Unpacking the spaces and politics of energy poverty: path-dependencies, deprivation and fuel switching in post-communist Hungary

Abstract

This paper focuses on the embeddedness of energy poverty – understood as the inability to secure a socially and materially necessitated level of energy services in the home – in the socio-technical legacies inherited from past development trajectories, as well as broader economic and institutional landscapes. Using Hungary as an example, we explore the recent expansion of energy poverty across different demographic and income groups. While much of the mainstream literature focuses on cases where energy poverty affects distinct social groups and issues, our analyses examine the systemic implications of a form of deprivation that involves a much wider range of social and spatial strata. We develop a framework that highlights the different ways in which inadequate access to energy services has resulted in the emergence of new political reconfigurations among a variety of actors, while prompting the articulation of household strategies with far-reaching structural consequences.

Keywords:

• energy poverty
• prices
• natural gas
• path-dependency
• Hungary

1. Introduction

Social scientists are becoming increasingly interested in the spatial aspects of fuel’ or “energy” poverty¹: conditions characterised by the inability of a household to secure a socially and materially necessitated level of energy services in the home (Bouzarovski 2014). Originally focused mainly on the UK and Ireland, scholarship on domestic energy deprivation has recently expanded to the European, North American and Australian contexts to highlight, inter alia, the crucial role of low incomes, high prices and inefficient dwellings in driving the predicament (Boardman 2010, Chester and Morris 2011, Dubois 2012, Walker et al. 2014). Such research has developed alongside the distinct literature aimed at investigating issues of inadequate access to “modern” fuels in developing countries, and the accompanying problems of poor health, indoor pollution, gender inequality, substandard education and barriers to economic development (Sagar 2005, Pachauri 2011). Suboptimal domestic levels of “energy services” – otherwise understood as the “benefits that energy carriers produce for human wellbeing” (Modi et al. 2005, p. 9) – lie at the core of fuel and energy poverty.

A growing number of academic contributions in these fields have acknowledged the broader systemic conditions that lead to the rise of domestic energy deprivation. For example, there have been efforts to connect the understanding of fuel poverty with dynamics of procedure, recognition or distribution (see Walker and Day 2012) or the built forms and consumption practices that underpin inadequately heated homes. Questions of vulnerability, equity and justice have also entered the discussion, by highlighting the manner in which fuel poverty is “constructed through diverse pathways, and is a dynamic phenomenon, not easily reduced to a single metric” (Hall et al. 2013, p. 415; also see Arthurson and Baum 2013).

However, the wider political and spatial implications of energy (or fuel) poverty in contexts where this condition encompasses a wide range of demographic and spatial strata are relatively unknown. Despite the recognition that indoor environments represent fluid and open spaces that are connected to broader social and ecological systems (Biehler and Simon 2010), mainstream work on the dynamics of energy service deprivation largely focuses on a relatively narrow range of explanatory factors centring on the domestic setting (particularly micro-economic affordability, as well as the thermal efficiency of the dwelling, heating system or appliances – see Boardman 2010). There is a need for exploring how energy poverty is embedded in the broader system of infrastructural provision (Coutard 2002, Marvin 2012) and institutional change (Harrison and Popke 2011) while simultaneously affecting both the consumption structure and state policies that characterise energy flows.

This paper aims to move towards a conceptualisation of domestic energy deprivation as a systemic issue that characterises the wider material and policy configurations involved in the housing sector, the regulation of energy operations, and day-to-day political decisions. As such, the paper explores i) the embeddedness of energy poverty in socio-spatial path-dependencies and reform approaches; ii) its influence on the structure of energy demand as a result of household practices in particular; and iii) the manner in which domestic energy deprivation has shaped the conduct of political debates and government decisions. Our arguments and evidence are articulated with respect to the situation in Hungary – a country in which over two decades of significant increases of household energy prices have unfolded against the presence of a fixed infrastructural setting in the form of an inherited energy-wasting residential stock, and an import-dependent domestic energy demand profile. The Hungarian case also allows for exploring the broader spatial implications of household energy strategies in response to processes of systemic change. Such processes are embedded in the post-1990 transformation of post-communist Central and Eastern European (CEE) nations (Bouzarovski et al. 2012).

Methodologically, the paper is based on an analysis of changes in the domestic energy “affordability gap” since the late 1980s, thanks to a comprehensive assessment of price and salary/pension indexes retrieved from the Hungarian Central Statistical Office (KSH). We have developed estimates of a number of expenditure-based indicators (such as measures first proposed by (Boardman 1991, Hills 2012) by using aggregated results and individual household microdata from the Household Budget Survey (HBS) for the period between 2005 and 2011. Here, the emphasis is on indirect or input-based figures that capture the means or resources available (e.g. income) to achieve a certain level of well-being. The paper also uses consensual or self-reported energy poverty measures (see Healy 2004) that have been obtained from aggregated data for Hungary (2005–2013) published by Eurostat's EU Survey on Income and Living Conditions (EU SILC) for several relevant variables. This approach accounts for certain basic goods (such as adequate heating facilities) or essential household attributes (such as a damp-free home) that are consensually considered as “socially perceived necessities” (Mack and Lansley 1985) and whose enforced lack can be taken as an indicator of energy poverty. In addition, we rely on press reports and secondary documents in exploring the political and institutional reconfigurations driven by the presence of energy poverty.

