Introduction

As the EU intensifies its climate policies, low-income households living in inefficient homes or relying on outdated technologies are disproportionately affected. Energy poverty, a pressing socio-economic challenge that affected over 9.2% of Europeans (about 41 million in 2024 according to the European Commission), may further intensify. Energy poverty is acknowledged to be the result of low-income, high-energy prices, and poor energy efficiency in homes, i.e. poor insulation or inefficient heating and cooling systems and appliances. Τo address energy poverty – which, beyond financial hardship, undermines health and well-being – it is essential to combine immediate relief measures, such as social tariffs and income support, with long-term structural solutions, notably energy efficiency upgrades. The latter provides a more sustainable response by reducing energy demand and supply costs, while supporting a fair and inclusive green transition across Europe. 

The EU’s policy framework has put this effort at its core. However, enabling vulnerable households to live in energy-efficient homes is a complex challenge that demands sustained and coordinated effort to make it a reality rather than an aspiration. This technical paper analyses the challenges and lessons learnt based on behavioural science literature and by drawing on evidence from the EU LIFE-funded project REVERTER, which aims to alleviate energy poverty through the deep renovation of dwellings occupied by vulnerable households. Its guiding belief is simple but powerful: energy poverty is not inevitable, and vulnerable households can become active participants in the energy transition by recognising that deep renovation must be seen as a social right.

Challenges in promoting deep renovation for energy-poor households

It is well known that energy renovation of homes faces economic, technical, legislative, administrative and social challenges. For instance, the high initial investment cost and the limited access to financing, grants or loans on favourable terms act as a deterrent for many homeowners, particularly those on low incomes. Uncertainty about the actual energy savings achieved, along with fluctuations in energy prices and borrowing rates, bureaucracy, frequent regulatory changes, and the lack of clear guidance, further hinder the implementation of energy renovation projects. A significant factor is also the lack of awareness about the available subsidies, as well as the differing interests of owners and tenants and multiple ownership arrangements, and the absence of effective mechanisms for collective decision-making. These challenges intensify for the energy-poor households as they face a combination of behavioural, cognitive, informational and contextual barriers, which are strongly associated with the psychological and social consequences of living under financial scarcity, hindering investment in energy efficiency, even when such measures are economically rational. 

A key obstacle identified across the behavioural economics literature is cognitive scarcity: the chronic financial stress associated with poverty consumes mental bandwidth and impairs decision-making capacity. In such contexts, individuals tend to prioritise immediate needs over long-term benefits, a phenomenon described as tunnelling or time myopia. This leads to present bias and high implicit discount rates, whereby future savings from retrofits or efficient appliances are undervalued compared to the immediate costs, explaining why energy-poor households remain trapped in a ‘low-road’ cycle, living in unhealthy and uncomfortable homes, paying more for energy bills, and relying on cheap but short-lived repairs. The phenomenon resonates with the ‘irony of poverty’, where those who most need to make optimal financial choices are least able to do so because cognitive load and stress undermine decision quality.

In addition to time-related preferences, informational and market biases play a major role. Energy-vulnerable consumers often exhibit energy and investment illiteracy – limited understanding of technical options, costs, or potential savings – to a greater extent and are less able to evaluate or trust available programmes. These asymmetries are further aggravated by bureaucracy, hassle factors, and the complex framing of application processes that deter participation in subsidy schemes, particularly among those already cognitively burdened by scarcity.

Under cognitive pressure, households resort to simplified rules of thumb that can lead to status quo bias, loss aversion, or decision inertia. Many energy-poor households avoid large investments in energy upgrades because of fear of loss, uncertainty about outcomes, or mistrust of institutions or contractors. Structural and social contexts amplify these behavioural dynamics. Limited social capital, the lack of salient social norms supporting efficiency, stigma associated with vulnerability, and the absence of trusted intermediaries reduce the uptake of assistance programmes. 

REVERTER four pilot areas 

In the context of REVERTER, a LIFE Programme project to alleviate energy poverty through the deep renovation of houses occupied by vulnerable households, more than 1,600 households were visited by around 80 energy ambassadors in the four pilot areas (Brezovo, Bulgaria; Athens Urban Area, Greece; Riga, Latvia; and Coimbra, Portugal). The ambassadors, among others, provided advice on deep energy renovations. 

