Energy Stressed in Australia Presentation by: Associate Professor, - - PowerPoint PPT Presentation

Energy Stressed in Australia

Presentation by: Associate Professor, Ben Phillips, ANU Kellie Caught, ACOSS Damian Sullivan, BSL 18th of October 2018

Energy Stressed in Australia

Energy Stressed in Australia

Cont ntent nt

• Background
• Energy Prices have risen
• High prices hitting certain populations groups hard
• Low-income households – bad to worse
• Newstart and related allowance households hardest hit
• Single parent and loan person households
• Low-income renters are particularly vulnerable
• Solar power lowers bills, but those with low wealth are locked out
• ACOSS and BSL Recommendations

Energy Stressed in Australia

Report B Back ckground

• To inform the development of appropriate policy solutions, policymakers need

to better understand who is most impacted by high electricity prices

• ACOSS and BSL commissioned Ass. Prof Ben Phillips, ANU to analyse the cost of

energy (electricity and gas) for a range of household types in Australia.

• The modelling is based on the Household Expenditure Survey (HES) undertaken

by the ABS, and includes trends between 2008 and 2018.

• A range of household types where considered, such as income and wealth

levels, source of income, tenure type, family type etc

• It considers actual expenditure as a share of income and takes into account

household energy use and any potential rebates households may receive, such as state government concessions or solar energy rebates

• This project was funded by Energy Consumers Australia Limited

(www.energyconsumersaustralia.com.au) as part of its grants process for consumer advocacy and research projects

Energy Stressed in Australia

En Energy P Price ces h have risen

• Electricity has increased by 117%, or 76% in real terms, over the last decade.
• Gas increased by 89%, or 53% in real terms.
• Inflation is around 25% over last decade
• The average share of energy costs to disposable income increased from 2.4 per

cent to 2.5 per cent over the last decade.

2.4% 2.5%

All 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 2018 2008

• Households are using less energy, likely

driven by improvements in energy efficiency within the household, particularly household appliances such as air-conditioning units. It may also be the case that households are responding to higher prices and choosing to conserve energy use.

Energy Stressed in Australia

High gh p prices h hittin ing c g cer ertain in p popula latio ions g groups h hard

• On average, low-income households spend 6.4% of their income on energy, while high-

income households (highest 20% of the income spread) spend far less relative to their incomes – an average of 1.5%.

• low-income households appear to use less energy, spending less in dollar terms per

year

• In 2018, in raw dollar terms, low-income families spend $2,015 per year on average,

compared to the highest income families at $2,649 per year.

• Higher income households are both more able to deal with increased costs both

financially and are more likely to be able to adjust to higher prices through using less energy or purchasing more energy efficient household appliances.

5.9% 3.6% 2.7% 2.1% 1.4% 6.4% 3.8% 2.8% 2.3% 1.5%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Lowest 20% Second 20% Middle 20% Fourth 20% Highest 20% 2008 2018

Energy Stressed in Australia

Low

• w-incom
• me h

househol

• lds – bad to w

worse

• There is considerable variation from the average in energy expenditure. Of the

households with the lowest 20% of incomes, one in four (roughly 455,604 households) are now paying over 8.8% of their income on electricity or gas

• Low-income households have also seen the largest increase in proportion of spending

since 2008.

3.2% 3.4% 2.4% 2.4% 1.7% 1.8% 1.4% 1.5% 0.9% 1.0% 7.6% 8.8% 4.6% 4.9% 3.4% 3.6% 2.6% 2.9% 1.9% 2.1% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 2008 2018 2008 2018 2008 2018 2008 2018 2008 2018 Lowest 20% Second 20% Middle 20% Fourth 20% Highest 20% 25th percentile Median 75th percentile

Energy Stressed in Australia

New ewstart a and related ed a allowance h e househ seholds h hardes est hit

• Those households dependent on income support payments such as Newstart and

similar allowances are hit hardest by high prices, with one in four of these households spending more than 9.7% of their incomes on energy.

