System analysis of the significance of energy poverty on household energy use and emissions in Germany

Abstract

The energy transition in Germany will increase renewable energy and energy efficiency with the aim to decarbonise the energy system. Households represent a third of the final energy consumption and as such have a crucial role to play by undertaking investments in the household energy infrastructure (building insulation, heating systems, and appliances). However, limited income influences how some households are able to engage with and benefit from the transforming energy system given that the majority of households lack either the sufficient disposable income to afford the high upfront costs of investments, or the decision-making power to undertake meaningful investments. At the same time, it is estimated that 11-21% of the German population already experiences energy poverty, and is on the rise. Yet the phenomenon is not recognised by the government as an issue requiring a tailored response. Current energy policy is based on modelling assessments which assume a homogenous population, which can underestimate the impact on lower income households and overestimate the possible contributions from this sector towards achieving the overall objectives of the energy transition. This research provides an empirical basis for recognising the significance of energy poverty outside of the current “vulnerable consumers” lens and within the energy transition process. Based on the TIMES-Germany model, the TIMES-Actors-Model-Households was expanded to account for the differentiated needs and capabilities of the population. The suitability of the method developed are demonstrated through several scenarios to explore issues relevant to energy vulnerable households, such as access and affordability. The results showed that disaggregation is a useful methodology to assess the differentiated energy needs of households based on socio-economic parameters, but highlighted that disaggregation alone is not enough to represent the lack of financial capacity of households. The incorporation of budget constraints is a critical methodological inclusion to assess the significance of energy poverty in the energy system. This enabled an analysis of the impacts of policies designed to support lower income households, such as investment or consumption subsidies or the effects of carbon taxes, or schemes to redistribute funding. Another result facilitated through this method is the estimation of the supressed demand experienced as a key indicator of the energy welfare of households. This methodology provides a platform to support the analysis of a differentiated policy response – effectively strengthening the opportunity to achieve the desired active participation in the energy transition and the energy welfare of households.