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Glossary · Energy industry & energy transition

Energy poverty

Energy Poverty Affordability electricity price heat Default supply social policy Households Energy Efficiency

Energy poverty describes a situation in which households cannot use necessary energy services reliably, adequately or without a disproportionate financial burden. This chiefly means heating, hot water, lighting, cooking, cooling and the operation of household appliances. In the specialist debate, electricity for digital participation, such as internet access and telephone, is increasingly also taken into account. The term does not refer to a single price or a single bill. It describes the relationship between income, energy demand, housing situation, technical installations and the rules by which costs are distributed among households.

A kilowatt hour of electricity or heat initially costs the same for all households under a given tariff. The resulting burden, however, differs greatly. A high electricity price affects a low-income household with old appliances and electric water heating differently from a high-income household with a renovated building and a controllable heat pump. Energy poverty is therefore not a simple consequence of high prices. It arises from the interplay of price level, consumption volume, building standard, appliance stock, household size, payment rhythm and social protection.

Legal definition in the EU

A definition binding across the Union has existed only since the recast Energy Efficiency Directive (EU) 2023/1791. Under Article 2, point 52, energy poverty is a household's lack of access to essential energy services that provide basic and decent standards of living and health. Heating, hot water, cooling, lighting and energy for household appliances are expressly mentioned. As causes, the Directive names a combination of factors, at least unaffordability, insufficient disposable income, high energy expenditure and poor energy efficiency of homes. The definition is expressly tied to the respective national context and existing social policy measures. It therefore does not set a uniform Europe-wide threshold, for example a specific percentage of income.

The definition has practical consequences. The Directive requires that efficiency and renovation measures primarily reach households in energy poverty and other vulnerable groups. Regulation (EU) 2023/955 on the Social Climate Fund was amended so that it adopts this definition. In 2023, the European Commission recommended transposing the definition into national law quickly. It also stresses that energy poverty and the energy-law concept of the vulnerable customer overlap but do not coincide. For Germany, the Öko-Institut found in 2025 that a binding national definition and clear responsibilities for monitoring and measures had so far been lacking.

What energy poverty measures and what it does not

No single indicator captures energy poverty completely. Commonly used are payment arrears on electricity or heating costs, threatened or executed energy disconnections, an above-average share of energy costs in disposable income, and self-reported inability to keep the home adequately warm. Each of these indicators shows only a part of the picture.

An example of the self-reported indicator is the European Union Statistics on Income and Living Conditions (EU-SILC). According to the Federal Statistical Office, in 2024 5.3 million people in Germany lived in households that, by their own assessment, could not keep their home adequately warm for financial reasons. That is around 6.3 percent of the population. In 2023 the share was 8.2 percent; the EU average in 2024 was 9.2 percent. Such values fluctuate with energy prices and measure an assessment, not measured room temperatures.

Payment arrears show acute financial overburdening. However, they do not capture households that pay their bills only because they cut back on food, health, mobility or social participation. A high share of energy costs in income can point to poverty. But it can also result from an unusually large home or temporarily high consumption. Whether a home is warm enough depends on subjective perception. Even so, it often reflects actual restrictions better than billing data alone.

Energy poverty must be distinguished from general income poverty. Many energy-poor households are low-income, but not every form of poverty shows up first in energy bills. Conversely, a household with a tight income may be less heavily burdened if it has a good building envelope, low fixed costs and suitable support. Energy poverty therefore describes the interface between social policy, housing policy and the energy system.

Energy poverty is also not the same as low energy consumption. Low consumption can stem from economical technology, such as efficient appliances or a well-insulated building. But it can also indicate hidden under-supply: rooms stay cold, hot water is avoided, lighting and appliances are used only to a limited extent. Without knowledge of living conditions and needs, consumption alone is not a reliable measure of poverty.

Electricity, heat and housing conditions

Energy poverty is often perceived publicly through electricity disconnections. Electricity is particularly visible because an interruption immediately affects many basic functions: lighting, refrigerator, telephone, internet, in part also cooking, hot water or the pumps of a heating system. In Germany, default supply ensures access to a standard tariff. It does not, however, guarantee affordability. Even there, a supply interruption is possible in the case of payment arrears.

For many households, heat weighs more heavily. Heating costs depend strongly on the condition of the building. A poorly insulated home with an old gas floor heating unit or an inefficient district heating transfer station can cause high costs without the occupants being able to reduce consumption easily. In rented homes, decision and payment diverge. Landlords decide on the building envelope, heating system and modernisation. Tenants pay the running energy costs and, through modernisation levies, partly also the investments. The technical solution therefore often does not lie with the person who pays the bill.

Appliances also play a role. Old refrigeration appliances, inefficient instantaneous water heaters or direct electric heaters significantly increase electricity consumption. Low-income households often cannot pre-finance replacement, even though it would reduce costs in the long term. In that case, energy efficiency is not a question of lack of insight but of investment. Efficiency reduces final energy demand. It has a socially relieving effect, however, only if households have access to the appliances, buildings and financing routes.

