We in the UK are the “Cold Man of Europe” according to Association for the Conservation of Energy research, yet we have some of the lowest gas and electricity prices and highest household incomes in Europe. How can this be?
The UK is ranked 14th out of 15 on space heating affordability; 7th out of 8 on the gap between current thermal performance and what the optimal level of insulation should be in each country; and last for fuel poverty out of 13 western European countries.
Conclusion? It is the energy efficiency of our homes. So, welcome or not, an energy price freeze, group switching, breaking the Big Six energy suppliers’ stranglehold, or even separating out the energy supply and generation markets do not constitute sole or even collective long-term answers originally quoted by government.
There are cheap and cost-effective savings to be made in all the UK’s 27 million properties. The size of the task has been recognised by successive governments, but how do we do it well and how do we pay for it?
The coalition has offered us the Green Deal as a private loan mechanism supported by the Energy Company Obligation. Labour has recently announced a rebranding of the Green Deal, perhaps with a subsidised interest rate, and a re-focus of ECO on area-based schemes.
But the headline statistics don’t look good.
- Only 57 Green Deals plans are live and 96 per cent of cashback money is going to boilers;
- There are 0.9 per cent cavity wall and 2 per cent loft insulation installations through the Green Deal Cashback Scheme;
- Few contractors are offering solid walliInsulation to owner/occupiers;
- Energy suppliers are complaining about the cost to them and energy bill payers of delivering their obligation will be three times the £1.3bn a year estimated by the government.
Here’s a five-point plan to get retrofit right;
1. Do we have the supply chain to deliver the work required?
No – the building supply chain is highly fragmented. But it could be improved if the demand was there.
2. Is relatively low cost private finance available for retrofit?
The answer is yes - the Green Deal or perhaps Labour’s re-branded Energy Save Scheme. The public purse can’t cover the £7bn to £11bn needed to do the job. We need institutional investors (or our pension money) invested in delivering warm homes.
3. Is a subsidy available to cover installation costs where measures are not cost-effective for individual householders (ie can’t be repaid over a 25-year loan period)?
Yes: the Energy Company Obligation. This is neccessary as the measures offer a societal benefit as well as a benefit to the homeowner so it’s appropriate to use public money. Remember; if much of our heating is to be powered by electricity in the future, cutting home heating demand by a third has an impact on how many power stations you need to build. Even if gas remains a major part of the energy mix, demand reduction reduces exposure to wholesale gas price rises and their knock-on impact on all our bills.
4. Can the refurbishment offer guaranteed energy savings to homeowners?
No - it is unlikely we will ever get to that stage as people live in homes and they are unpredictable. But a thriving market will drive innovation in products and installation processes, meaning we get close to predicted savings in enough homes to gain the trust of both homeowners to retrofit and bond markets to buy Green Deal debt. An appropriately incentivised market will close the performance gap between predicted and real savings.
5. Are homeowners given a strong reason to renovate?
No - there are a few monetary sweeteners in the current Green Deal offering. Labour suggests it may put in additional monies or use the government’s balance sheet to enable a subsidised interest rate. This is welcome, but on its own it doesn’t create the mindset shift required to get the revolution going.
What’s more, is that demand driver more than a simple monetary sweetener, but creating a real shift in mindset to stop the usual discounting or ignoring of future benefits? How many people are still saying “I’d rather go on holiday than insulate my loft”? The four other points enable someone who has already made the decision to improve their home to do so. Mechanisms must also be put in place to persuade people to take the decision to improve their property in the first place.
Steven Heath is external affairs director at Knauf Insulation Northern Europe
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