The importance of treating domestic energy deprivation as a systemic issue – both globally and in the post-communist states of CEE – is outlined in the next section of the paper. Having discussed the structural features of the Hungarian energy sector, the paper subsequently provides an indicator-based analysis of the recent evolution of energy poverty in this country, based on the two measurement approaches described above. This assessment serves to address the first aim of the paper, by highlighting how energy poverty in Hungary is embedded in the systemic legacies of socialist central planning, as well as restructuring decisions undertaken during the past two decades. The paper then provides an account of broader spatial implications of energy poverty via an exploration of household coping practices and fuel switching – thus addressing the second aim listed above. This analysis is complemented by an exploration of the broader political implications of energy poverty in Hungary, in response to the third aim of the paper. Here, we highlight the entanglement of the problem with public discourses and policy. The conclusions presented at the end of the article situate our empirical findings within ongoing conceptual discussions at the nexus of energy, deprivation, and climate policy.

2. Domestic energy deprivation: a multifaceted phenomenon

According to the homeless support NGO Menhely Alapítvány, an average of 118 people per year died of hypothermia inside their homes during periods of extreme cold between 1990 and 2003 in Hungary. In addition to illustrating the risks faced by the energy poor, this statistic also hints at the multiple complexities implicated in the rise of domestic energy deprivation in the country, such as the households’ inability to mobilise their own resources so as to avoid living in inadequately heated homes, the limited support capacity and response of informal and formal social safety networks in the community or the municipality's social services, as well as the households’ perceptions about the health risks of living in the cold. These elements suggest that energy poverty cannot be solely understood in terms of its three commonly cited explanatory factors – household incomes, energy prices, and the energy efficiency of the dwelling and its appliances and heating systems – even if this paradigm has been useful in articulating the energy poverty challenge in scientific and policy terms for a number of years (see Liddell 2012).

The indoor environmental conditions of dwellings (temperature, humidity and air quality) embody some of the qualities of the home that allow it to act as “a place to recover from the stress and strain of daily life and work” (Evans 2011, p. 173). When such factors do not meet certain standards, the residential environment stops acting as a place of comfort, shelter and security and turns into an additional burden and concern for its inhabitants – “a space of virtual captivity that creates deprivation via its interaction with the households who use it” (Buzar 2007a, p. 1915). This means that domestic energy deprivation is not reducible to the combination of inadequate indoor thermal comfort, unmet energy service needs or disproportionate domestic energy costs. Rather, it is a wider issue that influences individuals’ self-perceptions, while exacerbating feelings of social exclusion and isolation. Such effects extend beyond the traditional impacts of energy poverty (health risks, restricted available income, indebtedness, risk of disconnection from suppliers, etc.) and hint at the systemic implications of the everyday experience of domestic energy deprivation. They also demonstrate that energy poverty is only one component of the wider assemblage of energy service provision, in terms of both the governance of the infrastructural complex involved in this process and the socio-technical characteristics of relevant fuel carriers (Harrison and Popke 2011, Sovacool 2011).

To date, developed-world energy (or fuel) poverty has been primarily seen via the lens of “unaffordable warmth” or other energy services in the home (Li et al. 2014) rather than the economic and material standard of the facilities implicated in delivering such amenities – a discussion reserved for developing nations. Much of the literature in the field has been heavily focused on the myriad social and environmental benefits that residential energy efficiency improvements can bring, particularly thanks to their ability to reduce household energy costs and improve thermal comfort, while mitigating carbon emissions and climate change (Ürge-Vorsatz et al. 2014). Such work has played a crucial role in moving the discussion of the drivers of energy poverty away from distributions of incomes and prices, while highlighting the multi-dimensional aspects of energy efficiency (Ürge-Vorsatz and Tirado Herrero 2012, Bartiaux et al. 2014). There are, however, significant opportunities for enriching such debates with a deeper understanding of the social and political reconfigurations associated with energy interventions in the residential stock – a process that necessitates significant realignments in the rhythm and practice of everyday life among affected individuals and communities. Of no less significance is the need for developing frameworks that can capture temporal changes in patterns of domestic energy deprivation, so as to explain the intermittent presence of this condition among particular social groups.

Energy vulnerability thinking is emerging as a novel method of encapsulating the systemic factors that drive the emergence of energy and fuel poverty. It emphasises the systemic pathways and conditions that lead to the rise of material deprivation in the home (Bickerstaff et al. 2013, Bouzarovski 2013, Hodbod and Adger 2014), as opposed to the relatively static and reductionist perspectives embodied in mainstream fuel and energy poverty frameworks. While a coherent conceptualisation of energy vulnerability is still lacking in the literature, most approaches operating with this heuristic connect the underlying dynamics of energy deprivation with issues of risk and resilience. As such, energy vulnerability captures the driving forces that lead a particular individual or group of energy consumers into a situation of inadequate energy services. This allows for a multi-scalar theorisation of the issue, as the systems involved can range from supra-national bodies to single households. Indeed, most discussions of energy vulnerability to date see it as a question of energy supply at the national or regional scale (Gnansounou 2008, World Energy Council 2008, Christie 2009). However, a closer integration between the domains of energy and vulnerability is still lacking, as vulnerable populations tend to be defined in demographic rather than socio-technical or housing terms (Moore 2012). It should also be pointed out that vulnerability and resilience paradigms have been criticised, inter alia, for conceptually and practically diminishing the agency of endangered populations, while depoliticising socio-natural relations (Marino and Ribot 2012, Evans and Reid 2014, Welsh 2014).

