’It’s expensive, will it be more expensive? A cost-effective state as an answer to energy poverty’ [REPORT]

Below, translated to English executive summary of the report of Jagiellonian Club Centre for Analysis, It’s expensive, will it be more expensive? A cost-effective state as an answer to energy poverty, which is avaible to download in Polish here.

1. This report shows that there are no simple and cheap methods to alleviate energy poverty. Given the huge investment needed on the way to decarbonisation of the Polish energy sector and the uncertainty on the European energy market, a sustained increase in energy prices is to be expected. Such a situation, without mitigating measures, may aggravate and extend the phenomenon of energy poverty and may significantly increase the cost of its mitigation.

2. The share of households at risk of energy poverty in Poland range from 10-20% of the total number of households. 76% of respondents to the social survey conducted as part of the work on the report admitted that they saved energy during the last heating season. Analysis of the data at the regional level shows a very high variation in the intensity of this phenomenon. The high level of variation and the lack of a defined and consistently applied set of measures of energy poverty, poses a problem for proper planning of instruments aimed at levelling this phenomenon.

3. The energy development strategy documents, while noting the issue of energy poverty, provide neither a comprehensive analysis of the phenomenon nor long-term solutions. Furthermore, a weakness that runs through virtually every instrument analysed in the report to combat high energy prices is the lack of specific reference to energy poverty in the context of actual measures characterising energy-poor households. As a consequence, some instruments exclude energy-poor households that do not meet the income criterion from preferential treatment.

4. The instruments with the largest financial scale currently being implemented in Poland to combat rising bills for Poles are maximum prices for energy supply and price freezes and financial aid for buying fuel. Of these, the largest average annual budgets of the instruments in place are planned for, respectively: subsidies and price freeze for electricity (ca. 8.9 billion PLN/year) and financial aid for buying coal (7.8 billion PLN/year).

5. Unfortunately, for a large part of the instruments, all households (or most) are included in the aid – regardless of income. The effect of this arrangement is that higher-income households are partially subsidised by low-income households. The new universal threshold for electricity consumption entitling to a preferential energy price (3 MWh) covers about 74% of all households.

6. In the situation of high energy prices and huge investment needs of Poland for the implementation of the energy transformation, we propose the introduction of an income criterion for the maximum prices and energy subsidies, which would make it possible to exclude households with above-average income from the group of beneficiaries and thus allocate the saved funds to energy subsidies and grants (without own financial contribution needed) for building renovation of energy-poor households.

7. A simplified estimate indicates that in Poland 2 to 3 billion PLN per year in cash transfers for energy-poor households and about 22 billion PLN for renovation of existing buildings where people are suffering from energy poverty – this is an estimated level of funds that would make it possible to effectively combat the phenomenon of energy poverty (by that we mean reducing below 10% the share of energy expenditure in household income), assuming a current scale of energy poverty in Poland of about 10.5% .

8. However, in the social surveys conducted in our project, the idea of sacrificing specific programmes for the energy poor funded with all citizens’ money did not gain popularity. Almost twice as many respondents (57%) prefer small bill subsidies for everyone rather than significant subsidies exclusively for the poor (29%). In addition, more people were willing to support rebates for energy savers than grants (subsidies) for the poor (49% and 36% respectively). The last three places in the ranking of respondents with a negative score are occupied by interventions where the energy poor gain at the expense of the general public. Furthermore, 44% believe that 'good’ energy poverty programmes could replace the 500+ programme (a programme that is already in place which includes transferring 500 PLN a month for every child).

9. Given the perceived reluctance among respondents to instruments that only take into account low household income levels, a mechanism is needed to differentiate the level of support depending not only on income levels, but also on other measures of energy poverty. Respondents expect a link between state support and energy savings, so this is a factor worth highlighting in communication and instrument design. It is also important to emphasise in the rhetoric the need to spend public funds prudently. Communication and design of support instruments must take into account the expectations of the public to ensure broad support beyond the tenure of the government concerned.

10. Appropriately and thoughtfully designed support instruments as part of a green transition process can help the poorest to sustainably overcome their difficulties in providing for their own energy needs. A key tool to reduce energy poverty and the need for state subsidised energy prices is improving the energy efficiency of buildings. The Clean Air Programme (Czyste Powietrze) that is already in place in Poland has been refined over the years and, in its current form, appears to be an effective instrument that is worth investing further in.

11. When designing support instruments, EU funds and regulations will be an important element. As part of the implementation of the Fit for 55 package in the EU, a new separate emissions trading scheme was created for buildings and road transport (the so-called ETS II), which will become operational in 2027. To mitigate the effects of the energy transition also implemented through the EU ETS II mechanism, as well as to support households and micro-enterprises hardest hit by energy prices, the Social Climate Fund will be launched a year earlier. Poland could receive up to €11.4 billion from it over seven years. Another source of funds could be the Modernisation Fund, which has been increased as part of the revision of the ETS Directive. Delays and political uncertainty related to the transfer of funds for the Polish Recovery and Resilience Plan (through The Recovery and Resilience Facility) mean that these funds may not have the expected impact on energy poverty alleviation in Poland.

12. The energy transition may involve an increase in energy prices, which will have an impact on social transfer policies. This means that ministries responsible for social policy, as well as local social organisations, should also be involved in the development of strategic energy documents. The issue of energy poverty must be given due attention in, among other things, the Social Climate Plan, the preparation of which is one of the conditions for accessing Social Climate Fund resources.

[PRZECZYTAJ RAPORT CAKJ PT. „JEST DROGO, BĘDZIE DROŻEJ? GOSPODARNE PAŃSTWO ODPOWIEDZIĄ NA UBÓSTWO ENERGETYCZNE”]

The article and the report is published in a project partnership with the Poland from Nature [Polska z Naturą] Foundation, which is part of the Our Common Home network.