulnerable customers and, where applicable, people living in social housing. This share shall at least equal the proportion of households in energy poverty as assessed in their National Energy and Climate Plan established in accordance with Article 3(3)(d) of the Governance Regulation 2018/1999. If a Member State had not notified the share of households in energy poverty as assessed in their National Energy and Climate Plan, the share of the required amount of cumulative end-use energy savings among people affected by energy poverty vulnerable customers and, where applicable, people living in social housing, shall at least equal the arithmetic average share of the following indicators for the year 2019 or, if not available for 2019, for the linear extrapolation of their values for the last three years that are available: a) Inability to keep home adequately warm (Eurostat, SILC [ilc_mdes01]); b) Arrears on utility bills (Eurostat, SILC, [ilc_mdes07]); and c) Structure of consumption expenditure by income quintile and COICOP consumption purpose (Eurostat, HBS, [hbs_str_t223], data for [CP045] Electricity, gas and other fuels). 4. (new) Member States shall include information about the indicators applied, the arithmetic average share and the outcome of policy measures established in accordance with paragraph 3 of this Article in the updates of their integrated national energy and climate plans in accordance with Article 14 of Regulation (EU) 2018/1999, in their subsequent integrated national energy and climate plans pursuant to Articles 3 and 7 to 12 of Regulation (EU) 2018/1999, and respective progress reports in accordance with Article 17 of that Regulation. |
Where using an obligation scheme to fulfil their obligations to achieve the amount of savings required under Article 8, Member States should designate obligated parties among transmission system operators, energy distributors, retail energy sales companies and transport fuel distributors or retailers on the basis of objective and non-discriminatory criteria (see Article 9 below).
To empower and protect vulnerable customers, people affected by energy poverty and people living in social housing, and to implement policy measures as a priority among those people, Member States can require obligated parties to achieve energy savings among vulnerable customers, people affected by energy poverty and people living in social housing. For that purpose, Member States can also establish energy cost reduction targets. Obligated parties could achieve these targets by promoting the installation of measures that lead to energy savings and financial savings on energy bills, such as the installation of insulation and heating measures.
| Article 9 Energy efficiency obligation schemes 4. (new) Member States may require obligated parties to achieve a share of their energy savings obligation among people affected by energy poverty, vulnerable customers and, where applicable, people living in social housing. Member States may also require obligated parties to achieve energy cost reduction targets and to achieve energy savings by promoting energy efficiency improvement measures, including financial support measures mitigating carbon price effects on SMEs and micro-SMEs. 5. (new) Member States may require obligated parties to work with local authorities or municipalities to promote energy efficiency improvement measures among people affected by energy poverty, vulnerable customers and, where applicable, people living in social housing. This includes identifying and addressing the specific needs of particular groups at risk of energy poverty or more susceptible to its effects. To protect people affected by energy poverty vulnerable customers and, where applicable, people living in social housing, Member States shall encourage obligated parties to carry out actions such as renovation of buildings, including social housing, replacement of appliances, financial support and incentives for energy efficiency improvement measures in conformity with national financing and support schemes, or energy audits. 6. (new) Member States shall require obligated parties to report on an annual basis on the energy savings achieved by the obligated parties from actions promoted among people affected by energy poverty, vulnerable customers and, where applicable, people living in social housing, and shall require aggregated statistical information on its final customers (identifying changes in energy savings to previously submitted information) and regarding technical and financial support provided. |
Furthermore, a new article (Article 22) refers to the concept of vulnerable customers and introduces an obligation for Member States to implement energy efficiency improvement measures as a priority among vulnerable customers, people affected by energy poverty and, where applicable, people living in social housing, to alleviate energy poverty.
Member States are required to implement energy efficiency improvement measures to mitigate distributional effects from other policies and measures or the application of emissions trading under the EU ETS Directive, and to foster the roll-out of enabling funding and financial tools. The role of expert networks to develop strategies to support local and national decision makers in implementing energy efficiency improvement measures alleviating energy poverty is also underlined and specified in detail (see Article 22 paragraph 4).
