Why cheaper power alone isn’t enough to end energy poverty in summer
- Written by Duygu Yengin, Associate Professor of Economics, Adelaide University
Australia is an energy superpower. We have abundant natural resources, high average incomes[1] and one of the highest per-capita rates of rooftop solar uptake[2] in the world.
Yet every summer, many households across the country[3] skimp on cooling, fear their next energy bill, or risk disconnection during extreme heat. Economists call this phenomenon “summer energy poverty[4]” which can force households to make impossible choices[5] between staying cool or putting food on the table.
Australia’s January heatwave broke multiple temperature records[6] and led to significant spikes[7] in emergency room visits. Climate change means such extreme weather events are likely to become more common[8] in future.
Energy stress is often framed as an affordability problem, driven by electricity prices that are too high or incomes that are too low[9]. But it both reflects and drives wider social and economic inequality, extending well beyond the simple cost of power bills.
Our research[10] shows key drivers of energy stress are differences in wealth, a lack of emergency savings and whether people are renters. This is the case even comparing people with similar income.
More than an affordability issue
First, it’s important to understand the difference between income and wealth, which are related but not the same thing. Broadly speaking, income is the money you earn from work, benefits or investments. Wealth is the total value of what you own – your savings, property or other assets – minus any debts.
Importantly, income fluctuates. Wealth reflects a household’s ability to absorb shocks.
Our research[11] suggests wealth matters more than income in energy hardship. Households without savings or emergency funds of a few thousand dollars are far more exposed to energy stress.
Even small shocks, such as hotter summers, rent increases and unexpected expenses can lock households into repeated bill arrears. Those who previously struggled to pay bills were 47% more likely to face similar struggles next year.
Energy stress can be less a temporary setback and more a poverty trap.
A system built for households with buffers
Energy systems work best for households with secure housing, financial buffers and control over their energy choices. Time-of-use pricing[13] is one example. It charges more for electricity during peak hours and less when demand is lower.
This is designed to shift demand away from peak periods, improving efficiency. But peaks often coincide with essential needs: cooling during heatwaves, cooking after work or running medical equipment.
For households with caring responsibilities, chronic illness or inflexible work hours, it can be very difficult to move their power use without real harm.
What is often presented as “smart” market design can impose higher costs on those with the least flexibility and higher needs for cooling or heating.
In Australia[14], dynamic tariffs are being rolled out, particularly in states with high solar uptake, because electricity is cheapest when the sun is shining and more expensive at other times.
However, wealthier households can much more easily respond to dynamic tariffs, by investing in[15] rooftop solar, battery storage, electric vehicles and automated energy management systems.
Owners and renters
A further divide appears between those who own their own homes and those who rent.
Solar panels[17] and batteries[18] mostly benefit households that can afford upfront investment and own their homes. Government incentives[19] have boosted uptake, but mainly help those who are already wealthy.
This leaves renters[20], lower-income households and those in public housing[21] behind.
Housing quality matters too. Poor insulation and inefficient appliances increase energy vulnerability. Renters, particularly in social housing[22] and Indigenous households[23] are most exposed.
The problem of prepaid power
Our research also found Indigenous households are at least 14%[24] more likely to experience energy stress through being unable to pay bills on time.
Energy stress is even worse in remote Australia. Around 65,000 Indigenous Australians[25] rely on prepayment systems and experience an average of 49 disconnections a year. These systems, meant to help households budget better by requiring payment in advance, often worsen energy insecurity because power is automatically cut off[26] when credit runs out.
As heatwaves become the norm, is energy a basic right?
Affordable energy for everyday needs is central to health and wellbeing[27]. However, what looks efficient for the energy system can leave some households worse off – with the benefits flowing mostly to those who are already well-off.
An energy-just[28] system treats energy as essential infrastructure, not a market luxury. Equity will not emerge automatically from markets or technology.
Recent electricity rebates[29] went to all households, but arguably would have helped more if targeted to those in greatest need. Our research suggests policy responses need to go beyond short-term fixes.
As parts of Australia may become “unliveable” under extreme heat[30], improving housing standards is a must. Seven-star energy efficiency standards and large-scale retrofits in low-income housing can reduce energy stress for all households, including renters.
Access to clean energy should also expand beyond the reach of wealth and homeowners, through subsidised solar in public housing[31] and shared programs such as community solar banks[32], which let renters and apartment residents benefit from solar power and battery storage.
Ultimately, policy should tackle the deeper drivers of energy stress, inequalities in wealth and housing, while helping households build financial resilience, for example through access to emergency funds for bills.
References
- ^ high average incomes (www.oecd.org)
- ^ solar uptake (iea-pvps.org)
- ^ many households across the country (doi.org)
- ^ summer energy poverty (doi.org)
- ^ impossible choices (doi.org)
- ^ multiple temperature records (www.abc.net.au)
- ^ significant spikes (www.abc.net.au)
- ^ become more common (www.worldweatherattribution.org)
- ^ too high or incomes that are too low (doi.org)
- ^ Our research (ideas.repec.org)
- ^ research (ideas.repec.org)
- ^ Lukas Coch/AAP (photos.aap.com.au)
- ^ Time-of-use pricing (www.energymadeeasy.gov.au)
- ^ Australia (arena.gov.au)
- ^ investing in (arxiv.org)
- ^ David Mariuz/AAP (photos.aap.com.au)
- ^ Solar panels (doi.org)
- ^ batteries (doi.org)
- ^ incentives (solarcalculator.com.au)
- ^ renters (doi.org)
- ^ public housing (apvi.org.au)
- ^ social housing (www.ahuri.edu.au)
- ^ Indigenous households (doi.org)
- ^ 14% (ideas.repec.org)
- ^ 65,000 Indigenous Australians (www.originalpower.org.au)
- ^ automatically cut off (doi.org)
- ^ health and wellbeing (www.sciencedirect.com)
- ^ energy-just (doi.org)
- ^ Recent electricity rebates (www.pm.gov.au)
- ^ “unliveable” under extreme heat (www.abc.net.au)
- ^ solar in public housing (cpagency.org.au)
- ^ community solar banks (www.dcceew.gov.au)
Authors: Duygu Yengin, Associate Professor of Economics, Adelaide University
