Why energy poverty increased during the period of gas and electricity price caps

While, during the European energy crisis, the measures taken by the Government were promoted as intended to protect vulnerable households, the reality of today’s statistics seems to indicate the opposite. The study “Energy anti-crisis measures have deepened energy poverty”, carried out by the Intelligent Energy Association (AEI), reveals that, while inflation has gradually eroded incomes since 2020, energy poverty in Romania has increased alarmingly.

The European statistics related to the investments made in each country to protect the population correlated with those related to wages and energy efficiency confirm the deep discrepancy in our country, and those from AEI point to the importance of the urgent efficiency of buildings and the increase of the population’s income before any future cost regulations from the gas and electricity market.

The update of the Energy Efficiency Directive banning gas-fired power plants puts a stronger focus on alleviating energy poverty and empowering consumers. The new provisions include the EU’s first definition of “energy poverty” and require Member States to make energy efficiency measures predominantly implemented among people affected by energy poverty, vulnerable customers, low-income households and, where appropriate , of people living in social housing.

Romanians have not been able to keep their homes heated, even with capped gas prices

The study carried out by the energy policy expert Dumitru Chisăliță, together with his team from the Intelligent Energy Association, shows that during the energy crisis, many households were unable to pay their energy bills.

“The 2023 Consumer Conditions Scoreboard shows that in 2022, 16% of European consumers faced difficulties in paying their energy bills and 71% of them changed their habits to save energy . In 2022, energy poverty, measured by the inability to keep the home at an adequate level of heating, affected 9.3% of the EU population, affecting around 40 million people “compared to around 30 million in 2021. Energy poverty is generated by the low incomes of Romanians as a result of their erosion by a third of inflation, the double increase in natural gas prices compared to 2020, energy losses as a result of the low energy classes of buildings“, the quoted material shows.

According to Eurostat, in the list of natural gas prices for the population, Romania ranks 5th in the European Union, in terms of the average natural gas price paid by the final consumer, after the compensation made by the Romanian state decreased.

Among the highest energy costs in the European Union

Romania is in 12th place if we take EUROSTAT/AEI data, regarding the increase in prices actually paid by the population between the first half of 2020 and until the beginning of 2023. However, AEI experts say, Romania has experienced higher gas price increases than many European countries that do not have gas resources – the price of gas, even in the situation where it was subsidized, doubling in Romania between 2020 and 2022.

Specialists also studied the situation of electricity prices for the population, discovering similarities with what happened on gas bills. Thus, Romania is located in 9th place in terms of the price level actually paid by the population after the compensations granted by the authorities have decreased. At the same time, “Romania is found 21st in the European list of electricity price increases between 2020 and 2023 per populationif we consider the actual price paid by the population”, reveals the data synthesized by AEI on the Eurostat branch.

Other statistics analyzed refer to energy costs in gas and electricity contracts, in a household in the period 2020 – 2023, Romania being the 6th European country if we consider the prices actually paid by the population and the fifth country that has allocated the fewest resources to the energy crisis among European countries. Practically, reveals AEI, Romania has allocated fewer resources to protect consumers compared to other EU countries.

Energy poverty, explained through the filter of the minimum wage relative to costs

However, taking into account the prices actually paid by Romanians and the reduced energy consumption of Romanian households, it can be observed that the income allocated per capita was the same as the increase in energy costs between 2020 – 2022 in Romanian households. However, the study shows that in 2022, Romanians had on average 93% higher household energy costs (natural gas and electricity) than in 2020 (and 83% higher costs in 2023). AEI analyzed how many minimum wages from the year 2023 would have been necessary to pay the increase in household energy costs between 2023 and 2020. Thus, considering the prices actually paid for gas and electricity by Romanians, our country would rank 4th among European countries in terms of the impact of the energy price increase, a family with only one minimum wage per economy being put in a position to work almost 1 month just to pay off rising energy costs alone, experts claim.

“The matrix of the protection of household consumers, through financial support measures from governments to cover the increase in energy costs based on the prices existing in the contracts (in January 2023) it can be seen that there have been different approaches at the level of European countries. Some have understood to make HyperProtection, others SuperProtection, others to come with minimum protection measures. Romania is among the countries that have come up with minimal consumer protection measures”, explains Dumitru Chisăliță in the AEI study. Specialists explain that our country is among those that have chosen to collect funds from the state budget as a higher priority than supporting consumers vulnerable to price fluctuations.

Correlating the minimum wage per economy with the cost of natural gas based on actual prices and energy consumption in a household, AEI explains that Romania ranks among countries with high energy poverty. On the one hand, we have the second lowest minimum wage in Europe, after Bulgaria (half of the average European minimum wage, 4 times lower than the highest minimum wage in Europe). On the other hand, our country ranks last in terms of the energy performance of buildings, in the context where energy costs in a household have doubled in the last 3 years.

“Analyzing the Energy Poverty Matrices of the EU countries, it can be seen that Romania is found alongside Lithuania, Croatia, Bulgaria and Slovakia among the countries with high energy poverty. In Romania, it can be seen that the main cause of energy poverty is energy inefficiency, followed by the low minimum income of the population and only in the last phase the price”, the study shows.

However, in Romania the only energy measure applied was exclusively based on the drop in gas prices, an element that did not stimulate the reduction of energy inefficiency (the main cause of energy poverty in Romania) but its increase, perpetuating or even accentuating the phenomenon.

How to sustainably reduce energy poverty in Romania

At the level of solutions, the AEI specialists explain that reducing energy poverty in Romania can only be done through the following measures and only in a certain order. First, the energy inefficiency of buildings must be limited, and secondly, it is necessary increasing the income of the population, so that people can have leverage to withstand such shocks.

“The anti-energy poverty policies carried out in Romania for the last 30 years were based almost exclusively on subsidies and regulated prices, an aspect that had the opposite effect, increasing energy poverty. Analyzing the correlation of the minimum wage in the economy with the price of natural gas actually paid, it can be deduced that the decrease in the price of gas and energy has determined the increase in the level of energy poverty in Romania. In fact, it can be deduced that energy poverty is mainly determined by the low incomes of Romanians (they decreased strongly eroded by inflation in the period 2020-2023) and the high energy losses of buildings in Romania”, reiterates the study carried out by the Intelligent Energy Association.