When speaking about households, key factors that increase or reduce the risk of becoming energy poor involve changes in affordability levels, a deterioration in the quality and energy efficiency standard of the housing stock, as well as modifications in policy or regulatory settings. The more general literature on poverty and social exclusion offers a first point of reference for understanding domestic energy deprivation as one of the ways in which some members of society are unable to enjoy the same opportunities and living conditions as their peers. Some of this work points to the possibility of using non-monetary indicators to capture the lack of resources that underpins an individual's inability to participate in their reference society (Nolan and Whelan 2010). A number of energy and fuel poverty researchers have relied on capability approaches (Saith 2001, Sen 2009) to explore the multiple ways in which inadequate energy services may hinder household functionings, while highlighting the distribution of energy access and consumption for the entire population (Pachauri et al. 2004). Social justice perspectives have often been considered in conjunction with such debates, for example, by emphasising distributional questions in climate change policy (Büchs et al. 2011) or exploring the structural inequalities that underpin fuel poverty (Walker and Day 2012).

At the same time, there is widespread recognition of the close connection between inefficient energy conversions in the home and increased greenhouse gas and other pollutant emissions (IIASA 2012, IPCC 2014). Consequently, policy-driven assessments mainly conceptualise the connection between climate, environment and domestic energy deprivation via the lens of energy efficiency improvements. Such measures seen as all-encompassing solutions with a broad range of beneficial environmental effects – also termed ancillary, multiple or co-benefits (OECD/IEA 2014) – which also contain a significant potential for improving the welfare levels of individuals and societies (Ürge-Vorsatz et al. 2014). However, the linkages between energy poverty and climate policies are also underpinned by concerns about the domestic energy affordability implications of low-carbon transitions. Academics and practitioners alike have questioned the existence of a “rebound effect” in situations where energy efficiency objectives are pursued without considering the needs of worse-off households, mainly because energy poverty is characterised by the suboptimal consumption of household energy services (Milne and Boardman 2000). The regressive implications of current energy pricing mechanisms, climate mitigation and environmental policies have also been emphasised in contexts where such measures have forced poor households to bear disproportionate costs compared to higher income consumers and larger non-domestic polluters (Hiteva 2013, Neuhoff et al. 2013, Grösche and Schröder 2014).

Issues of energy vulnerability, housing efficiency and environmental policy coalesce in the post-communist states of CEE, as a result of the path-dependencies inherent to their energy system restructuring trends (for a more detailed discussion of path-dependencies in transition economies, see Chavance and Magnin 1997, Ürge-Vorsatz et al. 2003, Stenning et al. 2010, Sýkora and Bouzarovski 2011). These states have been subject to extensive economic and political reforms during the past two decades, as a result of the stated objective of moving towards a market-based economy. In the energy sector, the reform process has entailed efforts to unbundle and privatise state-owned utility companies, and increase energy prices (Buzar 2007b). The character and sequencing of such measures have been shaped, in part, by the socio-technical legacies of communist central planning: a supply mix dominated by imported hydrocarbons and polluting lignite, a thermally inefficient and ageing housing stock, widespread district heating (DH) networks, and compact urban structures (Ürge-Vorsatz et al. 2006). It has also been faced with the institutional inertia resulting from the former economic system, in which energy utilities were horizontally and vertically integrated, while being owned and controlled by the state.

In CEE, increases in energy prices have combined with inadequate social safety nets and poor residential energy efficiency to drive an unprecedented expansion in energy poverty rates during the past two decades. This has been demonstrated by a number of comprehensive studies undertaken in the region (UNDP 2004, Fankhauser and Tepic 2007, Buzar 2007c) as well as Eurostat data on self-reported indicators describing levels of indoor thermal comfort, arrears in utility bills and related housing faults such as the presence of a leaking roof or damp walls (Thomson and Snell 2013). At the same time, significant differences in access to modern energy services between urban and rural areas (Petrova 2014) have combined with the emergence of informal economic practices (Smith 2002) to create a divergence between monetary deprivation and material poverty. Household practices to address energy poverty are part of a wider range of alternative economic strategies, involving the mobilisation of housing assets, the sharing of resources within community-based social networks, and the expansion of non-market and non-capitalist transactions (Bridger and Pine 1998, Burawoy and Verdery 1999, Lampietti and Meyer 2002, Collier 2011). Such practices have helped to challenge the hegemonic logic of neoliberalism while bringing to the fore the diverse social links and power relations that give rise to post-socialist transformations (Stenning et al. 2010).