• The plight of some Newstart recipients has deteriorated dramatically since 2008, when

a quarter were spending over 7.7% of their incomes on energy.

1.3% 1.5% 1.6% 1.5% 2.7% 2.5% 3.1% 3.8% 2.8% 2.6% 1.6% 1.3% 3.0% 3.4% 3.9% 5.4% 5.6% 6.0% 7.7% 9.7% 8.6% 8.0% 4.4% 4.4% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2008 2018 2008 2018 2008 2018 2008 2018 2008 2018 2008 2018 Wage&Salary Business Pensions Allowances Other Gov Other sources 25th percentile Median 75th percentile

Energy Stressed in Australia

Single p parent a and loan p person h households

• Single parent & lone person households (many of whom are reliant on Gov pensions)

spend more of their income on electricity and gas than many other household types.

• One in four single parent households are paying more than 5.2% and lone person

households paying more than 5.7%.

• Women make up the vast majority of single parents

1.6% 1.6% 2.1% 2.4% 1.4% 1.4% 1.7% 2.1% 1.3% 1.3% 3.5% 3.7% 5.0% 5.2% 3.8% 4.0% 5.0% 5.7% 3.0% 3.5% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 2008 2018 2008 2018 2008 2018 2008 2018 2008 2018 Couple/children Single parent Couple Only Lone Person Other/Group 25th percentile Median 75th percentile

Energy Stressed in Australia

Low

• w-income renters a

are p particularly vu vulnerable

• The research finds that 39% of households on the lowest 20% of incomes are renters, and

65% of households whose main income source is allowances like Newstart.

• These households have less choice and less control in the reduction of their energy bills.
• When we add housing costs to the analysis, it suggests some households are under

immense financial stress

3.8% 5.3% 3.3% 5.9% 3.3% 3.5% 8.0% 32.4% 18.5% 19.5% 1.8% 1.5% 24.3% 25.7% 25.9% 32.4% 23.1% 28.8% 52.0% 59.4% 47.8% 46.3% 8.4% 7.4%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 2008 2018 2008 2018 2008 2018 2008 2018 2008 2018 2008 2018 Wage&Salary Business Pensions Allowances Other gov Other/group 25th percentile Median 75th percentile

Energy Stressed in Australia

Solar p r power l r lowers bills lls, b but t those with l low w wea ealth a are e locked ed o

• ut
• While ownership of solar panels is fairly consistent across income levels, it varies more

greatly between wealth quintiles. This is in part because many older people have relatively low incomes but own their own homes. Renters are likely to be largely excluded from access

• Not only are low-income households hardest hit by high energy prices, but they may miss
• ut on the opportunity to take advantage of cleaner, more affordable energy sources such

as solar power

$1,827 $1,382 $2,000 $1,553 $2,126 $1,712 $2,308 $1,743 $2,519 $1,899

Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5

quintile

$0 $500 $1,000 $1,500 $2,000 $2,500 Solar No Solar

Solar household by Income quintile Solar household by Wealth quintile

Energy Stressed in Australia

ACOSS and B BSL R Recommen endations

• Some households are paying significantly more of their income on energy, and the gap

has increased since 2008, contributing to growth in inequality and poverty.

• Policies need to focus not only on reducing energy prices for everyone, but also on

reducing the size of household bills and improving people’s capacity to pay to reduce the disproportionate amount low-income households pay of their income.

• Key policy recommendations:
• Establish an energy poverty benchmark which no person should fall below to

access energy.

• Implement measures to reduce prices across the supply chain – networks,

generation, retail, demand response.

• Increase Newstart allowance by at least $75 a week.
• Mandate energy efficiency standards for rental homes.
• Improve energy concessions, including shift to percentage based concessions
• Consider targeted regulated retail price
• Prioritise solar for low-income households and ensure non-solar houses are not

paying for solar growth.

Energy Stressed in Australia

Thank y k you

Conta ntacts:

Kellie Caught, ACOSS – kellie@acoss.org.au Damian Sullivan, BSL – DSullivan@bsl.org.au Ben Phillips, ANU - ben.phillips@anu.edu.au