April 2020 Bank Secrecy Act / Anti-Money…
As the general election is approaching, Sia Partners takes a closer look at a significant problem in the Netherlands: energy poverty. This study estimates the number of affected households and highlights the differences with poverty. It also puts a few recommendations forward.
A quick search on the Internet for “energy poverty in the Netherlands” will often lead to the same result: 750,000 Dutch households would be affected by energy poverty. This makes it a pressing issue for the country.
Unfortunately, this indicator turns out to be incomplete. It focuses solely on the ratio between income and energy expenses: should a household spend a too large share of its revenues on energy (e.g. 10% or twice as much as the median household, depending on definitions), it is then considered as energy-poor. This indicator is often referred to as measured energy poverty (mEP). This indicator is important, but does not tell the whole story of energy poverty.
In Belgium, for instance, energy poverty is assessed against 3 indicators: measured (see above), hidden and perceived energy poverty (see Figure 1)1. Hidden energy poverty includes households who cut their energy consumption below the level required for a decent life in order to keep their energy bill payable. Perceived energy poverty accounts for those who are unable to keep their home adequately warm. There is an overlap between the three aspects, but together they provide a more comprehensive view of the issue.
Taking these three dimensions into account (and subtracting the overlap between them), Sia Partners estimates that 270,000 households are currently missing from the statistics available to decision-makers2. In total, there are thus more than 1 million households affected by energy poverty in the Netherlands.
Energy poverty is often perceived as a side-effect of poverty. Consequently, fighting the latter should result in solving the former. Again, reality turns out to be more complex.
Although there are undoubtedly shared root-causes between poverty and energy poverty, a closer analysis reveals that they tend to cover distinct parts of the population: 47% of energy-poor households are indeed not considered as at-risk-of-poverty (see Figure 2)3.
This can be easily explained. A household is at-risk-of-poverty if its income is lower than 60% of the national median income4. Low income can also be a cause of energy poverty but two other factors also come into play: high energy bills and poor energy efficiency. The three do not have to happen concurrently. For instance, a household can dispose of an income just above the at-risk-of-poverty threshold but live in such an energy inefficient dwelling that its energy bill cripples its budget.
Hence, a poverty-centered policy only is not sufficient and measures focusing on energy poverty need to complete it. Otherwise, the risk is to see almost 500,000 energy-poor households being left helpless.
The past two years have experienced growing attention for energy poverty and new initiatives pop out on a regular basis to fight the problem (see Figure 3). It is worth stressing that, at the same time, numerous initiatives are being launched to promote energy efficiency or foster the energy transition. Relieving energy poverty sometimes appears to be a positive side-effect but is not central to these actions. Therefore, the number of energy-poor households impacted remains limited.
Fighting energy poverty requires additional political attention but there seems to be a lack of it from The Hague. Since 1995, the word ‘energiearmoede’ (energy poverty) has appeared only 24 times in parliamentary documents, compared to approximately 1,650 times for energy transition (energietransitie) and 6,500 for energy savings (energiebesparing)5. More recently, the government did not seem in favor of monitoring energy poverty and report on its evolution every two year, as suggested by the European Commission6.
A close look at the election programs of the 13 largest political parties in the Netherlands reveals that not a single one mentions energy poverty, whereas energy transition and energy savings appear respectively 38 and 48 times7. It is thus hard to see any good coming out of it for the 1 million energy-poor households in the Netherlands.
Given the fact that it is a significant and nationwide issue, it is questionable whether a limited number of local initiatives and a generic social policy will be sufficient to solve energy poverty.
The end of the winter and the fact that the Dutch economy is recovering are good news but will not be sufficient to significantly reduce the number of energy-poor households. The diversity of situations at hand de facto excludes a “one size fits all” scenario but rather calls for smart and specific measures.
Based on its experience in three other European countries, Sia Partners recommends starting with the following:
The upcoming spring and summer are a perfect moment to put these elements into motion and make sure that, by the start of the 2017-2018 winter, the number of households living in energy poverty is transparent, monitored, and set to decrease. In a continuation of the Energy Agreement (energieakkoord), there might be room for an Energy Poverty Agreement.
1. Huybrechs F. & Meyer S. (2011), Energiearmoede in België, OASeS-UA/CEESE-ULB, 200 p. + attachments
2. Sia Partners analysis
3. Sia Partners analysis based on Eurostat (2017) and the Energy Poverty Barometer (2009-2014) of the King Baudouin Foundation (2016). Figures were extrapolated from Belgium to the Netherlands due to the lack of available data.
4. See Eurostat for the exact definition (equivalised disposable income after social transfers). Although the CBS uses a slightly different definition for the Netherlands, this article refers to the European definition.
6. Verordeningen en richtlijn marktontwerp elektriciteitsmarkt, Vergaderjaar 2016-2017
Kamerstuk 34663 nr. 6
7. Sia Partner's analysis of the Election Programs