Will EU’s buildings directive bring benefits for low-income households?

The Energy Performance of Buildings Directive (EPBD) provides an essential gateway for citizen participation in the energy system, bringing cheaper bills to low-income households through old-fashioned energy efficiency, writes Louise Sunderland.

Louise Sunderland is a researcher, advisor, and policy analyst who works with the NGO Regulatory Assistance Project (RAP) on energy efficiency, energy poverty, and carbon revenue recycling.

Last week, the European Commission’s Citizen’s Energy Forum in Dublin reflected on the winter energy crisis, drawing lessons for energy poverty alleviation and long-term inclusion of all citizens in the energy transition.

One of the big themes of the Forum and the preceding roundtable discussion with energy regulators was ‘demand flexibility’ or shifting demand for electricity to make best use of the supply of renewables.

Value of flexibility

The importance of mobilising flexible demand took centre stage last winter. Energy providers in a number of European countries undertook campaigns to shift electricity demand away from peak times because flexible demand is a powerful tool to reduce gas use, the primary cause of the energy crisis, in electricity generation.

But flexibility is not just for a crisis. In an electricity system dominated by renewable generation, balancing supply with demand is vital to making best use of our valuable renewable resources and avoiding overly costly grid upgrades.

In the words of keynote speaker Eamon Ryan, Irish Minister for Environment, Climate, Communications and Transport, this means choreographing “a dance between supply and demand”. Flexible demand is also a powerful tool for cost-effective decarbonisation.

We also learned that households that are able to move some of their electricity use can benefit from lower-price electricity at certain times of the day. Could flexible demand be a powerful tool to reduce bills, too?

Time to deploy flexibility as a cost-saving tool

Speakers touched on the new reality that energy prices are becoming more granular in time.

They are moving from fixed tariffs, where every kilowatt-hour costs the same to a household, to variable tariffs, where prices per kilowatt-hour change with the ups and downs of the wholesale market, and even further to time-varying or dynamic, meaning the kilowatt-hour is priced differently at different times depending on supply and demand.

When we use energy joins how much energy we use in dictating our final bill, meaning moving energy use joins reducing energy use as a powerful instrument in our bill reduction toolkit.

For households that need this new bill reduction tool most – vulnerable households, people on low incomes and those at risk of energy poverty – moving demand needs to be easy and risk-free.

If policymakers focus too much on changing prices and tariffs to reflect the value of electricity at different times, this can be a punishment rather than an incentive for people who have no ability to react to that price without rationing.

To enable people to safely access the value of their flexible demand, first we need to facilitate the safe shifting of significant demand.

Where are the big savings?

The really big bill reductions will be from moving heating loads.

The greatest source of future flexible demand across Europe will be electrified household heating. And the largest part of the household energy bill is for heat, at around 65% of final energy consumption in the residential sector across Europe.

People need to be warm when they need to be warm. So, warmth can’t be shifted in the way, say, washing clothes might be. But the energy input to deliver warmth can be.

The key to achieving this is not a smart app, or an automated plug, a digitalised service or a smart meter. It’s a much more analogue, even old-fashioned, tool.

Efficient homes are more flexible

Energy use to generate heat can only be scheduled to avoid expensive times when heat can be stored. If your home can hold heat and stay warm for the period of highest demand and price, you might be happy to turn down the heating input for that period.

And the key to holding heat is building fabric energy efficiency – insulation, draught-proofing, efficient windows and doors – and efficient hot water storage.

An adequately insulated building stock is Europe’s greatest possible heat battery, providing huge services to the energy system otherwise served by costly investment in batteries and centralised storage or excess generation.

Minimum efficiency for the worst buildings

For households on low incomes or at risk of energy poverty, home energy efficiency improvements are recognised as a key structural tool to alleviating high bills and energy poverty long term, most recently in the Commission’s Recommendation on Energy Poverty.

The multiple health, bill-saving, wellbeing and other benefits are already well known. We can now add a new benefit to the list – the value of reducing heating bills by efficiently holding heat and reducing the need for energy inputs at expensive times.

Improving homes that do not hold heat well, occupied by the lowest-income households, must be a key priority of the energy transition. For households already overburdened and underserved, decarbonised heating will be less affordable and the benefits of cheap and clean electricity will be less accessible, if the worst performing homes are not insulated as a priority.

As the need for household flexibility comes into focus, energy prices become more granular and the time we have to decarbonise heat slips rapidly away, it is ever more urgent to ensure minimum levels of energy efficiency for households living in the worst-performing homes.

This was a key aim of the 2020 Renovation Wave Strategy and decision-makers still have an opportunity to offer this gateway to the clean, smart energy transition through the Energy Performance of Buildings Directive negotiations next month.