Understanding Fuel Poverty: Causes and Consequences

As the UK approaches the colder months, a significant change in energy costs is on the horizon. The energy regulator, Ofgem, has announced a rise in the energy price cap, which will increase a typical household’s annual energy bill by £149 starting in October 2024. This 10% hike will bring the average yearly cost to £1,717, marking a notable shift from recent trends of falling energy prices.

Read The Rising Energy Cap in the UK: What It Means for Households & Pensioners for more information about the new energy cap

While this increase remains lower than the peak of last winter, it presents a challenge for many households, particularly pensioners and those on fixed incomes. The government’s withdrawal of certain financial supports and halting of winter fuel payments for 10 million pensioners in England and Wales means these rising costs will be felt even more acutely. As a result, the issue of fuel poverty is expected to worsen, making it vital to explore its causes and consequences. 

This article delves into the factors behind fuel poverty and its impact on households across the UK.

Causes of Fuel Poverty

Fuel poverty arises when a household cannot afford to heat their home to a comfortable and healthy temperature. Several key factors contribute to this, including:

1. Household Income

A primary cause of fuel poverty is low household income. When a significant portion of a family’s income is spent on energy costs, there is less left for other necessities such as food, clothing, and healthcare. As of 2023, an estimated 5.6 million households in the UK are experiencing fuel poverty, a figure that has risen from 4.5 million in 2021. Families on lower incomes are disproportionately affected by rising energy costs, leaving them vulnerable to cold, damp living conditions.

2. Energy Efficiency

The energy efficiency of a home plays a significant role in determining whether a household will face fuel poverty. Homes that are poorly insulated or have inefficient heating systems require more energy to maintain a comfortable temperature, driving up costs. Rural homes, in particular, are often less energy-efficient, with lower average energy ratings (FPEER) and larger floor areas. This results in higher fuel costs, with rural households reporting an average fuel poverty gap of £778, significantly higher than the national average of £417.

3. Rising Energy Prices

The UK’s energy price cap, set by Ofgem, limits the amount suppliers can charge households on a default tariff. However, recent increases have raised the average annual energy bill to £1,717, up from £1,568. Despite this cap, wholesale energy prices continue to drive up household bills, further exacerbating the issue for those already on the brink of fuel poverty.

“The lack of control over basic living conditions is particularly challenging for vulnerable groups such as the elderly, disabled, or those with chronic illnesses.”

Impact on Households

The consequences of fuel poverty are far-reaching, affecting not just household finances but also health, well-being, and social inclusion.

1. Health Problems

Living in a cold, damp home can have severe health implications. Prolonged exposure to cold temperatures can exacerbate respiratory conditions such as asthma, while dampness increases the risk of mould, which can further impact lung health. Additionally, cold homes are associated with increased risks of cardiovascular problems, such as strokes and heart attacks. Households in fuel poverty often have to self-ration their energy use, which can mean going without heat for extended periods, heightening these risks.

2. Mental Health Strain

The stress and anxiety caused by financial insecurity can lead to mental health issues. Households in fuel poverty often face difficult choices about whether to heat their homes or pay for food, rent, or other essentials. This strain, combined with the discomfort of living in cold conditions, can lead to increased levels of depression and anxiety. The lack of control over basic living conditions is particularly challenging for vulnerable groups such as the elderly, disabled, or those with chronic illnesses.

3. Social Exclusion

Fuel poverty can also contribute to social isolation. Individuals and families living in cold homes are less likely to invite friends and family over, leading to feelings of exclusion and loneliness. Some people resort to spending long periods in public places such as libraries or community centres to keep warm, but this does not address the core issue of inadequate heating at home.

“The private rented sector, which accounts for 18.9% of all UK households, is particularly concerning, as it contains 35.1% of all fuel-poor households.” 

–The Committee on Fuel Poverty (CFP)

Fuel Poverty Across Housing Sectors

Fuel poverty rates differ significantly across housing sectors. In 2023, 24.1% of households in the private rented sector were classed as fuel-poor, compared to 14.9% in social housing and 9.2% in the owner-occupied sector. The private rented sector, which accounts for 18.9% of all UK households, is particularly concerning, as it contains 35.1% of all fuel-poor households. 

While energy efficiency standards, such as the Minimum Energy Efficiency Standard (MEES), have had some impact, much more needs to be done to improve conditions for tenants in private rental properties.

How can we help?

At Halo Smart IoT, we understand the challenges faced by households struggling with fuel poverty. Our IoT sensors monitor energy usage and temperature levels in real time, identifying homes at risk. By understanding where inefficiencies lie, you can enhance energy efficiency, reduce costs, and ensure vulnerable tenants receive the necessary support to stay warm and secure.

Halo Smart IoT empowers private landlords, councils, and social housing administrators with advanced IoT sensors that continuously monitor energy usage and home temperatures. 

Protect your residential properties by booking a call with our team.