• In Brezovo (Bulgaria), the visits indicated issues such as an ageing population, low-income levels, social isolation, and limited energy literacy. Dwellings are old and often poorly insulated, and only 16% of residents demonstrated confidence in understanding energy efficiency measures. Regarding participation in energy retrofit subsidy schemes, 31% of the households were not interested, and 45% were uncertain. The primary barriers included perceptions of insufficient subsidies, bureaucratic complexity, and lack of accessible information. By that time, there were only two subsidy programmes related to the renovation of multi-family buildings and the implementation of Renewable Energy Sources (RES) in homes, with a short application period and a high level of complexity.
• In the Athens Urban Area (Greece), the vast majority of homes were energy inefficient. About 50–60% of the households were struggling to make ends meet, and only 8.5% of them felt well informed about energy issues. More than half of households were not interested in participating in a subsidised energy upgrade programme. 46% cited financial difficulties, 33.7% reported that the subsidy rate was too low, while 12.5% stated they could not obtain a bank loan, 23.2% feared bureaucracy, 19.3% did not believe that energy savings would be significant, 14.7% were unaware of such schemes, 10.2% reported problems with home ownership, and 8.2% believed their home was already energy efficient.
• In Riga (Latvia), most of the surveyed apartments were located in Soviet-era buildings (61%), which generally have low energy efficiency levels and poor technical condition. The households were small, typically one to two people, with a modest but generally stable income. A large majority of respondents (76%) had not participated in energy retrofit subsidy programmes. The biggest obstacles are the inability of homeowners to agree among themselves and the perceived bureaucracy of the application process.
• In Coimbra (Portugal), the target was households living in the relatively old social housing. About one-third of homes are not heated at all, and 40% of the households stated that living on their income was very difficult, but according to the ambassadors, this figure underestimates the true extent of hardship. Energy literacy was also low, as only 2% of households reported high confidence in their knowledge and ability to manage energy use. About 40% of the households were not interested in energy retrofitting. Financial constraints, concerns about eligibility, and personal circumstances, such as age or work commitments, were the main reasons for reluctance.

_{Figure 1. Mould problems identified by REVERTER energy ambassadors in houses of vulnerable households in Coimbra due to energy poverty and poor energy efficiency of buildings (Source: REVERTER Deliverable 4.2 “Findings from the pilot implementation”)}

Aligning solutions with needs

The main barriers identified from the four pilots to tackle energy poverty through improvements in homes and energy efficiency were related to financial and cognitive scarcity, e.g. low energy literacy, which limits the ability of households to optimise usage or take advantage of efficiency opportunities, uncertainty about the outcomes of deep renovation, complex framing of application processes, etc.

With this in mind, REVERTER designed, set up, deployed and managed four physical and digital one-stop-shops (OSSs) in the four pilot areas to support energy-poor households to enrol in subsidised energy efficiency improvement programmes, operated under the Facilitation business model that helped bring together the different actors needed to support households throughout the process. As part of this approach, trusted intermediaries, such as social workers and community-based organisations, were engaged as energy ambassadors to bridge trust gaps, explain benefits, and reduce perceived risk. In addition, 30 community events and targeted information campaigns – particularly for energy-vulnerable households – were organised to raise awareness of the benefits of home refurbishment and available funding. In total, REVERTER reached more than 4,900 energy-poor people.

_{Figure 2. Information leaflets used to help citizens understand complex concepts of home retrofits in a practical and accessible manner and to enrol in subsidy schemes (Source: REVERTER Deliverable 4.2 “Findings from the pilot implementation”)}

_{Figure 3. Community event aiming to raise awareness of the benefits of home energy retrofits and available funding programmes (Source: REVERTER Deliverable 4.2 “Findings from the pilot implementation”)}

The OSSs received approximately 1,600 visits and provided personal consultations to households interested in retrofitting their homes. Overall, satisfaction with the OSS services and the ambassador visits was high, and the results are remarkable. In the four pilot areas, 1,840 vulnerable households were enrolled in retrofit subsidy schemes. Moreover, home visits helped more than 3,500 households to adjust their energy habits and 3,400 households to improve their quality of life. For instance, in Portugal, despite low energy literacy, approximately 95% of the households reported adjusting their energy habits. 

