Analysis of the current energy support mechanism for low income groups And investigation of alternative energy support measures to support vulnerable consumers in Malta

Abstract

In 2014, about 25,276 Maltese families were registered as fuel poor and they were provided with an ‘energy benefit’ aimed at mitigating the effect of expenditure on water and electricity bills [1]. This financial assistance cost the taxpayers approximately €5 million per year [2]. In the light of this scenario, new strategies to tackle such a financial burden and thus reduce the fuel poverty need to be evaluated. These are precisely the objectives of this project which consists mainly of an in-depth analysis of the energy consumption patterns of vulnerable consumers, the modelling of a proposed definition appropriate to the local context, and an analysis of the impact that the application of this definition will have with respect to the present situation. In the Maltese legislation, although there is no formal definition for the vulnerable consumers, a combination of expenditure and consensual approaches are being applied in order to identify those consumers that are deemed to be in need of, and eligible for some form of financial assistance. The current system suffers from a number of shortcomings and therefore it was important to identify a more consistent and a narrower definition for ‘the vulnerable consumer’. The proposed definition is based on Hills’ methodology, taking into account the interaction between two components, namely low income and high energy costs (LIHC indicator). When these two factors occur simultaneously, the result greatly impinges upon the household’s vulnerability, and it is likely to push the household below the poverty line. From the detailed analysis carried out, the ‘Estimated Income Indicator threshold’ and the ‘Estimated Energy Indicator threshold’ were determined as 7,956 euros per person per year and 700 euros per person per year respectively. Based on these results, the electricity consumption threshold was taken as 5.0 kilowatt-hour (kWh) per person per day. To define the applicability of the proposed definition/thresholds, 600 invitation letters to perform energy audits were sent to the households that are currently eligible for the energy benefit. About 122 house visits were completed to analyse 61 vulnerable consumers’ residences electricity consumption. Energy audit data was then analysed and amongst various results, it was found that 61.5% of the visited households spend more than 9% of their income on the utility bill whilst 86.5% of the visited households consume more than 5kWh per person per day. Based on these actual results, alternative solutions were put forward, making up the last phase of this study. From the energy audit results, it was determined that the most common equipment used in the audited households and which has direct implications on the consumers is the ‘Water Heating Equipment’. A number of solutions were identified and analysed in order to find the most economically feasible method to lift the identified vulnerable households out from fuel poverty. It results that with the installation of a 3kW peak PV system to all eligible vulnerable households, about 7,328 consumers will no longer classify as fuel poor whilst the net calculated savings over a period of 20 years can reach 13.5 million euros. Adopting the proposed definition would have implications on the manner in which households which are identified as being energy vulnerable, will be provided with the required assistance, since each vulnerable household has its particular circumstances and may therefore be considered as a case study on its own. The interplay between low income and high energy costs implies that more appropriate assistance should focus on reducing the consumption level of the vulnerable consumers. In this way one would be directly addressing the root cause rather the resulting symptoms characteristic of the vulnerable households.