The Scottish Fuel Poverty Advisory Panel Annual Report March 2023 – April 2024

We’re pleased to publish our first annual report. As this is our first annual report, we have set out the work we have done since our appointment in January 2022. We reflect on the significant increase in fuel poverty rates, from 24.6% in 2019 to 31% in 2022, driven by the energy crisis and the wider cost of living crisis, and the impact these have had on those suffering and entering fuel poverty. This is the context which has dictated and shaped our work since we were appointed.

The Scottish Fuel Poverty Advisory Panel Annual Report 2023-2024.pdf

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Living with fuel poverty in Scotland

Increases in fuel poverty since 2019

The fuel poverty landscape has changed significantly since 2019 when The Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019 was passed: dramatic household energy price inflation has led to increasing numbers of households entering fuel poverty, as well as deepening the level of fuel poverty in already fuel poor households[3]. Energy price rises and fragile household incomes have created a significant new challenge in tackling fuel poverty. The 2022 Scottish House Condition Survey shows that since 2019, progress made in reducing fuel poverty rates has effectively been reversed[4]. Rates of fuel poverty have risen from 24.6% of households, with 12.4% in extreme fuel poverty in 2019, to 31% in fuel poverty and 18.5% in extreme fuel poverty in 2022 (as shown in Figure 1 rates of fuel poverty and extreme fuel poverty rates, Scotland, 2021-2022). This backdrop of unprecedented energy price inflation, the wider cost of living crisis and their impact on those suffering fuel poverty, has dictated and shaped our work since our appointment.

Living in fuel poverty in Scotland – what we have heard

We have heard many difficult stories during our evidence-gathering and stakeholder engagement sessions from those with lived experience of fuel poverty, and from those who support them. Fuel poverty is not inevitable but the 4 drivers of fuel poverty – and how they interconnect – can make the approach to mitigations and solutions complex:

  1. High energy prices. Of the fuel poverty drivers, high energy prices are currently the primary driver of fuel poverty in Scotland. In spite of the recent reduction in energy prices (the Price Cap fell from £1,928 in January 2024 to £1,690 in April 2024 – although this does not protect all consumers), Ofgem[5] has pointed out that energy prices remain higher than before the energy price crisis. This has left a left a legacy of huge consumer energy debt[6] and many households are struggling to pay their energy bills[7]. Intelligence suggests that energy prices will continue to be high until the late 2030s[8], therefore Scotland’s ambition to eradicate fuel poverty by 2040 will be in the context of continuing high energy prices.
  2. Poor energy efficiency of the home is an important driver of fuel poverty. However, even those living in an EPC A, B, or C[9]-banded home can be fuel poor. Albeit that for those living in fuel poverty in an energy efficient home, the lower running costs can make the difference between living in fuel poverty and extreme fuel poverty[10]. The question of where the costs fall for delivering net zero, in which decarbonising heat in homes plays a significant part, is one which governments, consumer advocacy, Ofgem and industry are grappling with[11]. But however these costs ultimately fall, they have the potential to negatively impact those suffering fuel poverty unless protecting people from and preventing fuel poverty is at the front and centre of the heat transition. Net zero heating systems have the potential to decrease fuel poverty, but an unintended consequence is that they may also deepen it[12]. As Scottish Government accelerates the transition to low-carbon heating systems, there is also a question of impacts on fuel poor households. Such heating systems can create more efficient and warmer homes, yet electricity remains 4 times[13] the cost of gas. This price discrepancy risks inadvertently increasing bills without dedicated support and protection for those in fuel poverty, or a wider reconfiguration of current energy markets to align electricity and gas prices.
  3. Low incomes make paying for energy challenging, and often impossible, particularly in an era of high energy prices. Fuel poverty is an intersectional issue where multiple coalescing points of vulnerability determine a household’s risk of fuel poverty. We do know that those with low incomes are often those with higher energy needs – those with disabilities, chronic health conditions, the very young and the elderly. We also know that low incomes cause people to ration fuel and, for some, to self-disconnect their energy supply altogether – impacting their health, wellbeing and overall capacity[14]. Fuel rationing and disconnection also have wider negative impacts. For example, where households are experiencing child poverty and/or more than one person has health issues, and/or, the household has debt and arrears. There is also then the wider strain this places on supporting services and those who deliver them.
  4. How energy is used in the home – A lack of understanding of both home heating and the wider energy market, as well as varying levels of supplier understanding of individual circumstances, can and does lead to increased fuel poverty. This lack of energy literacy and poor supplier practice can also lead to the under-consumption of energy, which is often unrecognised by typical fuel poverty measurements. Those suffering fuel poverty, and those vulnerable to fuel poverty, can be lifted out of and protected from fuel poverty through consumer protections and interventions that recognise that the prevailing cost to heat a home is unachievable for many.

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