New report on energy poverty and electricity support schemes for households

On commission from the Norwegian State Housing Bank, we have investigated possible electricity support schemes for households, especially the economically disadvantaged. The report contains a review of various ways of designing support schemes against high electricity prices and a discussion of concrete ways of designing support schemes.

We also provide an overview of the support schemes that were introduced in selected European countries to alleviate the situation with high energy prices in 2021-22. In addition, we provide an overview of the international literature on measures to combat energy poverty.

Power prices are expected to be high for some time to come. There may therefore be a need for a support scheme also in the future. For the disadvantaged, it is important that a support scheme is put in place quickly, when the need arises. The goal of a support scheme should be to help the disadvantaged "over the hump" and prevent them from falling into the poverty trap. This indicates that a support scheme should be fairly simple and build on existing structures, e.g. the housing benefit scheme.

In principle, a cash payment is a better support scheme than price support: market-based prices still provide incentives to save electricity, but households receive help to pay the bill. For the market to function efficiently, it is important that price signals reach end-users. Furthermore, the household itself can decide how the support is best put to use. Housing benefit is just such a scheme.

In addition to a support scheme to help the disadvantaged "over the hump", counselling should be considered in advance of the crises. One way to avoid large price fluctuations is fixed-price power agreements. Traditionally, fixed-price agreements have been more expensive than contracts linked to spot prices, but for the disadvantaged, who do not have a financial buffer, it may be the right choice nonetheless. Information and guidance on the different types of power contracts and what measures each individual can take to save energy is important. In particular, advice on energy efficiency measures adapted to the individual may prove useful.

There is currently a lack of support schemes that make it possible for different groups of disadvantaged people to implement simple and cost-effective energy efficiency measures. The current support schemes for energy efficiency support large-scale and comprehensive measures. For the disadvantaged, a support scheme targeting "low-hanging fruit" would be more useful. Although these measures are profitable and should therefore be carried out by the individual himself, finances, competence and/or time and energy in everyday life are known barriers. We recommend that a thorough assessment be made of needs and how a package of policy instruments to trigger simple energy measures among disadvantaged people can be designed.

The report is available (in norwegian) here.