Energy poverty in Denmark?
In the following guest article, Sam Nierop draws on research carried out for his recently completed master’s thesis to provide an outline of the Danish energy poverty situation. Denmark scores well on most indicators of energy poverty, even though expenditure on energy is relatively high and specific protection against disconnection of the energy supply is absent. Nevertheless, an increased focus on vulnerable customers within Danish energy policy might be necessary in order for vulnerable households to improve the energy efficiency of their dwellings.
Denmark is not commonly regarded as a country having issues with energy poverty. Indeed, European-wide studies have established that Danish households are relatively unlikely to have problems to afford adequate energy services (Thomson and Snell, 2013). In the 2012 EU Statistics on Income and Living Conditions, 3.6% of Danish households reported arrears on utility bills and 2.6% were unable to afford to keep the home adequately warm, compared with European averages of around 10% for both indicators (Eurostat, 2014a). Moreover, domestic thermal efficiency in Denmark is excellent compared to other European countries, although not as high as in the rest of Scandinavia (Healy, 2003).
Both the concepts of ‘energy poverty’ and ‘vulnerable customers’ have not been defined in Danish law. The protection of ‘economically unfortunate citizens’ is covered by the social security system and general safeguards within energy regulations (Danish Energy Regulatory Authority, 2013). This means inter alia that Denmark has no specific protection for vulnerable customers against disconnection of the energy supply (Grevisse and Brynart, 2011). Nevertheless, the Danish government does provide one form of targeted assistance for energy expenses, namely refunds of heating costs for low income pensioners which can cover up to 20,000 DKK (around £2150, €2680 or $3660) per year.
Still, in 2005 the energy expenditure of the lowest income quintile in Denmark was 8.9% of all expenditure, more than any other Western European country (cf. 7.1 % in Germany, 5.6% in Norway, 3.9% in the United Kingdom and 3.6% in Sweden) (Eurostat, 2014b). Firstly, this might be explained by the fact that Danish households live in relatively large dwellings with more useful floor area to heat (Dol and Haffner, 2010). Secondly, Danish energy prices are comparatively high: Danish electricity prices were the highest among all EU Member States in 2013, with more than 50% of the price consisting of VAT, taxes and levies (Eurostat, 2014c). Energy taxes and carbon taxes have been found to have regressive impacts in Denmark, as lower income consumers bear a proportionally larger burden (Klinge Jacobsen et al., 2003; Wier et al., 2005). Smaller consumers also pay a higher electricity price than larger consumers (Eurostat, 2014c).
Using household budget surveys from Statistics Denmark, my research indicated that there are two categories of Danish households that are spending considerably more on energy than the Danish average: households on the lowest incomes and pensioners in detached housing (Statistics Denmark, 2014). Similar to other countries, the first category, households on the lowest incomes, is spending a larger share of disposable income on energy than higher income groups. This category includes inter alia the unemployed and single parents (Bak and Larsen, 2014). These households are also most likely in Denmark to be unable to afford to keep the home adequately warm and to have arrears on utility bills (Eurostat, 2014a). The second category, pensioners in detached housing, has the highest energy bills among socio-economic groups in Denmark. This can be roughly explained by two factors: first, this group lives in relatively large housing with more surface area to heat, and second, this group is more likely to use liquid fuels, which is an expensive way to heat the home in Denmark.However, this higher energy expenditure has not led to many arrears on utility bills for persons over 65 years in Denmark (Eurostat, 2014a). This might be because of the earlier mentioned refunds of heating costs available for pensioners.
My research suggested that a considerable share of vulnerable households within these two categories live in older, less adequately insulated housing. The lack of focus on vulnerable customers within Danish energy policy could present special problems for these households. First, energy saving programs of electricity companies in Denmark have not been targeted at renovation of existing housing up till now (Gram-Hanssen and Christensen, 2011). Moreover, my research indicated that a majority of households on the lowest incomes reside in rented dwellings, which might make it more difficult to improve the energy performance of their housing due to the landlord-tenant dilemma (Ástmarsson et al., 2013). Furthermore, my research suggested that pensioners in detached housing are generally living in owner-occupied dwellings with property values below the Danish average, which means they could have more trouble to obtain mortgage-backed financing for energy renovations. Therefore, an increased focus on vulnerable customers within Danish energy policy might be necessary in order for vulnerable households to improve domestic energy efficiency, so that these households are structurally able to afford adequate energy services.
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