3. The driving forces of energy poverty in post-communist Hungary

In energy poverty terms, Hungary is broadly representative of the CEE region as a whole – and particularly neighbouring states such as Slovakia, the Czech Republic and Poland. As elsewhere in the region, systemic path-dependencies from the period of communist central planning have played a key role in the recent emergence of domestic energy deprivation in this country. During the past 20 years, Hungary has seen the restructuring of the energy sector away from the centrally planned system that existed under socialism, resulting in price increases and utility liberalisation. Hungary also inherited an inefficient housing stock and a specific supply situation – characterised by dependence on Russian gas imports and the predominance of energy provision specific to communism, such as DH. As a result of these trends, it has been estimated that a substantial fraction (between 10% to 30%) of the population was living in energy poverty at the end of the past decade, with the share of households experiencing disproportionately high “energy burdens” – defined as the share of energy costs in family incomes – steadily increasing since the mid-2000s (Tirado Herrero 2013).

Energy poverty in Hungary is a highly path-dependent phenomenon predicated upon a series of socio-technical lock-ins. In the first instance, infrastructural legacies inherited from the past are evidenced by the poor thermal performance of the country's residential buildings, many of which were built during communism. A particularly relevant example is the stock of single-family houses built prior to the 1990s, whose ubiquitous presence in rural and suburban areas makes them the most common residential building type in Hungary. They take up more than 50% of the country's total residential floor area (Tirado Herrero 2013). Because of their building characteristics (such as poor surface-to-volume ratio) and the fact that many were built informally by families who tried to circumvent the lack of a functioning housing market by working manually with relatives, friends and acquaintances (Hegedűs and Tosics 1994), they are also the most energy-inefficient building type – the specific energy demand for space heating suspected to be in the range of 300–500 kWh m⁻² year⁻¹ (Tirado Herrero 2013). Other building forms (e.g. multi-family buildings of various ages) are supposed to have a lower specific energy demand – from 120 to 230 kWh m⁻² year⁻¹ (Tirado Herrero 2013) – which is still far from optimal in spite of the improvements in the energy performance of buildings that are thought to have occurred parallel to rising energy prices.

A second example of path-dependent inefficiencies in the residential energy supply system is provided by the existence of prefabricated multi-apartment panel blocks in large housing estates – the flagship of communist housing policies. Often supplied with DH networks, they currently host an unconventional typology of energy poverty as a result of high domestic energy costs, the lack of individual consumption meters and the inability to switch fuels. The poor efficiency of Hungary's buildings has consequences beyond domestic energy affordability issues, given that the residential sector is responsible for a large percentage of the country's final energy consumption, and therefore of its greenhouse gas emissions. Even though Hungary has easily achieved its Kyoto protocol mitigation target and its current (as of 2012) emissions are 20% below 2000 levels, achieving the 2050 European Union reduction target of 80–95% would require a significant overhaul of the country's infrastructure, including its residential stock (EC 2011).

Third, energy poverty is also influenced by Hungary's historically high levels of dependence on natural gas imports. The country's overall heavy reliance on gas can be traced back to the discovery of large domestic gas reserves during the 1960 and 1970s (Kessides 2000). It is also predicated upon the manner in which gas infrastructures were constructed and operated during Soviet times, when this resource provided an important instrument for political and economic control (Bouzarovski 2009, Bouzarovski 2010). However, it is also the result of decisions taken in more recent years, such as extensive replacement of tile stoves and coal and oil boilers with more efficient gas boilers between 1990 and 1998 – a process further enhanced by the regulation and subsidisation of domestic energy prices (Energia Központ 2009).

Despite the continued existence of indirect and direct tariff subsidies, Hungarian households have been putting up with a sustained rise in the real price of domestic energy for more than 20 years. This trend can be traced back to the early 1990s, when nominal energy prices started to increase at ostensibly faster rates than inflation in the context of the rapid economic adjustment that followed the end of communist rule. A particularly notable change occurred in 1991, when the annual increase of domestic energy prices (81%) dramatically exceeded the otherwise substantial inflation rate of the Hungarian economy recorded for the same year (35%). During the 1990s, energy prices rose faster than inflation in six years out of 10, and the same happened in all years since 2001 with the exception of 2013 (Figure 1). As a whole, nominal prices of domestic energy experienced a 13-fold rise between 1992² and 2013, while the overall Consumer Price Index (CPI) of the Hungarian economy increased by seven times in the same period (Figure 1). These trends have also been detected in many other CEE and EU countries (Bouzarovski and Tirado Herrero 2015) and provide evidence of the crucial role of domestic energy prices in driving energy poverty across the whole of Europe.

Figure 1. Fuel and power price index and CPI in Hungary, 1992–2013; 1992 = 100.

Source: Microdata obtained from the KSH HBS and processed by the authors.

Unsurprisingly, among the seven CPI sub-categories defined by the KSH (including food, clothing and footwear, and consumer durable goods), the one corresponding to domestic energy (fuel and power) registered the largest average inter-annual inflation rate for the period between 1985 and 2013 (KSH 2014a). A comparison of changes in the CPI, salaries and pensions and the prices of different energy carriers since 2000³ points to the existence of two clearly differentiated periods (Figure 2). During the first half of the decade, wages and pensions grew more rapidly than energy prices, contributing to a reduction of the domestic energy affordability gap from the 1990s. This trend came to an abrupt end in 2006, when cumulative energy price increases outpaced the rates of salary and pension growth, mainly as a result of the rapid augmentation of natural gas prices.

