Energy poverty – a 21st century problem that needs a 21st century solution

In the lead up to the 2016 federal election, Good Shepherd Microfinance asked team members what financial inclusion issues they’d like to see addressed during the election campaign and by the incoming government. Peter McNamara and Tracy Collier chose to turn the spotlight on the growing issue of energy poverty.

It’s eight degrees outside. It’s cold, wet and dark … a typical Melbourne day in mid-June. I should have the heater on, I want to have the heater on, but I don’t.

Why? I simply can’t afford it.

I’m renting and the high cost my energy bill is linked to the old appliances and lack of insulation in my home. I’ve spoken to the real estate agent, but my landlord has little incentive to invest in the energy efficient heater, double glazed windows or solar panels, which would lower my energy bills.

Then there’s the impact of electricity price rises. In the 10 years to 2013, energy prices increased by an average of 72 per cent.[1] Safe to say my income hasn’t increased at anything like that rate.

So energy is taking up a higher percentage of my income. In fact, it’s got to the point where I have to balance my desire for warmth and a good night’s sleep with the impact a high energy bill will have on my ability to afford rent, groceries, car registration and my phone bill.

This month my heater is off because I’m trying desperately to keep cost down. Ask me again in a month or two and the heater may be off because I’ve been disconnected – I’m already behind in my payments, and I’m not sure how I’m going to catch up.

This is what energy poverty can look like, and it’s shaping as one of the major inclusion challenges facing Australia. Rising energy costs have been felt by everyone, but people on low incomes are disproportionately impacted. A 2014 discussion paper from ACOSS reported that the lowest income households spend seven per cent of disposable income on energy, compared to 2.6 per cent for the highest income households.

Some households may be unaware about the benefits of energy efficiency, others will be doing everything they can to reduce their energy consumption; electric blankets instead of heaters, turning the TV off at the plug so the standby mode doesn’t increase their consumption, and sealing gaps to block draughts. But even the most energy conscious households may find that their bills continue to increase.

The new government will have the opportunity to reduce energy poverty by investing in renewable and efficient technologies – importantly it will need to ensure the benefits of these technologies are experienced by people on low incomes who won’t be buying solar systems for themselves, especially when they’re renting and can’t afford cutting edge, efficient technology.

We’re calling for the incoming Government to encourage and incentivise home owners and landlords to improve the energy efficiency of their properties, including retrofitting, so that tenants can benefit from solar and insulation. Energy bills can also be reduced through access to affordable energy efficient appliances such as the products offered through our Good2GoNow program in partnership with The Good Guys.

In addition, our experience shows that education programs can have a positive impact through providing support to vulnerable households so that they can take simple energy saving actions and use power as efficiently as possible. The fact is using energy wisely and purchasing energy efficient products is a win for everyone – the environment benefits from reduced energy use and the cost of running appliances is cheaper, especially for people on low incomes.

But with the increasing cost of energy, there’s no guarantee that reducing your consumption will lead to a reduced bill, so it comes back to income. The Government should ensure all people have enough to live a dignified life where energy is a right not a privilege – the current Newstart allowance of $263.80 a week is insufficient and needs to be increased.

Finally, and after attending the National NILS Conference where the theme was partnerships, we’d like to see the Australian Government consider how it can work with energy retailers directly. It may be to improve hardship programs, or to forgive debts where there is no realistic chance that a customer will ever be able to pay off their debt. Perhaps it is initiatives to put downward pressure on energy prices. One things for sure, working together is likely to have a more significant impact that working in isolation.

 

Peter McNamara General Manager – Business and Operational Development and Tracy Collier, Strategic Advice and Microfinance Partnerships Manager