Changing the name of the Winter Fuel Payment would increase likelihood of investment in renewable energy technologies

28 February 2014

Changing the name of the Winter Fuel Payment (WFP) would make recipient households more likely to invest in renewable energy technologies while still achieving the health goals of the current WFP policy, according to research published by the University of Stirling and funded by the Nuffield Foundation.

Although the WFP does not require households to spend the cash benefit on fuel, the research found that households in receipt of the WFP are up to 62% less likely to invest in renewable energy technologies than similar households who do not received the payment. This is because the WFP name appears to encourage households to use fuel, rather than investing the payment in renewable energy technologies such as solar water heaters, solar panels and micro wind turbines.

Mirko Moro, Lecturer in the Division of Economics at the Stirling Management School, said: “Previous research has shown that recipients of the WFP increase their consumption of energy and our research shows that they do so at the expense of clean renewable energy.

“Households often have different mental budgets for different expenditure categories and they tend to see the WFP as a subsidy for fuel only. It is not that the WFP does not work, but changing the name may ensure that households do not forgo investments in renewable energy after the payment is received.”

“A name that includes the words ‘renewable energy’ or ‘energy efficiency’ could ensure that households consider more energy efficient technologies while still achieving the health goals of the current WFP policy.”

The study compared households which are only recently eligible for the WFP with those that who just missed eligibility, with household characteristics such as employment status and income also being accounted for. To ensure that differences in renewable energy installations were attributable to the WFP name, researchers also looked for changes in the propensity to purchase other durable goods. No change in investing in a new kitchen or car was found between those in receipt of the WFP and those not, while there was a clear negative shift in the probability of installing renewable solar or wind technologies.

Discussion paper and policy brief

Download Policy Labels and Investment Decision-making, Stirling Economics Discussion Paper 2014-01 (PDF)

Winter fuel payment policy brief (PDF)