Figure 2. Changes in the prices of energy carriers, main household income sources and the CPI in Hungary, 2000–2013; 2000 = 100.

Source: Microdata obtained from the KSH HBS and processed by the authors.

While the recorded increase in the domestic energy price index during the 1990s can be seen as a consequence of the transition towards full-cost recovery rates, understanding the dynamics of natural gas prices requires closer scrutiny of the different components that make up the final price of this fuel. A key underlying cause is the monopolistic structure of Hungary's natural gas supply in international markets, given that most of this energy source either originates in Russia or transits through it from Turkmenistan, with Western European suppliers (France and Germany) functioning only as minor providers. In 2009 and 2010, imports accounted for up to 80%of Hungary's annual consumption, with the remainder being covered by the declining share of indigenous production (OECD/IEA 2012a). Natural gas is supplied on the basis of an oil price-indexed 20-year contract that was signed by the Hungarian company MOL with Gazprom in 1996 (Kessides 2000). While this arrangement has provided medium-term price stability, it has prevented Hungary from enjoying the benefits of lower spot prices based on gas-to-gas competition (EC 2012). In nominal terms, import prices went up by over 250% between 2004 and 2011 (OECD/IEA 2012b).

However, the gas price hike has also been influenced by a number of national-scale factors and processes. Of particular importance is the elimination of regulated prices in 2006, as well as the upgrading of Hungary's strategic natural gas storage capacity. The latter was triggered, in part, by the four-day disruption of supply that occurred during the January 2006 Russia–Ukraine gas dispute, followed by a similar 13-day event in 2009. The project was implemented at a cost of 750 million US dollars, which was borne by end users through increases in gas bills. In its 2006 review of Hungary's energy policy, the International Energy Agency (OECD/IEA 2007) warned against the high price of this investment and the likely effect on consumer tariffs, advocating its implementation in combination with measures such as energy efficiency and supply diversification. Also contributing to gas price increases has been the cumulative 7% rise in the VAT rate for all domestic energy carriers but DH, applied in July 2009 (when this figure went up from 20% to 25%) and January 2011 (when a further increase of 2% was applied).

4. The structure and evolution of inadequate access to energy services in the home

The presence of a pervasive landscape of energy vulnerability in Hungary is primarily visible in the composition and temporal changes of household consumption patterns. The ratios between HBS COICOP⁴ expenditure categories and total household expenditure per capita for the period between 2000 and 2012 show that “Food and non-alcoholic beverages” and “Housing, maintenance and household energy” were the largest domestic budget items: on average, they took up to approximately 45% of the total expenditure of the average Hungarian household (Figure 3). However, their evolution in this period indicates a significant change in the domestic consumption structure. If in the early 2000s the category “Food and non-alcoholic beverages” was the largest expenditure item, representing 30% of a household's annual budget, by the year 2009, it was overcome by “Housing, maintenance and household energy”, which currently takes up around 25% of household expenditure and has stayed in top position since 2009. This rise is almost solely explained by the rise in household energy expenditures, otherwise mainly driven by the price increases described above. The situation as of 2012 was such that if domestic energy was considered a COICOP category of its own, it would have been the second most important item in a household's budget after food and non-alcoholic beverages.

Figure 3. Income distribution of Hungarian households according to their energy burden in 2005 and 2011.

Source: Microdata obtained from the KSH HBS and processed by the authors.

Changes in the income distribution of energy burdens between 2005 and 2011 indicate a clear shift towards the increased prioritisation of energy in household budgets (Figure 3). The increase in energy prices has clearly forced all households – and particularly those with low earnings – to allocate a larger fraction of their income towards the fulfilment of domestic energy service needs. In light of the finding that median energy burdens have increased from 10.1% to 14.6% between 2005 and 2011, a useful perspective on the extent of the problem is provided by estimates of the numbers of households whose energy costs exceed a certain “line” (a common approach used by researchers in this field, see Boardman 1991, Hills 2012, Heindl 2013). Even when several such cut-off points are used, the number of households experiencing disproportionate domestic energy expenditure demonstrates a uniform increase for each of the given thresholds. The particularly steep rise associated with the 10% line indicates the spread of the problem among middle-income groups (Figure 4), resulting in a situation wherein almost one-third of all households spent one-fifth of their income on energy in 2011. This suggests that a significant proportion of Hungarian households have been experiencing domestic energy affordability difficulties, and that energy vulnerability has turned into a systemic issue resulting from the interaction between the rapid increase in energy prices and the fixed infrastructural legacies inherited from the past. At this point, it must be noted that “energy burden” calculations implicitly incorporate the subsidies to domestic natural gas consumers that were provided via a price-support scheme implemented during the mid-2000s. During its peak in 2006, this system benefitted up to 80% of Hungarian households (Czakó 2011), effectively reducing the domestic energy expenditures recorded by the HBS during this period.

Figure 4. Percentage of households exceeding various energy burden thresholds.

Source: Microdata obtained from the KSH HBS and processed by the authors.

