Everyone is Watching

There are a lot of financial instruments in Europe being used to help consumers improve the energy performance of buildings.  The recent study by the Buildings Performance Institute Europe on “ Europe’s Buildings Under the Microscope” documents many of them in place today.  Yet, everyone knows that those incentives are not enough if Europe is to embark on an ambitious retrofit strategy that will lead to improvements of up to 80% by 2050.

The UK has been developing a new programme, entitled the Green Deal, which is to start later in 2012.  The legal framework was passed by Parliament last October.  As the Department said: “It’s expected to attract capital investment of up to £15 billion in the residential sector alone by the end of this decade and at its peak, the Green Deal could support around 250,000 jobs.”

The Government’s objective are to:

• Remove the upfront cost of energy efficiency measures (like loft, cavity and external wall insulation, draught proofing and energy efficiency glazing and boilers) making expensive home improvement affordable. For the first time in the world, the energy saving work will be repaid over time through a charge on the home’s energy bill. The repayments must obey a “golden rule” whereby the charge is no more than the expected savings, meaning householders should save from day one.
• Put consumer protection at the heart of the Green Deal. High standards will be crucial from the first independent home energy assessment to getting the job done by qualified installers.
• Provide extra financial help for the most vulnerable and hardest to treat homes by getting energy companies to fund work like basic insulation and boiler upgrades as well as helping those living in homes where the cost of the work, like solid wall insulation, may not obey the “golden rule” without extra money to make it affordable.
• Improve at least 682,000 privately rented homes. From April 2018 it will be unlawful to rent out a house or business premise which has less than an “E” energy efficiency rating.

Look again at the sentence in bold:  For the first time in the world, the energy saving work will be repaid over time through a charge on the home’s energy bill.  That is impressive if consumers will take it up.

There have been many commentators supporting it and criticising it.  This is no surprise.

In December, The Guardian newspaper came out with a revelation about the potential impact:

The government’s impact assessment forecasts that several factors will severely limit the take-up of the scheme, including the hassle of having builders in, the fear of cowboy contractors and being unaware of the scheme or the benefits to their homes and energy bills. There are 6m lofts in the UK that are poorly lagged, but the impact assessment suggests just 10% of this will be properly insulated by 2020 as a result of the green deal. Of the further 6.3m cavity walls yet to be insulated, just 1.7m are forecast to be treated under the plan.

On January 17^th, the Energy Minister, Greg Barker, steadfastly defended the programme:

With a game changing scheme like the green deal, some in the supply chain will feel uncomfortable that it changes ways of working they have become used to. But too many people are missing out on the benefits of energy efficiency for us to rely more of the same. Eight million solid wall homes have had no affordable solution to insulate. The green deal will change that.

Linked with the Green Deal, is a revision of the Carbon Emissions Reduction Target (CERT) which requires all domestic energy suppliers with a customer base in excess of 50,000 customers to make savings in the amount of CO₂ emitted by householders. Suppliers meet this target by promoting the uptake of low carbon energy solutions to household energy consumers, thereby assisting them to reduce the carbon footprint of their homes.  This is an obligation which has been in existence for many years.  It is to transform into the Energy Company Obligation (ECO) and will give increasing focus to providing support to the most vulnerable.

The Association for the Conservation of Energy recently came out with a report in response to a Government consultation on the subject that has some concerns.

Remaining uninsulated lofts and cavity walls

At the end of 2012, when the Carbon Emissions Reduction Target (CERT) ends and the new Energy Company Obligation (ECO) commences, there will remain approximately 6.2 million cavity walls and 8.5 million lofts suitable for insulation in British homes. Approximately 3.7 million of these cavities do not face any cost-incurring technical barriers and are considered ‘conventionally easy’ and low cost to insulate.

This remaining insulation potential is very large, indicating that the high rates of cavity wall and loft insulation that will be seen throughout 2012 to meet the CERT obligation need not collapse for a lack of fillable lofts and cavities in 2013. Because under current proposals the ECO will target only a small fraction of this remaining potential (in low income and vulnerable households), the insulation of all remaining cavities and lofts by 2020 – as is deemed necessary by the Committee on Climate Change and the Government’s Carbon Plan – will be entirely reliant the Government’s flagship Green Deal programme.

Expected delivery 2013-2022

Figures within the Impact Assessment accompanying the Green Deal/ECO proposals confirm that the Green Deal is not expected to deliver more than a small proportion of these lofts and cavities. Just 1.7 million cavity walls, and far fewer lofts, are expected to be insulated through to 2022. At such a rate, even the low cost cavities would not be insulated until almost 2040, with the more expensive cavities not filled until 2050.

The UK Energy Research Centre, which includes some of the best researchers in Britain, published its own report on January 17th (UKERC Green Deal consultation response jan 2012 – final).    It is instructive to include two of its conclusions:

There appears to be unfounded optimism with respect to the scale of Green Deal mechanism, in particular there is no evidence to support the claim in the preface that “By 2020, we will have seen a revolution in British property”. Indeed, the details of the proposals and the impact assessment of them imply a significant reduction in the rate of energy efficiency improvement from that achieved in recent years. In particular, there is projected to be a major reduction in the rate of the two key low cost insulation measures – cavity wall insulation and loft insulation – with negative implications for both carbon reduction and the insulation industry, but there is no explicit consultation on this impact.

It is not clear how the proposals relate to the legal obligations on Government with respect to elimination of fuel poverty by 2016 (2018 in Wales). The proposals alone are not designed to achieve this elimination, but there is no indication of what other measures will be adopted and therefore how these proposals interact with them.

This story is not over.  Green Deal is a programme that has the potential to be replicated throughout Europe and across the world if it works.  It links ambitious retrofit and fuel poverty and it links with private sector funding, so sorely needed.  EiD will be following the progress and bring more reaction from the consultation.