“Half of households in Poland that suffer from energy poverty experience financial poverty as well. If wages go down and unemployment goes up, it may turn out that the consequences of these detrimental economic changes will be especially severe for households that are already suffering from energy poverty,” says Jakub Sokołowski, economist at the Institute for Structural Research, in an interview with BiznesAlert.pl.
BiznesAlert.pl: It would seem that nowadays heating and power are easily accessible. However, even in the 21st century some Poles still find it hard to meet their basic energy needs. This is called energy poverty. Could you explain this concept in more detail?
Jakub Sokołowski: Energy poverty is defined as a situation where household owners are not able to provide for their heating and electricity needs.
Is energy poverty growing in Poland? What are its features?
In Poland there are about 1.3 million households that suffer from energy poverty. This is about 10% of all the households in the country. This group is very diversified, which is especially visible in the context of the COVID-19 pandemic. Out of this group, which includes over a million households, members of 200 thousand households live in buildings that are not properly heated and at the same time are in a bad technical shape, e.g. they have a leaking roof, draughty windows or doors, or are damp. In case of 100 thousand households, the buildings are in bad technical condition and are inhabited by at least one elderly person of 60 years or older.
… does this mean energy poverty mostly affects the elderly?
Not only, but this group is at a higher risk of being affected by the consequences of the pandemic. Additionally, scientific research shows that staying in a damp building for a long time adds to the risk of lung disease, which is one of the most critical factors that increases the likelihood of contracting the coronavirus.
Is this problem caused by, e.g., the fact that the elderly often cannot afford to insulate their houses because of low retirement wages in Poland? One could also expect this problem to be more prevalent in the countryside.
A large portion of the poor in Poland live in the countryside. Additionally, the elderly often live in older buildings, which are usually in bad technical condition. They often believe paying for insulation makes no sense because it takes, let’s say, 20 years to get the return on investment. Moreover, it is very costly to heat older buildings, which causes a spike in electricity and heating bills. In the end, the people living off of disability benefits or retirement are at a high risk of energy poverty.
It can be expected that the current economic crisis caused by the pandemic may add to this problem.
Yes. We should acknowledge that half of households in Poland that suffer from energy poverty experience financial poverty as well. If wages go down and unemployment goes up, it may turn out that the consequences of these detrimental economic changes will be especially severe for households that are already suffering from energy poverty. In result, the quality of life and living conditions, which are already substandard, will worsen.
The situation may be especially difficult if the second wave of the coronavirus epidemic hits in the fall, during the heating season. We have calculated that a third of poor households, which is about 400 thousand, use traditional furnaces for heating. We have not experienced this yet, because the first wave of the pandmic had arrived after the peak of the heating season. During the second coronavirus wave, in case of isolation or quarantine, the people affected by energy poverty will have to spend more time at home. In result, they will need more heating fuel, which will increase heating costs. So what is the way out for the energy poor households? They will either somehow bear these costs, which will lower their income and quality of life. Or they will resort to using free fuel, i.e. trash or waste. Burning trash will cause air pollution. According to scientific research, even a small increase in air pollution caused by PM 2.5 dust significantly increases death risk from the coronavirus.
This is why the government should be concerned with helping households, which sometimes need emergency assistance. The help doesn’t need to involve installing a thorough insulation. From the point of view of societal benefits, it is not always constructive to insulate any kind of building as it involves huge costs. Public funds should be distributed wisely. In some cases it is enough to replace the source of heat and ensure access to clean heating fuel.
Are you talking about targeted solutions?
Yes, from the point of view of societal benefits, changing the heating source and providing allowances or vouchers for clean fuel is a targeted solution. It may significantly impact the quality of life of those living in energy poverty and eliminate local sources of air pollution.
What can the government do to limit energy poverty, especially at a time of crisis and a pandemic?
It is imperative to understand the features of local energy poverty. There is no data that shows the characteristics of poverty in every region in Poland. However, we do know that there is huge diversity among different regions when it comes to this issue. Energy poverty in the Lower Silesian Voivodeship is different than in the Warmian-Masurian Voivodeship. Local governments should research this issue, characterize the poverty and provide help.
We do have governmental programs that were implemented before the epidemic, and which are indirectly targeted at poor households. One of those is the “Clean air” program that should be continued. A question remains on how income thresholds in this program should be changed as “Clean air” was designed for households that are more or less prosperous. Households suffering from energy poverty would actually need to receive full financing for insulation or changing the heating source. We also have a program called “Stop smog”. It has been recently updated thanks to intensive consultations with local governments. This program includes energy poor households, as it completely covers insulation costs. Previously it was limited to the 30 most polluted towns in Poland, but now it is available in all communes across the country. Still, it would be easier to participate in the program if the issue of energy poverty was better understood locally.
Another group of instruments includes benefits and allowances, which help bear the costs of daily functioning of households. We have a housing allowance, an energy allowance and a targeted allowance for fuel. It is necessary to modify these tools. For instance, the energy allowance is only available to households, which receive the housing allowance. This means almost all households in single-family homes cannot receive the energy allowance, because to qualify for a housing allowance one must meet the small-area criterion. Secondly, the allowances are relatively low, so it needs to be reconsidered whether they actually fulfill their purpose in the current shape. The energy allowance is only awarded for electricity, so it is worth considering whether it should be expanded to heating costs. In case of the targeted allowance for fuel, not all households realize that it can be spent not only on coal, but also on other fuels. One could consider introducing vouchers for clean and efficient fuel.
Can investments in renewable energy sources help energy poor households handle growing energy costs? Should there be new programs that fully cover installations of this type?
In this case all expenses that need to be incurred by those suffering from energy poverty will be a problem. This is visible in case of the “Clean air” scheme. Such investments are often out of reach for the poorest households. Local governments could research the situation of locals suffering from energy poverty and then offer support and coordinate the participation of those households that are in the most difficult situation. Perhaps they could establish energy cooperatives and invite energy poor households in. We are missing on such solutions as all programs are mostly designed for households that are better off. Social housing has a lot of potential as well, but in Poland we are not giving it enough consideration. In some cases it would be better to build a new, efficient building that uses renewable energy sources and a clean source of heat, than waste energy and public funds on insulating existing buildings.
Interview by Patrycja Rapacka