The evolution of consensual energy poverty indicators retrieved from EU SILC (Figure 5) evidences the actual impacts of increasing energy poverty levels on household well-being. It reflects the upward shifts in domestic energy prices and burdens discussed in previous sections, with the notable exception of the period between 2005 and 2008, when the percentage of people who reported being unable to keep their home adequately warm saw a significant decrease. This discrepancy points to the methodological gap between expenditure-based and subjective indicators of energy poverty, which are known to be poorly correlated (Waddams Price et al. 2012). It suggests that a rise in residential energy prices does not necessarily translate into a lack of self-reported thermal comfort, possibly due to practices of fuel switching, as well as the broader manner in which indoor heating services are experienced and perceived (Petrova et al. 2013). Nevertheless, the total population share of individuals who felt that they were unable to keep their home adequately warm rose by 5% points between 2009 and 2012. This trend presents a major concern in health terms (Healy 2004), not the least due to the fact that the annual number of excess winter deaths in Hungary has been estimated at 5300 for the period between 1995 and 2007 (Tirado Herrero 2013), representing an average relative excess winter mortality rate of 12%.

Figure 5. Changes in consensual energy poverty indicators in Hungary between 2005 and 2013.

Source: Microdata obtained from EU-SILC and processed by the authors.

5. Transformative practices: household strategies to address energy poverty

Hungary's emergent landscape of energy vulnerability is being confronted by households via a wide range of “coping strategies” (Brunner et al. 2012) whose pervasiveness is beginning to effect structural changes in overall patterns of fuel consumption in the country, while challenging the notion that deprived groups are passive subjects with a limited capacity to adapt to new circumstances. Household responses to energy poverty are evidenced by the “arrears in utility bills” indicator (Figure 5), whose value changed from 15% to 25% between 2005 and 2013 – a trend consistent with the rise in energy price and expenditure indicators described above. In addition to the expansion of energy poverty, this development demonstrates the agency of vulnerable populations: households may purposely choose to delay the payment of expensive energy bills in order not to run out of money in the winter months, thus transferring the financial consequences of energy poverty to the utility providers. From the households’ perspective, the flip side of this coping strategy is the risk of falling into indebtedness, resulting in disconnection or the installation of pre-payment meters (Szivós et al. 2011). However, the same socio-technical configurations that force households into energy deprivation also protect indebted energy users. Such is the case of pre-fabricated panel buildings supplied by DH without individual consumption meters and one-pipe, single-loop vertical hot water distribution systems, where the disconnection of individual households is technically impossible (OECD/IEA 2004). Yet, arrears and non-payment reinforce the drivers of energy poverty as they undermine the capacity of DH providers to invest in the maintenance of upgrades of the system (Poputoaia and Bouzarovski 2010).

The wider socio-spatial implications of energy poverty are also effectuated via the substitution of modern energy carriers – mostly natural gas – by traditional or solid fuels for domestic energy heating. This process, sometimes termed “energy degradation” (Bouzarovski et al. 2012), has been reported in several CEE states (UNDP 2004, Fankhauser and Tepic 2007). It is evidenced by the fact that approximately 36% of Hungarian households were relying on solid fuels in 2011, as opposed to 14% in 2005. The trend transpired despite the presence of piped gas links in 76% of dwellings and 96% of settlements in Hungary (KSH 2014b), even if the amount of natural gas consumed per household dropped from 1457 m³ per year in 2005 to 934 m³ per year in 2011 (KSH 2014b). The reliance on solid fuels has displayed a strong income differential, with over half of all households in the lowest income decile dedicating more than 10% of their energy expenditure to this carrier in 2005 and 2011 alike (Table 1). Energy expenditure data from the HBS provide one of the most reliable ways of gauging the relative importance of different fuels among groups with different incomes (Buzar 2007c, Bouzarovski 2014). The propensity for lower income households to consume solid fuels are indicative of the increasing inequality in the purchasing power of households, rather than matters of evolving cultural or economic preferences.

Table 1. Percentage of Hungarian households who dedicated more than 10% of their energy expenditure to solid fuels in 2005 and 2011, by income deciles.

Income deciles	1	2	3	4	5	6	7	8	9	10
2005	57	39	33	31	25	25	24	17	12	5
2011	60	48	48	44	43	39	33	31	21	13

Source: Microdata obtained from the KSH HBS and processed by the authors.

As a result of these developments, firewood – the dominant solid fuel consumed by Hungarian households, alongside coal and woodchips – now trails natural gas as the second most common energy carrier for domestic space heating, even though both fuels are often used synchronously (Energia Klub 2011). Households who predominantly rely on firewood also report heating a smaller fraction of their dwelling space (Energia Klub 2011), which reduces levels of thermal comfort and the overall quality of life (Boardman 2010). Switching to firewood as a strategy to reduce domestic energy expenditures has been a spatially uneven phenomenon, as there is evidence to suggest that its prevalence has been influenced by the location and socio-technical characteristics of relevant households and dwellings. Firewood is more common in rural areas, where it is more easily accessible through self-collection or purchase. Single-family home are associated with the highest rate of firewood consumption (33% of households, in addition to a further 15% using both firewood and natural gas), possibly because such dwelling types are more likely to be equipped with storage space, stoves and chimneys. Firewood use is less common in multi-family apartment blocks (3% of households, with an additional 6% using both natural gas firewood and natural gas) and practically non-existent in pre-fabricated panel buildings dating from the 1960s to 1980s (Energia Klub 2011). Consequently, this coping strategy is thought to be absent from city centres and housing estates built during socialism. Location interacts with other variable such as household age and composition, with older people being disadvantaged in spite of their greater needs for affordable warmth (Tirado Herrero 2013).