| Article 22 (new) Empowering and protecting vulnerable customers and alleviating energy poverty 1. Member States shall take appropriate measures to empower and protect people affected by energy poverty, vulnerable customers and, where applicable, people living in social housing. In defining the concept of vulnerable customers pursuant to Articles 28(1) and 29 of Directive (EU) 2019/944 and Article 3(3) of Directive 2009/73/EC, Member States shall take into account final users. 2. Member States shall implement energy efficiency improvement measures and related consumer protection or information measures, in particular those set out in Article 21 and Article 8(3), as a priority among people affected by energy poverty, vulnerable customers and, where applicable, people living in social housing to alleviate energy poverty. 3. To support vulnerable customers, people affected by energy poverty and, where applicable, people living in social housing, Member States shall: a) implement energy efficiency improvement measures to mitigate distributional effects from other policies and measures, such as taxation measures implemented according to Article 9 of this Directive, or the application of emission trading in the buildings and transport sector according to the ETS Directive [Reference to proposal]; b) make the best possible use of public funding available at national and Union level, including, where applicable, the financial contribution Member State received from the Social Climate Fund pursuant to [Article 9 and Article 14 of the Social Climate Fund Regulation], and revenues from allowance auctions from emission trading pursuant to the EU ETS, for investments into energy efficiency improvement measures as priority actions, c) where applicable, carry out early, forward-looking investments into energy efficiency improvement measures before distributional impacts from other policies and measures show effect d) foster technical assistance and the roll-out of enabling funding and financial tools, such as on-bill schemes, local loan-loss reserve, guarantee funds, funds targeting deep renovations and renovations with minimum energy gains; e) foster technical assistance for social actors to promote vulnerable consumers’ active engagement in the energy market, and positive changes in their energy consumption behaviour. f) ensure access to finance, grants or subsidies bound to minimum energy gains; 4. Member States shall establish a network of experts from various sectors such as health sector, building sector and social sectors to develop strategies to support local and national decision makers in implementing energy efficiency improvement measures alleviating energy poverty, measures to generate robust long term solutions to mitigate energy poverty and to develop appropriate technical assistance and financial tools. Member States shall strive to ensure a network of experts’ composition that ensures gender balance and reflects the perspectives of people in all their diversity. Member States may entrust the same network of experts: a) to establish national definitions, indicators and criteria of energy poverty, energy poor and concepts of vulnerable customers, including final users; b) to develop or improve relevant indicators and data sets, pertinent to the issue of energy poverty, that should be used and reported upon, and c) to set up methods and measures to ensure affordability, the promotion of housing cost neutrality, or ways to ensure that public funding invested in energy efficiency improvement measures benefit both, owners and tenants, of buildings and building units, in particular regarding vulnerable customers, people affected by energy poverty, and, where applicable, people living in social housing. d) to assess, and where applicable, propose measures to prevent or remedy situations in which particular groups are more affected or more at risk of being affected by energy poverty or more susceptible to the adverse impacts of energy poverty, such as women, persons with disabilities, older persons, children, and persons with a minority racial or ethnic background. |
| Article 28 Energy Efficiency National Fund, Financing and Technical Support 2. (revised) The Commission shall, where appropriate, directly or via the European financial institutions, assist Member States in setting up financing facilities and project development assistance facilities at national, regional or local level with the aim of increasing investments in energy efficiency in different sectors, and protecting and empowering vulnerable customers, people affected by energy poverty and, where applicable, people living in social housing including by integrating an equality perspective so that no one is left behind. 9. (revised) Member States may set up an Energy Efficiency National Fund. The purpose of this fund shall be to implement energy efficiency measures, including measures pursuant to Article 8(3) and Article 22 as a priority among vulnerable customers, people affected by energy poverty and, where applicable, people living in social housing, and to implement national energy efficiency measures to support Member States in meeting their national energy efficiency contributions and their indicative trajectories referred to in Article 4(2). The Energy Efficiency National Fund may be financed with revenues from the allowance auctions pursuant to the EU Emission Trading System on buildings and transport sectors. |
Conclusion
In conclusion, the Commission’s efforts towards a greater consideration of energy poverty are to be welcomed and denote a positive attempt of systematisation and further implementation of this concept and its ramifications through the challenges brought by the new climate ambition. However, these proposals of legislation are currently being modified through the ordinary legislative procedure and there is still time for the ENPOR partners to suggest improvements.
In particular, as Member States will probably be required to support compliance with minimum energy performance standards, it is important to underline that these standards can fall short of their social objectives unless they are preceded by the appropriate incentives and technical assistance. Given the magnitude of the task to be fulfilled in a short period of time, we can question the availability of sufficient support instruments and incentives in the current legislation, especially regarding the private rented sector.
Furthermore, Member States still have work to do to implement the current legislation and to ensure energy poverty is tackled in policies, financing programmes, and more. These next steps are only a starting point, but the path is still long and challenging in the context of the new crises that are crossing Europe.