European Energy Poverty Observatory aims to tackle EU energy poverty

24 March 2017 Consultancy.uk

Paying for the energy they need remains a problem for 50 million people across Europe, creating a host of health and productivity related externalities for society. Tackling the issue has become part of wider legislation within the EU. In a bid to identify problem areas and support cross state collaboration to tackle the issue, a consortium of organisations, including Ecorys, have joined forces under the titled the European Energy Poverty Observatory.

Energy poverty, whereby people have difficulty paying their bills or are rationing electricity to make ends, affects around 50 million households across Europe. The consequences on health can be considerable, from being undercooled or too hot to living with damp and mould.

The causes of energy poverty stem from low household incomes and high energy prices – incomes in the UK have stagnated while the costs of energy has increased steadily since the financial crisis. In addition, much of the housing stock across Europe are poorly insulated or continue to use inefficient applications – particularly outdated boilers.

The social costs for high energy prices can be high, studies have linked energy poverty to ill health, including respiratory and cardiac illnesses, and mental health problems – all of which can be exacerbated by living in low temperatures and with stress associated with unaffordable energy bills.

European Energy Poverty Observatory aims to tackle EU energy poverty

As part of wider efforts to combat the phenomenon, the European Commission (EC) included it as a policy priority in the Clean Energy package last year. The rationale for the move, among others, relates to the wider social benefits of energy security, as governments are not left footing the bill of high energy price health externalities on society, more efficient energy use reduces air pollution and low income households have better comfort and wellbeing, as well as more financial means to deal with other problems and be more economically active.

To support people across Europe tackle energy poverty, a consortium of 13 organisations*, from academia to the business sector, have come together to create a ‘specialist “knowledge hub”’ – called the European Energy Poverty Observatory (EEPV). The consortium, which includes sustainability consulting firm Ecofys, is funded by the European Commission, will work together to identify core issues causing energy poverty as well as mechanisms that can be deployed to end the problem. As Harriet Thomson explains, “There’s a growing integration of energy poverty analysis and policy in European Commission activities – so it’s now more important than ever to build a specialist network of stakeholders working on energy poverty in Europe.”

The EEPV will officially launch at the end of this year, focused on leveraging data across Europe and providing it as a friendly and open access resource, as well as creating the conditions for collaboration, including the sharing of best practices, across member states and institutions that are dealing with energy poverty in sometimes vastly different markets and conditions.

Professor Stefan Bouzarovski, who chairs the Observatory’s Steering Committee, says, “The Observatory is closely linked with a range of existing research activities at the University of Manchester, particularly the Collaboratory for Urban Resilience and Energy within the Manchester Urban Institute, as well as Manchester Energy. It builds on the University’s path-breaking scientific and policy engagement with wider European and global challenges around questions of social inequality and environmental sustainability.”

* The University of Manchester, Ecofys, Intrasoft International, The European Policy Centre, National Energy Action, Wuppertal Institute, Asociación de Ciencias Ambientales, Centre for Renewable Energy Sources and Saving, ECODES, Energy Action, The EnAct project, the EU Fuel Poverty Network, and Housing Europe.

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Brexit will have major impact on UK-EU electricity flows

22 April 2019 Consultancy.uk

Brexit could have a major impact on the consumer price of electricity in the UK, according to an analysis by Sia Partners. The total costs for UK society could swell to €600 million annually due to less efficient flows of electricity.

As the Brexit process has perpetually stalled, with no realistic end in sight now until Halloween, underprepared businesses have been handed a lifeline. The scramble to prepare for a No Deal scenario can now continue for another half-a-year, and one of the key factors which companies will need to consider when drawing up these plans is the cost of accessing utilities post-Brexit. In the digital age, virtually no business can survive without a ready supply of electricity – while the pay-cheques of staff will also need to inflate to accommodate future rises in bills.

With significant cross-border flows of electricity between continental Europe and the UK, Brexit is destined to have a major impact on individuals and companies in this manner, according to new analysis by consulting firm Sia Partners. These flows of electricity are governed by common European rules, but when the UK leaves EU, Britain’s electricity markets will no longer be integrated into Europe’s ‘Internal Energy Market’.

European model

Historically, electricity grids and markets were developed on a national level. However, years ago the EU set out to achieve integration in electricity grids, on the premise that coupling grids and markets can lead to significant benefits. By making electricity flows possible, price arbitrage can be faded out by allowing buyers to access cheaper prices offered beyond the country’s own borders, driving up competition and lowering average prices.

Brexit will have major impact on UK-EU electricity flows

An analysis of electricity flows between the UK and Ireland demonstrates this. Before Ireland was coupled to the UK, commercial electricity exchanges on the UK - Ireland border flowed 40% of the time against the natural direction, i.e. from the higher to the lower price market. After more effective cooperation and regulation was put into place ('After the I-SEM' went live), the picture changed drastically, with commercial flows now following the price differential 96% of the time. Quantifying this welfare benefit is not easy: according to one estimate by ACER, the economic added value of having market coupling with implicit capacity allocation on the GB-Ireland border (1GW) amounts to around €110 million annually.

Europe’s aim is to achieve interconnection of at least 10% of their installed electricity production capacity by 2020. As it stands, seventeen countries are on track to reach that target by 2020, or have already reached it.

On the UK side, the region currently has a total capacity of around 5GW connected with mainland Europe (France, the Netherlands, Ireland, Belgium), corresponding to roughly 5% of UK’s installed capacity. In comparison with other EU countries, this ratio is on the low end; however, the UK is playing catch-up and has 10 interconnections scheduled for commissioning in the next four years.

Brexit

It's clear that the UK’s withdrawal from the EU will have an impact on electricity markets co-operation. The question which remains is how large will the impact will be? To provide a forecast for this, analysts at Sia Partners ran a modelling exercise with two scenarios in mind. After leaving the European bloc, the UK will have to make agreements with European countries, similar to how Switzerland and Norway currently operate. Norway has a deal with a relatively high level of integration with the EU’s internal energy market, while Switzerland stands at the other end of the spectrum, with the country excluded from several market coupling initiatives (e.g. MRC, XBID) and from implicit capacity allocation with any other EU member state.

“If Brexit leads to a construction which is similar to the Swiss deal, where UK’s electricity borders are uncoupled from its neighbouring countries, then there will be a major loss of welfare.”
– Sia Partners

If the UK follows in the footsteps of Norway, then the consequences of Brexit could be muted. According to Sia Partners’ calculations, the economic loss would be minimised in the mid-term, with only operational challenges expected. For example, the implementation of pan-European projects, such as XBID, could run into delays in the UK. The EU currently has 7 of such interconnection projects scheduled for completion before 2022.

“In case a Norwegian style deal is struck, the UK will lose its decision power related to EU energy policy but it would allow keeping the benefits linked to the internal energy market not only for itself but also for Ireland and continental Europe,” the researchers state.

If, however, a Swiss deal is struck, then the projected costs could range between €500 million to €1 billion. An expected 60% of this loss will be borne by the UK, 16% by France, and 8% by Belgium, the isle of Ireland and the Netherlands. The researchers concluded that if Brexit leads to a construction which is similar to the Swiss deal, where UK’s electricity borders are uncoupled from its neighbouring countries, “then there will be a major loss of welfare.”