The growing use of firewood has also affected public health – due to indoor air pollution coming from domestic biomass combustion – in addition to landscape and ecosystem conservation. Low-income households relying on self-collection bear the opportunity cost of the time needed for collecting firewood, and risk conflicts with forest authorities (Lampietti and Meyer 2002, UNDP 2004, Euractiv 2012). Estimates indicate that some 30–35% of the 10 million cubic metres of firewood harvested per year in Hungary are collected illegally (Szajkó et al. 2009). Informal or illegal firewood collection is a problematic issue for deprived Roma communities in rural areas, who have been subject to fines and even imprisonment for this reason (Tirado Herrero 2013).

6. Political resonances: energy price regulation and subsidies

Successive Hungarian governments have been making various attempts to buffer the impact of growing energy prices on the purchasing power of Hungarian households and voters. These politically motivated policy interventions, which are still ongoing, have mainly taken the form of regulated energy prices and relatively short-lived subsidy schemes. They evidence the pervasiveness of energy vulnerability in Hungary, which has forced actors on the national political scene to take an explicit stand towards the issue in order to secure enough electoral support.

Price regulation has a historical legacy in Hungary, as a result of the practices inherited from communist central planning and the fact that all residential gas consumers benefitted from implicit tariff subsidies until the mid-2000s. According to the World Bank, in those years, domestic consumers were favoured by a low residential-to-industrial price ratio and by the government's ability – through the Hungarian Energy Office – to buffer the impact of high import tariffs on domestic consumers by regulating the increases in retail gas prices. The latter practice was put in place in the late 1990s by the state in response to the emergence of gas price increases as a major issue in the 1998 elections, following a decade of significant tariff reform (Kessides 2000, OECD/IEA 2007). While this intervention managed to keep prices under control, it led to the accumulation of losses in the balance sheets of distribution companies until 2006, when the regulated retail price of natural gas fell below the import price and the accumulated losses of the wholesaler (E.On Földgaz Trade) peaked at 112 billion HUF. A major increase in regulated prices was thus decreed in the same year, in line with the broader liberalisation of the gas sector. As a result, the accumulated losses of the regulated wholesaler were reduced to the tune of almost 20 billion HUF in early 2008 (E. On. Földgaz 2008), while triggering the “price hike” described above. In 2009, a new Gas Act eliminated the obligation to compensate the losses incurred, by citing the difference between import prices and retail prices (E. On. Földgaz 2008).

In addition to regulated prices, households have benefitted from natural gas and DH price support schemes (gázártámogatás and távhőtámogatás) since the early 2000s. Originally, these programmes offered general support to residential gas and DH customers – subsidies was paid to all households connected to the two networks, without any consideration of financial or occupancy status (OECD/IEA 2007). In order to provide more direct targeting, the government introduced eligibility criteria in 2007, based on energy consumption, household size and monthly income. Yet, more than half of Hungary's domestic gas and DH consumers still qualified as recipients of the subsidies as of 2009 (Szivós et al. 2011). DH users have also benefited from a preferential VAT rate of 5% (instead of the 27% standard rate) since 2010, resulting in the annual heating costs of an average 50-square-metre apartment served by DH being similar to those of an equally sized residential unit reliant on natural gas (Energia Klub 2010). It is worth noting that the gázártámogatás and távhőtámogatás schemes were merged with the household maintenance support programme (lakásfenntartási támogatás) in 2011, so as to encompass a wide range of household utility costs and allow for in-kind benefits such as the direct provision of fuel to households (Tirado Herrero 2013).

Recent years have seen the emergence of a second wave of policy regulation. Allegedly motivated by the uninterrupted increase of household energy prices and energy burdens, the Hungarian government launched a series of decreed reductions in utility costs in December 2011. These measures declaratively aimed to achieve, inter alia, 20–30% reductions in the prices of natural gas, electricity and DH by the end of 2014. They were accompanied by the restructuring of the energy regulator (the former Hungarian Energy Office), which was given a wider range of powers, as well as the establishment of legislative barriers towards the transfer of cost burdens to final energy users by energy companies (Pásztor 2014). The measures have affected both the prices of energy carriers and the overall CPI (Figures 1 and 2). Further steps in the same direction include recent proposals to scrap base fees in utility bills (BBJ 2014b), intended price cuts for firewood and coal (BBJ 2013), the investigation of “money siphoning” (i.e. the payment of dividends to shareholders) by utility companies (BBJ 2014a), the legal embedding of utility price cuts in the Constitution, and government plans to buy back, re-nationalise and turn energy companies into non-profit entities (Feher 2013). This series of decisions can be seen as a reversal of the mid-2000s de-regulation of the energy sector – in line with more general reform trajectories in CEE – and is related to broader anti-EU developments in Hungary's energy policy, such as agreement to construct a new reactor in the Paks nuclear power plant together with the Russian Federation.

