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Energy Saving Trust response to the Spending Review

To reduce energy bills and meet our national carbon reduction targets the UK needs to achieve energy improvements in all our homes. The cuts announced this week in the Spending Review impact all the key areas of government support for home energy efficiency.

 

Our view

The current government has been elected on a programme of making savings in government spending.  But the Chancellor also recognises the role of targeted infrastructure investment as a means of strengthening the UK’s economy and productivity. 

We think government support for home energy efficiency is a highly effective form of infrastructure investment. And as our research shows, a large-scale programme of government investment in home energy improvements delivers major benefits in jobs, growth, health, welfare and productivity.

We will continue to make the case for a much larger government programme that supports home energy efficiency as infrastructure investment, but it’s clear this won’t happen soon. For now, we need to ask how the Department of Energy and Climate Change (DECC) and Department of Communities and Local Government (DCLG)  can make the most of the smaller budgets for energy efficiency that the Chancellor has provided.

 

Home Renewable Energy

The Spending Review announced cuts of £700 million to the Renewable Heat Incentive (RHI). The RHI has had growing success with over 46,000 installations generating renewable heat through the scheme, up from only 15,000 this time last year. The RHI has particularly helped off-gas rural households (73 per cent of RHI installations are in off-gas households GB wide) where the problem of fuel poverty is most acute.

We understand there will be a new DECC strategy for heat in the spring. It’s vital this strategy contains a robust plan to promote clean efficient heat, particularly in rural homes. One area that’s going to be particularly important is advice and support to make it easier for homeowners to choose between renewable heat systems, which can involve complex choices.

The cuts to the RHI also sit alongside planned cuts to the Feed -in Tariff (FiT), announced before the Spending Review.  As we’ve explained before,  if the government proceeds with these planned FiT cuts the market for home and community scale solar PV will shrink massively.  We recognise the government’s need for savings to be made from the FiT budget but believe a FiT programme that still works well for homes and communities can actually be delivered with a cost to bill payers of only 24p per year.

 

Funding for energy efficiency

Since we have limited budgets we need to focus government support for insulation and new boilers on the coldest homes and households that are in most need of help with their bills.

The government has announced a 42 per cent cut, to take effect from 2017, to the Energy Company Obligation (ECO) – the main programme that funds household insulation and new boilers. With this scale of cut, we accept that all ECO spending will now have to be directed at fuel poor households who can’t afford to pay.

Where does this leave the rest of households, those not in fuel poverty, the so-called ‘able-to-pay’? In the past, schemes such as the Green Deal Home Improvement Fund or the Boiler Scrappage Scheme gave direct government funding to householders – rich or poor – to make energy efficiency upgrades. With the DECC cuts it is unlikely we will see any new grant programmes in the near future.

 

Without grants, what can government do to help ‘able-to-pay’ households?

Energy Saving Trust is playing a key part in the Bonfield Review set up by DECC to consider the customer experience in home energy efficiency.

First, government needs to look again at the role of regulation. Historically, the biggest energy saving improvements to our housing stock have been made through building regulations. In 2005, the government made it mandatory to install high-efficiency boilers at the point of boiler replacement. Now, half of all homes use these high-efficiency models. Regulation needs to be introduced carefully and promoted well in advance, so householders and businesses can prepare.   

In addition to regulation we need to support awareness, advice and guidance to help drive the market for energy efficiency. Choosing insulation, windows, or a new heating system can be complicated and, unfortunately, not every company in the market can be trusted. There’s a need for a continued focus on impartial independent advice to help householders make the right choices.

We want to look afresh at the advice and guidance needs of householders in regards to home energy upgrades.  Of course, most people access information online; what’s the best format for online energy efficiency advice? How can we join up Energy Performance Certificates to make them more useful  to more people? How do we get impartial energy saving information from government working alongside advertising and commercial promotions from energy efficiency companies to reach the largest number of people? These are all questions that Energy Saving Trust will be helping the Bonfield Review and government to answer.

We don’t know if or when new money – beyond the very limited ECO budget – might become available to support actual energy efficiency installations in homes. But one way to make that money go further is to focus on low-interest loans for energy efficiency rather than grants. That’s something the Scottish Government is already offering, working with Energy Saving Trust, and their experience shows that default rates are low, and demand is high.

 

Rented homes

How do we encourage the 35 per cent of households in the rented sector to save energy? The social housing sector has made big strides in energy efficiency over the last decade. Now we need to enshrine that in law with minimum energy performance standards that all social homes have to reach.

In the private rented sector, similarly, we need to give teeth to the minimum Energy Performance Certificate E standard that will take effect in England in 2018. As it stands, landlords won’t have to meet that standard if they can’t access a grant to pay for all of the required upgrades. We believe most homes in the bottom F & G energy bands are not good quality accommodation and we think it’s only reasonable to require private landlords to invest some of their own money to make them warmer and healthier for their tenants.

 

A fresh pair of eyes

We don’t welcome the spending cuts to energy efficiency and home renewable energy programmes, in fact we think there is a strong case for large-scale government investment in home energy efficiency. But even while we’re waiting for politicians to wake up to that opportunity, we can help civil servants look with fresh eyes at how we promote and communicate the benefits of insulation, efficient heating systems and microgeneration. The priority for the next few years will be fresh ideas and greater policy certainty for investors. We look forward to starting this process with the Bonfield Review, reconsidering how energy efficiency programmes are delivered to householders. 

Our Head of Policy, David Weatherall, is one of the Energy Saving Trust’s most experienced spokespeople and has worked on the policy issues around energy efficiency for more than ten years. Follow David on Twitter: @Atrapalhado

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