29% of Irish households are now deemed to be in “energy poverty” due to inflation, according to the Economic and Social Research Institute (ESRI).

It means that the share of households spending more than a tenth of their net income on energy (including electricity but excluding motor fuel) has climbed above the previous record high of 23% in the mid 1990s.

The research shows that if prices increase by a further 25%, the number of households in energy poverty would climb to 43%.

ESRI report

The ESRI estimate is based on energy inflation from January 2021 to April 2022.

The new study published today (Thursday, June 16), which is funded by the Community Foundation for Ireland, shows inflation in that timeframe increased the cost of household consumption by an average of €21.27/week.

This increases to €38.63/week when motor fuels are included.

In rural areas the average increase was €24.20/week, while it was €19.21 in urban locations.

“Should energy prices rise by a further 25%, we estimate this would increase by an average of €36.57, excluding motor fuels, or €67.66 if they are included,” the ESRI warned.

The research shows that lower-income households are being impacted more by rising energy costs.

The ESRI said that cutting indirect taxes on energy – such as VAT, fuel duty, or the carbon tax – is a poorly targeted response.

This is because highest-income households would stand to benefit more from such measures.

The ESRI suggests that increases to welfare payments, the fuel allowance, and even lump-sum payments like the household electricity credit are better targeted at those most affected by energy inflation.

This could include a Christmas bonus-style double welfare payment.

Commenting on the findings, Niall Farrell, one of the authors of the ESRI report, said:

“Rising energy prices are having a substantial impact on households, many of whom were already experiencing energy poverty or deprivation.

“Our research finds that, on average, these changes are more burdensome for lower income households, rural households and those at risk of poverty.

“This is because energy expenditures tend to comprise a larger share of income for these households,” he said.