However, concerning energy retrofits, the four pilot areas showed significant differences: 

• In Brezovo, 1 multi-family building inhabited by 6 households, 33 single-family houses, and 2 social buildings (family-type accommodation centres) were retrofitted.
• In the Athens Urban Area (AUA), 15 applications for subsidies were submitted.
• In Riga, a total of approximately 1,460 households living in multi-family buildings applied for support under the national subsidy scheme, and all applications were successfully approved.
• Finally, in Coimbra, 100 social dwellings were retrofitted, and 225 retrofit applications were approved.

_{Figure 4. Meetings with vulnerable households in Riga to help them apply for support under the national subsidy scheme (Source: REVERTER Deliverable 5.3 “Report on communication and dissemination activities”, available at: https://reverterhub.eu/wp-content/uploads/2025/10/REVERTER_D5_3.pdf)}  

Based on the field experience and the lessons learnt, some solutions are discussed hereinafter that could bridge the gap which stands between energy-poor households and energy-efficient homes. Since these differences stem from the existence, duration, and effectiveness of subsidy programmes, as well as behavioural factors, the proposed solutions for energy-poor households are organised on three levels: personalised consulting through OSS and ambassadors, targeted information campaigns, and improved financing programmes. 

Personalised guidance, through OSSs and energy ambassadors, helps to build trust and increase the perceived ease of participation. To maximise its effectiveness, trusted local actors (e.g. municipalities, NGOs, churches, community centres, or social workers), and institutionalised ambassadors are needed to ensure stability and continuity, so as to overcome scepticism in institutions and the stigma of vulnerability. Moreover, given the intersection between energy poverty and broader social vulnerabilities, municipal social services should be engaged in tiered models (for example, energy ambassadors for outreach, energy specialists for retrofit assessments, social workers for complex cases). Last but not least, offering integrated services to the energy-poor households, from application submission to contractor supervision, available free of charge, will combat bureaucracy and hassle factors and will increase their participation in subsidy schemes.

Outreach campaigns for the subsidy schemes specifically targeting low-income households must use clear, accessible language and frame renovations in terms of immediate comfort, health improvements, and relief from bill anxiety due to stability of expenses rather than distant payoffs, to mitigate the prevalence of present bias and high discount rates. The campaigns must also exploit community networks and multiple channels (digital, print, in-person events, including the use of mobile OSS) to ensure that information reaches those who need it most. Digital platforms, providing information about existing grant schemes, apps and tools that can assist households with low energy literacy, etc., can be helpful complements.

Inclusive energy retrofit subsidy schemes must be designed. Complex, bureaucratic and time-consuming application processes discourage participation. Hence, governments should radically simplify forms, streamline documentation, reduce procedural friction and provide clear, step-by-step instructions written in accessible language to mitigate informational overload. Moreover, since scarcity reduces cognitive bandwidth and risk tolerance, it is crucial to avoid pre-financing requirements, replace rebate systems with upfront grants or automatic deductions at purchase (pre-committed subsidies), provide high subsidy rates - ideally 100% - for the lowest-income households and set up guarantee-backed zero-interest loans. In the same direction, it is helpful to complement subsidies with immediate financial relief, such as temporary bill discounts during renovations, to avoid renovation-induced poverty and promote energy savings guarantees to reduce perceived uncertainty. Governments should also support collective renovations at the neighbourhood scale, where peer effects, trust, and economies of scale can reduce perceived risk. 

Finally, evidence also suggests that nudging can improve participation rates without limiting choice. Examples include short workshops on energy literacy or budget planning, post monitoring of energy with public dashboards to provide transparent updates on their performance, automatic pre-enrolment in eligible schemes, text message reminders of application deadlines, and framing letters to activate social norms (e.g. ‘join your community in saving energy’). 

Conclusions

Energy poverty is a pressing socio-economic challenge in several Member States, which will be intensified by the EU’s climate policies unless appropriate measures are taken. To tackle energy poverty in the long term, structural solutions like energy efficiency upgrades should be implemented. Adequate funding is necessary but not sufficient, because households in energy poverty do not merely lack money but also mental bandwidth, trust, and agency. Effective policy must therefore combine financial assistance with behaviourally informed, tailor-made design - simplifying procedures, reframing communications, enhancing trust, and leveraging nudges and boosts - to help energy-poor households to act on long-term energy efficiency opportunities.