Effective support for vulnerable households – closing the gap between capacity to pay and cost of consumption – Part 3

Image – St Vincent de Paul Society / AGL community housing upgrade, Ottway, South Australia (August, 2015)

In previous posts on this topic, we looked at the higher energy consumption of customers participating on hardship programs, challenges with payment plans and capacity to pay, along with significant numbers of customers living in public or private rental properties. This final post explores potential solutions and recommendations for policymakers.

Energy saving technologies & lack of access to capital

Analysis completed by Sustainability Victoria in the Victorian Households Energy Report found that the average Victorian home constructed before 2005 has a House Energy Rating of 1.81 stars. This is significantly lower than the 6 star minimum for houses built after 2011. They further found that “retrofit measures can potentially deliver significant energy savings in Victorian homes built before 2005. Upgrading the efficiency of the building shell can substantially increase thermal comfort and reduce household energy consumption, leading to significant savings. Further savings can be achieved by upgrading the existing lighting and appliances to high efficiency models” (SV, 2014).

Significant annual energy savings can be achieved as seen in Table 5 for pre-2005 homes through the installation of more efficient hot water systems, heating systems, draught sealing, insulation and solar PV (Table 5). Most of these measures however, require action and approval from landlords in order to progress with installation.

Also unsurprisingly, those measures that can deliver the greatest annual savings also tend to require higher upfront capital investment to install (ranging from $800-$3000). Access to capital for low-income households and especially customers in financial difficulty can be a compounding and significant challenge – even where no interest loans may be available, the customer still needs the available funds to make repayments as per the loan period. If customers are unable to meet the costs of ongoing energy bills, it is difficult to see how they can also find additional funds to meet the repayment costs of the upgrade.

Therefore, policymakers when designing policies to address these customers segments, need to take into consideration measures which will result in the biggest annual savings, along with any limited ability of the customers to make ongoing repayments.

Programs and policies which are designed to support vulnerable customers, particularly on hardship programs to access these technologies should thus look to leverage partnerships and co-investment from many parties to lower the capital costs associated with making these upgrades and gaining access to these technologies.

Table 5– Energy saving measures and payback periods (Sustainability Victoria* & AGL Energy)

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Recommendations

To effectively and sustainably address the affordability gap for customers participating on retailer hardship programs, policymakers must look to effective measures which assist customers in private and public rental properties reduce their consumption. Given the innovation in the energy sector over the past decade and the increasing availability of new technologies which can achieve this aim, addressing the long-standing barriers for low-income tenants should be a priority. The evidence suggests customers on hardship programs are consuming greater amounts of energy than average energy consumers and this will likely increase over time given current trends for technology adoption.

AGL encourages policymakers to adopt all three policy approaches to support vulnerable energy consumers:

  • Programs which focus on energy savings from fixtures such as hot water, heating/cooling, solar and draught proofing – these items deliver greatest material savings for customers in terms of ongoing energy usage;
  • Targeted solutions for all home tenure segments – home owners, private and public rental properties;
  • Programs which overcome access to capital barriers, potentially looking to leverage partnerships across the private and public sectors.

Programs which could effectively deliver these savings cost effectively and targeted to the customers segments which benefit most, may include:

  • Minimum standards for rental properties which may stipulate requirements for energy saving fixtures to be included. This could be phased in over several years to ensure an appropriate transition period for property owners. This could also be potentially accompanied by an incentive scheme;
  • Mandatory disclosure at the point of sale or lease around the energy rating/estimated running costs of a home – provision of information to future occupants around expected costs should be required both to drive market transformation, but allow genuine informed decisions to be made by tenants;
  • Targeted and direct upgrades of public and community housing properties within regions of poor building quality or high disadvantage. This could be a co-funded partnership with industry to also prioritise upgrades for customers participating on retailer hardship programs.

AGL is committed to ongoing engagement with policymakers, community groups and regulators around solutions to better support vulnerable customers. As part of AGL’s $6 million Affordability Commitment to community leaders in December last year, AGL has committed $500,000 per year over the next three years to support vulnerable customers gain access to energy savings technologies and measures – we welcome co-investment and collaborative approaches from all sectors to ensure these funds are delivered to customers most in need. To find out more about the Affordability Initiative, please go to the  AGL Blog: http://aglblog.com.au/2014/12/roundtable-energy-affordability/


St Vincent de Paul Society / AGL community housing upgrade, Ottway, South Australia (August, 2015)

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* Sustainability Victoria (2014) , Victorian Households Energy Report

^ Assumptions for solar calculation: 3kW system, yield of 1450kwh/kw p.a. (average), 50% export rate, 25c/kWh cost of grid power, 6c/kWh FiT.

Part 2 – http://aglblog.com.au/2015/09/effective-support-for-vulnerable-households-closing-the-gap-between-capacity-to-pay-and-cost-of-consumption-part-2/

Part 1 – http://aglblog.com.au/2015/09/effective-support-for-vulnerable-households-closing-the-gap-between-capacity-to-pay-and-cost-of-consumption-part-1/

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