Just as previous government-led interventions, post-2012 utility cuts are firmly entangled in political strategies to gain electoral support by confronting EU institutions and international corporations. Presented as the “battle of the utility bills” (rezsiharc), such efforts were a central theme of the right wing government's campaign before the April 2014 general elections, in which the populist Fidész party achieved a new parliamentary majority. While it is likely that the measures have brought short-term benefits to low-income households by allowing for a reduction in energy burdens, their ability to address the wider spatial and infrastructural components of energy vulnerability is questionable. This is because they have preferentially supported urban consumers of natural gas and DH, while failing to provide relief to households (mostly in rural areas) relying on bottled natural gas or firewood as a source of heat (Szivós et al. 2011). Also, there are fears that the subsidies may increase rates of energy poverty by diverting resources that could be used for reducing the country's supply dependency on Russia, or investing in residential energy efficiency. Furthermore, it remains unclear whether or how utility companies will resist the price cuts by cutting investments in supply infrastructure or via litigation in international courts towards the compensation of incurred losses (Labelle 2013).

7. Conclusions

This paper has sought to highlight the social, economic and political implications of a systemic and “hidden geography of energy poverty” (Buzar 2007b) which extends across a variety of social and spatial strata, as opposed to being concentrated within a narrow demographic group. We have drawn attention to some of the ways in which domestic energy deprivation is embedded in wider spatial and institutional landscapes, while operating at a variety of material sites and scales – from household practices to transnational energy flows. We have explored trends in energy prices, poverty indicators and policy frameworks in Hungary since the 1990s, while examining the broader political and structural implications of the issue. It has transpired that energy poverty has both spatial agency and helps articulate political work, as it forces state and private sector actors to adjust their policies in different ways, while serving as a basis for an entire host of household strategies that challenge hegemonic orders.

In response to the first aim of the paper (regarding the path-dependent nature of energy poverty), it can be concluded that the post-communist emergence and expansion of this phenomenon in Hungary arise at the nexus of past socio-technical legacies and systemic restructuring measures undertaken during the past 25 years. In the absence of comprehensive efforts to decrease the country's energy import dependency or to improve the thermal efficiency of the housing stock, state policies have taken the form of regulated tariffs, subsidy schemes and, more recently, government-decreed cuts in utility prices. This situation testifies to the complexities created by the existence of a fixed infrastructural setting operating parallel to a rigid system of energy supply, which in turn is underpinned by Hungary's position as an energy importing economy locked into inflexible purchase contracts. Looking beyond the context of the case study, it highlights the importance of treating energy poverty as a whole-systems issue, extending beyond the domestic domain into the entire energy chain (Chapman 1989). While research and policy on “fuel poverty” and “energy vulnerability” in countries like the UK, France or Ireland (Boardman 2010) are dominated by discussions of the combination of incomes, prices and energy inefficiency in driving the problem, the theoretical frameworks and findings presented in this paper highlight the need for understanding how infrastructural legacies and lock-ins underpin the spatial inequalities that drive domestic energy deprivation.

As for the second aim of the paper – focusing on changes in the structure of energy demand as a result of household practices – we have found that the propensity to experience a lack of adequate energy services has become a pervasive feature of both the general population and the supply mix of the given case study. But energy deprivation does not bring about a passive and reactive set of behaviours and practices within households and institutions. Rather, the diverse strategies that are articulated with respect to the condition have far-reaching effects on the systemic conditions that underpin the emergence of energy poverty. As such, they are able to influence the make-up of the very infrastructural and political orders that give rise to the emergence of vulnerable groups and places.

As for the third aim of the paper (on the conduct of political debates and government decisions), it has transpired that energy poverty amelioration approaches in Hungary have assumed a politically reactive and populist nature. This indicates the sensitivity of the country's political scene to post-communist domestic energy affordability issues. Although the future course of mandatory cuts in household utility costs remains unclear, the rezsiharc is likely to add to the portfolio of short-term measures focusing on the employment of temporary price relief to ameliorate energy poverty. In the past, such decisions have subsequently triggered quick increases in prices, while endangering the country's ability to invest in infrastructure improvements and address climate change.

Overall, our findings point to the need for developing an explicit conceptual and policy link between domestic energy deprivation, on the one hand, and the implementation of housing and climate policies, on the other. Ex-ante studies focusing on the co-benefits and multiple benefits of energy efficiency interventions (Ürge-Vorsatz et al. 2012) have highlighted the significant welfare-enhancing effects of thermal retrofits – a key infrastructural solution often prescribed in the policy-oriented literature. However, high or increasing levels of domestic energy deprivation complicate the application of policies that promote energy vulnerability-enhancing measures, such as renewable feed in-tariffs or surcharges paid by domestic energy users irrespective of income, needs or living conditions. At the same time, the expansion of energy poverty among the general population has been accompanied by the adoption of household strategies orientated towards carbon-intensive and polluting fuels, such as coal or firewood.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

The research leading to this paper has received funding from the European Research Council under the European Union's Seventh Framework Programme (FP7/2007–2013)/ERC grant agreement number [313478].

Notes

1. In line with Boardman (2010), the two terms are used interchangeably in this paper.

2. Note that comparative full-time earnings data are not available before 1992.

3. Price data disaggregated by energy carriers are not available before 2000.

4. COICOP stands for “Classification of Individual Consumption by Purpose”.