Dynamic Properties of Energy Affordability Measures

Measures of affordability and of fuel poverty are applied in practice to assess the affordability of energy services, for example, or of water or housing. The extensive body of literature on affordability measures has little overlap with the existing literature on poverty measurement. A comprehensive assessment of the response of affordability measures as a result of changes in the distribution of income or expenditure (the dynamic properties) is missing. This paper aims to fill this gap by providing a conceptual discussion on the ‘dynamics’ of both energy affordability measures and fuel poverty measures. Several types of measures are examined in a microsimulation framework. Our results indicate that some measures exhibit odd dynamic behavior. This includes measures used in practice, such as the low income/high cost measure and the double median of expenditure share indicator. Odd dynamic behavior causes the risk of drawing false policy recommendations from the measures. Thus, an appropriate response of affordability measures to changes in relevant variables is a prerequisite for defining meaningful measures that inform about affordability or deprivation in certain domains of consumption.

Heindl, Peter and Rudolf Schüssler (2015), Dynamic Properties of Energy Affordability Measures, Energy Policy 86 , 123-132