How Rising Energy Prices Impact Eastern European Households

This study aimed to provide an overview on the energy price impact on households and contribute to the development of policy recommendations and share best practices to mitigate the adverse effects of energy price hikes which can lead to energy and transportation poverty for endangered groups.

Eastern Europe was heavily reliant on energy imports, predominantly from Russia which has decreased in all countries since 2022. This dependency has historically shaped the region’s energy landscape, with gas prices starting to rise as early as July 2021 due to increased global demand post-COVID-19. The war in Ukraine further intensified the situation, causing a significant spike in gas prices in February 2022. As Russian gas supplies decreased in May 2022, prices surged again, leading to energy bills that could have been five times higher than in 2021 without government intervention.

The study revealed a variation in energy costs across the surveyed countries. Czech households experienced the highest increase in energy costs overall as well as, in case of share of income (38%) from 2021 to 2022, followed by Bulgaria (19%), Slovakia (13%), and Hungary (13%). Government interventions, such as price caps on natural gas and electricity, have helped mitigate the impact on short-term, but had a significant impact on market players. For instance, in Slovakia, electricity prices remained stable in the second half of 2021, with a cap in place until 2024. Unfortunately, these caps are often limited to consumption below the national average, leading to steep cost increases for households with larger or inefficient homes as only 40-70% of the residential buildings are insulated in the assessed countries.

The energy efficiency of buildings is lagging in Eastern Europe compared to the Western region, resulting in higher energy consumption across the scope countries. A characteristic that is represented in all the analyzed countries are the similarities in the vulnerable groups which is estimated to be up to 5-10% of households. People living in houses built between 1945 and 1980 are facing extreme high energy costs, spanning from 30-60% (energy bills have historically represented 15-30% of household income in the region, surpassing the EU average) of their income which will likely lead to energy poverty. Other endangered groups include single parents, pensioners and singles. Countries like Bulgaria, with an energy need of 362 kWh/m²/year, highlight the urgent need for improved insulation and energy efficiency measures.

Mobility infrastructure and associated costs in the five countries also show opportunities for improvement. In the assessed countries ~40% of the respondents use car for transportation, while in Western European countries above 50%. The countries share similar mobility challenges, with a higher reliance on public transport and a significant portion of the population not using any transport due to financial constraints. Transportation poverty can be a developing issue in the region as up to 19% of the population in the analyzed countries might be exposed to it. Fuel prices increased by 30-50% from 2021 to 2022 which might limit car usage for lower income households.. For low-income households cars are generally unaffordable as spending on fuel could reach 27% of income Public transport prices remained relatively unchanged, making it slightly more affordable for members of lower-income households. In fact, public transportation got more affordable in all of the countries due to the increase in household income.

To address these challenges, several policy measures can be considered, including:

Energy Efficiency Improvements: Financial support for retrofitting of residential buildings can reduce energy consumption by 50-70%. This includes enhancing insulation, installing electric heat pumps, and scaling the roll-out of rooftop solar PV as these measures can decrease energy demand and exposure on country and household level

Transport Solutions: Introducing demand-responsive transport in rural areas, promoting commuter cycling, and developing infrastructure for ridesharing and carpooling can improve mobility and reduce transport poverty by creating alternative to individual car ownership

Targeted Financial Support: Providing financial support to vulnerable groups, such as single parents, pensioners, and low-income households, can help mitigate the impact of the increased energy prices. Targeting enables to optimize cost of the supporting measure and avoiding unnecessary support of high income households.

The crises highlighted that residential households can be particularly vulnerable, emphasizing the region’s dependence on energy imports. This situation underscores the need for overarching measures to improve the conditions of low-income households and reduce their energy vulnerability. The rising energy prices presented significant challenges for households in Eastern Europe, but they also offered opportunities for policy interventions that can improve energy efficiency, reduce costs, and enhance mobility. By implementing the above mentioned measures the region could improve its resilience and could prepare to manage any potential future crises. However, the reliance of energy import and the lagging energy efficiency of the region still demand supporting policies and measures, especially targeting low-income households.