Energy poverty - change brings new vulnerabilities

Changed conditions could increase vulnerabilities for energy poverty in Sweden

Energy poverty describes the compromises households can face in terms of energy costs in general and heating costs in particular. Owing to a relatively high standard in thermal insulation and strong social support policies, the prevalence of energy poverty has historically been lower in Sweden than in many other EU member states.

But factors such as geopolitics and energy transitions are changing the conditions and causing new vulnerabilities to emerge. During the end of 2021, circumstances including the geopolitical situation caused electricity prices to rise and some households, for whom a number of risk factors coincided, experienced a state of energy poverty where adequate heating of the dwelling could not be achieved due to financial reasons. At the same time, demand-side flexibility is increasingly viewed as a central component in the energy transition to maintain balance in the electricity network as the share of renewable and intermittent electricity generation increases. This is associated with more volatile electricity prices and potentially more frequent price peaks. However, as the ability to offer demand-side flexibility varies among households, more dynamic electricity pricing risks creating winners and losers, and new vulnerabilities to energy poverty may emerge among households with limited economic as well as flexibility resources.

Viewing these societal changes from an energy poverty perspective can allow us to identify risk factors relevant to the Swedish context and pinpoint where vulnerabilities emerge, so that precautions can be undertaken when future price peaks occur. It can thus be valuable to identify households vulnerable to the state of energy poverty rather than classifying a fixed group of households as energy poor. In doing so, we can also identify suitable measures to avoid negative implications for vulnerable households. Such measures could either be general subsidies for, e.g., improved energy efficiency or smart control services for electricity and heating, and should not exclude less affluent households from participating and benefitting.

Ways to adopt international knowledge to the Swedish context

There is extensive knowledge at RISE regarding how energy poverty is defined and alleviated in other EU member states, as well as broad expertise regarding the Swedish context in terms of energy system, housing standard, and households’ payment models and affordability concerning energy for heating. We can thus offer support when risk factors, definitions, and indicators for energy poverty are to be adopted in Sweden, but also in the design of new policy and subsidies to reduce rather than aggravate social inequality.

We thus offer support to authorities, counties, municipalities, property owners, and energy companies interested in understanding how the energy transition can affect households’ abilities to demand and afford energy. This knowledge is useful for early identification of where in the housing stock and among which household groups vulnerability to energy poverty is the highest, and thus where measures for energy poverty alleviation should be targeted for maximum accuracy and efficiency. This knowledge can facilitate the implementation of accurate and efficient measures against energy poverty as variations in energy prices increase and economic incentives for flexibility become more prominent. Attention to such issues will inevitably be needed to ensure a just energy transition.