The cost of household energy bills in Western Australia has increased substantially over the past decade and is forecast to keep rising, driven by projected increases in electricity prices above the rate of inflation. This is contributing to pressures on household budgets, particularly those on low incomes. Government programs to assist low income households improve their energy efficiency is one means of addressing rising electricity prices and the financial hardship caused. The WA Public Utilities Office engaged Synergies to develop, evaluate and recommend options for a targeted energy efficiency scheme for eligible households.
Recent statistics show that Australian households in the lowest 20% income bracket are spending about 6% of their disposable income on energy. Further, energy costs now comprise up to 10% of total expenditure by these households.
In recognition of the financial hardship arising from increasing electricity prices, the Public Utilities Office asked Synergies to identify suitable assistance measures that would meet two objectives:
achieve a material reduction in energy bills for low-income households that are experiencing acute financial hardship; and
lift the capacity of low-income households more broadly to make informed decisions about improving energy efficiency in the home, thus giving them the tools to reduce their energy costs.
As a means of identifying suitable options for WA, Synergies reviewed 14 energy efficiency programs (past and present) in comparable Australian jurisdictions (and one from the UK).
The schemes reviewed varied in their breadth and scope, both in terms of target households and the types of actions/measures eligible for subsidisation under the scheme. Some schemes involved broad-based interventions across the community, but most have adopted a more narrowly defined target – often with an emphasis on directing assistance to low-income households.
The main strategies used for promoting energy efficiency (which may be used in isolation or in combination) are:
education and awareness raising;
home energy efficiency audits;
appliance subsidies and free or subsidised energy efficiency kits for the home; and
building retrofits (e.g. ceiling insulation, window treatments, lighting replacements and installation of photovoltaics).
In addition to assessing the cost effectiveness of these strategies, our review examined the overall costs and benefits of each program and the factors responsible for success.
Based on our jurisdictional review, the most cost-effective energy efficiency schemes typically involve appliance replacement, audits and education. Retrofits are typically less cost-effective. For example, the reviewed schemes indicate that it costs around $16 to $20 per household to deliver an ongoing bill saving of $1 each year.
Drawing on our review findings, Synergies recommended a two-scheme approach – one that offers a relatively intensive level of assistance to a narrow group of households assessed as experiencing acute financial hardship, and the other that is broad based and offers a much more modest level of assistance to a wider range of households.
Our report to the PUO sets out the design features of each scheme, their policy objectives, implementation matters, and indicative cost to government.
Targeted support to low income households in the form of in-home energy efficiency audits and appliance replacements can be a cost-effective means of lowering power bills to customers. However, the eligibility criteria need to be carefully defined, such that support is targeted only to those that are experiencing acute financial hardship due to high energy bills, and who are receptive to a in-home audit. The audits can be prohibitively expensive, and therefore efforts should be made to leverage off existing support services – eg. social workers and financial counsellors – to perform the audit task.