Disconnection rules in Germany (as of November 2026)

Since 23 December 2025, the rules on electricity and gas disconnections for non-payment affecting household customers have been set out in Section 41f of the Energy Industry Act (EnWG). They apply to default supply as well as to special contracts. The new Section 41g EnWG supplements them for default supply only. Previously, the disconnection rules for default supply were found mainly in Section 19 StromGVV and GasGVV. The reorganisation was introduced by the Act to Strengthen Consumer Protection in the Energy Sector of 18 December 2025 (BGBl. 2025 I No. 347).

  • Threat of disconnection: If a household customer does not pay despite a reminder, the supplier may have the supply interrupted no earlier than four weeks after prior notice of the threatened disconnection by the network operator.

  • Minimum arrears: The default must reach a statutory threshold, in particular twice the instalment payment attributable to the current month. In addition, it must amount to at least 100 euros.

  • Announcement: The start of the interruption must be announced separately and with advance notice. The notice of threatened disconnection must, among other things, refer to local assistance services and to the costs of disconnection and reconnection.

  • Proportionality: A disconnection is inadmissible if its consequences are out of proportion to the severity of the default or if the customer demonstrates that they will probably make their payments.

  • Default supply: Under Section 41g EnWG, the default supplier must offer an agreement to avert disconnection with payment by instalments. If the customer accepts it in good time, the disconnection is averted.

Electricity disconnections are not a normal market instrument like a tariff switch. They interfere with elementary daily living. That is why there are procedures, deadlines, information duties, proportionality checks and instalment payments. At the same time, suppliers must be able to limit payment defaults. The conflict arises where energy is organised as a tradable good but in everyday life represents a basic infrastructure service. District heating and other heat supply are governed by their own sets of rules.

Why the concept is relevant in the electricity system

An electricity system can be technically efficient and still produce social hardship if costs are distributed unfavourably. Network charges, levies, taxes, procurement costs, standing charges and metering charges are passed on to households through tariffs. Their distributional effects differ. A high energy price per kilowatt hour burdens above all high-consumption households. A high standing charge hits low-consumption households relatively harder because it is incurred regardless of the kilowatt hours consumed.

With electrification, these distributional questions become more important. Heat pumps, electric cars and electric processes can reduce fossil energy consumption and lessen dependence on oil and gas. Households without their own capital, without a parking space, without controllable technology or without a renovated building, however, do not automatically save as a result. Electrification shifts costs and consumption into the electricity sector. Whether this results in relief or additional burden depends on buildings, tariffs, subsidies, network charges and the ability to use electricity flexibly.

Dynamic tariffs or a time-of-use tariff can relieve households if they can shift their consumption into low-price hours. This applies, for example, to charging an electric car or to a heat pump with heat storage. Households with few controllable appliances, cramped homes or irregular working hours have less room for manoeuvre. A tariff that rewards flexibility can make sense for the electricity system and at the same time sharpen distributional issues if the technical prerequisites are unequally distributed. Flexibility is therefore not only a market resource but also a question of access.

Typical misinterpretations

A common oversimplification equates energy poverty with wrong consumption behaviour. Behaviour influences the bill, but for many of those affected the bigger lever lies in factors that can hardly be changed in the short term: floor space per person, insulation, heating technology, hot water preparation, appliance age, contract commitment, debt and income. Saving tips help little if the home is energetically poor or an old refrigerator consumes many times as much as a new appliance.

A second misinterpretation sees energy poverty as purely an electricity price problem. Electricity prices matter, especially for households with electric water heating or night storage heating. But heat, rent and modernisation costs are just as much part of it. A falling electricity price can reduce energy poverty but does not solve the problems of poor buildings. Conversely, a renovation can reduce energy demand and still burden households if the rent rises more than the heating costs fall.

Blanket relief measures also have only limited targeting. A general price reduction or price cap relieves everyone, including households with high income and high consumption. More targeted are often transfers, housing benefit adjustments, hardship provisions, a social tariff, debt counselling, protection against disproportionate disconnections and investment aid for efficiency. Design is decisive: support that requires own funds or is paid out only retroactively can exclude precisely the households that need it most urgently.

Low energy prices are also not always the best social policy. Very low prices can weaken incentives to save and make efficiency investments less attractive. Often more sensible is a mix of affordable basic needs, targeted support and price signals that do not permanently subsidise avoidable excess consumption. A special case is the rebound effect. If consumption rises after a renovation because a previously under-supplied household finally heats sufficiently, this is not a failure. The EU expressly treats this effect as a possible positive impact if it reduces energy poverty.

Connection with supply, market and social protection

Many bodies are responsible for energy poverty. Energy suppliers issue bills, network operators ensure physical supply and carry out disconnections, social authorities grant transfers, housing companies decide on building investments, regulatory authorities influence network charges and the legislator lays down protection rules. If these responsibilities do not fit together, gaps arise. A household may be entitled to social benefits and still fall into payment arrears in the short term. A renovation may be desired in energy policy terms and be socially problematic if the distribution of costs is not limited.

Energy poverty shows that affordability cannot be read off from average costs. What matters is which households bear which costs, what technical alternatives they have and how quickly they can react to price changes. The concept thus sharpens debates on electricity prices, the heat transition, building renovation, social transfers and tariff design. It is not a marginal issue of the energy system but describes the condition under which supply remains actually usable in everyday life.

Sources

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Edited by eCMS on 11.11.2026 19:45

© 2026 Erik Schmidt. All rights reserved. Quotations with a link to the source are welcome.