Phew, the debate on fuel poverty gets heated!

30th Jan 2017

 

I didn’t realise how much of a stir our recent report on fuel poverty would cause, what’s more, I don’t regret that for a minute. It is an important social issue that needs to be debated so that the best solutions are found. But it also led to deeper conversations about how impacts are measured.

Let me explain. Conventional analysis looks at the costs of the intervention (such as connection to gas and installation of central heating to replace say electric) against the anticipated returns, which are usually measured in bill savings (gas being considerably cheaper than electric per kWh). Now whether you look at cash returns, payback, NPV or IRR (did I tell you I used to lecture accountancy?) the basis of measurement is the same, cash savings.

But it was suggested that these savings will “overstate” the benefit of the intervention, as the householder would take some “comfort gain” – that is to say, they would live with a warmer home and choose to do so, therefore reducing the notional savings. I totally accept this, what’s more, I actually think it is great. I welcome the fact that moving people out of fuel poverty will mean they can live in a warm home. Surely that is what the heating industry is all about, providing people with thermal comfort throughout the year? But how do you place a monetary value on “comfort”?

What is also missing from the analysis is also the public gain. Reducing the adverse health impacts of living in a cold and damp home saves us all money – less burden on the NHS being an obvious one. What about better educational outcomes for children living in a warm home, comfortable to study in with fewer school absences associated with living in a fuel poor household? Public policy economists will place a value of this but it is too often missing in conventional ‘cost v benefit’ analysis.

Finally, to the organisation that objected to gas central heating as a means to reduce fuel poverty, suggesting instead, retrofitting to super-insulation standard, fitting PV on the roof, installing a high-efficiency new electric heating system with battery storage as a cheaper option to tackle fuel poverty, I’ve filed the idea appropriately.

Best wishes

Mike Foster, CE