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DECC,Energy Policy,Green Deal,Pay As You Save

If not the Green Deal, then what?

The Government announced yesterday that no further public funding will be provided to the Green Deal Finance Company.  This leaves the energy efficiency supply chain at a loss to understand how the Government thinks it will meet its fuel poverty and climate change targets.  Yes, the Green Deal has not been as effective as the Government originally forecast, but the principle of a Pay as You Save mechanism to support energy efficiency investment remains sound.  Working to build on the existing framework, not pulling the rug from under it, was the way forward.

DECC are aiming to develop and establish a more stable, long-term, coherent framework for home energy efficiency: it is difficult to see how they can achieve this without finance options for the ‘able-to-pay’.  And we should not forget that this will include those on modest incomes who do not qualify as fuel poor: are we expecting them to turn to payday lenders?

The energy efficiency industry has invested significantly in the development of the Green Deal.  Government’s decision to undermine this core plank of home energy efficiency policy without first developing an alternative will in turn undermine the confidence of industry and its willingness to support whatever new framework is developed.

Energy efficiency investment remains the single most affordable way for Government to deliver on fuel poverty and climate change objectives.  So, yes, we will be working with DECC to develop a better framework for the future of home energy efficiency policy; but as of yesterday, our job and theirs became a lot harder.

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Energy Company Obligation,Supplier Commitment

Delivering the best deal for energy consumers: options for the next supplier commitment

For the benefit of consumers and the supply chain, and unlike the Energy Company Obligation (ECO), longevity, simplicity and flexibility must be at the heart of the next supplier commitment’s design (read full position paper). Its objective must be to serve as an important and stable plank to meeting carbon budgets within a wider framework of policies and measures that support a nationwide transformation of the housing stock through staged deep retrofits. It should be capable of delivering a wide range of measures to a large number of households, and drive the best possible outcome for consumers by lowering their bills and improving their health and comfort, both in the medium and long-term. A separate and new fuel poverty programme should be established alongside it, delivered in every locality by working with the devolution agenda and preferably funded through public expenditure. This must be fit for the purpose of meeting England’s new fuel poverty targets and flexible enough to mesh with existing fuel poverty programmes in Scotland and Wales. The next supplier commitment (SC) needs to:

  • Inter-operate with a long-term policy framework for low carbon housing (which is currently lacking with respect to finance, structural tax incentives (e.g. Stamp Duty, Council Tax) and regulation) – which must also be characterised by longevity, simplicity and flexibility
  • Be set in lifetime carbon terms over a five-year time horizon, to 2022, with the five-year time horizon extended every 2.5 years and transparent penalties for non-compliance
  • Be required to satisfy customers, not respond to tick boxes in over-long and costly paper trails
  • Include the able-to-pay and have a robust but broad distributional safeguard for fairness
  • Use deemed carbon scores to enable consistent and stable offers to be made to consumers while reducing administrative cost
  • Deliver and employ individual home retrofit roadmaps to make staged deep retrofit a reality
  • Not constrain any part of the SC to only particular measure classes (such as the Carbon Emissions Reduction Obligation and insulation) and be allowed to install any Green Deal approved measure across insulation, heating and controls, lighting and renewables
  • Deliver an ambitious solid wall insulation programme with a minimum of 500,000 installations for the first five-year period, concentrating on houses and guided by quality of installation
  • Include mandatory minimum delivery through brokerage, the level of which should be kept under review

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Statement on Closure of Green Deal Home Improvement Fund

ACE has today issued this statement on the overnight closure of the Green Deal Home Improvement Fund.

Jenny Holland, Head of ACE’s Parliamentary Team, said:

“The runaway success of the Green Deal Home Improvement Fund shows that there is no shortage of householder demand for energy efficiency improvements. However, in the wake of the decimation of ECO and the failure of the Green Deal to generate significant take-up, the last thing the energy efficiency industry needs is this kind of stop-start programme.

“As recently as Tuesday DECC announced that they were cutting the cashback for solid wall insulation from £6,000 to £4,000. Three days later – and with no warning – the scheme has been closed completely. This is bad news for an industry that is looking for policy certainty and consistency – not a relentless pattern of peaks and troughs in demand.

“To create industry confidence we need long-term policies and programmes that are not chopped and changed from one day to the next. Structural incentives like stamp duty and council tax incentives will help create the certainty for which industry is crying out.”

For more information, contact: Jenny Holland, jenny@ukace.org, 07875 629781

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Green Deal,Greg Barker

Government turns from maximisation to minimisation

In October 2010, the energy and climate change minister, Greg Barker, formally invited me to chair a new advisory Forum. It was to be one of four reporting directly to him.

Over the next two years before launch, each was concerned with the development of different aspects of the new Government’s flagship policy. Our declared overall objective was to deliver “an ambitious programme to increase the energy efficiency of the UK building stock. In particular, we expect it to contribute to a 29 per cent reduction in carbon emissions from our homes and 13 per cent from non-domestic properties by 2020.”

We were christened the Green Deal Maximisation Forum. Our job was to work with Government to come up with measures to boost uptake levels.

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Energy Company Obligation,Green Deal

ECC Committee: ACE evidence submitted to Green Deal watching brief (part 2) inquiry

ACE has submitted written evidence to the Energy & Climate Change Select Committee’s inquiry into the Green Deal (watching brief part 2). In May 2013, the Committee published its first watching brief report, in which it outlined its concerns about the lack of clarity regarding the outcomes that DECC expected from the Green Deal and how it would measure the its success. The Committee identified key areas in which scrutiny would be beneficial, and outlined its intention to review the performance of the Green Deal and ECO at a later date – hence Part 2 of this Green Deal watching brief inquiry.

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Green Deal,Retrofit

Retrofitting the Green Deal

retrofitting-the-green-deal-large-thumbnailProperly executed, the Government’s new Green Deal energy saving loan scheme has the potential to transform energy saving in Britain’s homes, bringing in big gains to the economy, household budgets and the environment at the same time.

But it has got off to a disappointingly slow start and seems on course to deliver a few tens of thousands of home retrofits a year, at most. Given all of the time and effort that has gone into creating the scheme from government and the private sector and the scale of the original ambition behind it, this is a tiny sum.

The Green Deal ought to be delivering several 100,000 retrofits a year. A goal of more than one million homes per annum would be reasonable given the size of the task of improving the UK’s still highly energy-inefficient housing stock.

The benefits in carbon savings, energy bill reductions, maintaining and creating jobs and enhancing welfare and health from this level of retrofits would be enormous.

The most important problem with the Green Deal, as it now stands, concerns a funding gap caused by its so-called ‘golden rule’ which places limits on how much a household can borrow under the Green Deal. Most households which might be interested in taking out a Green Deal would find themselves having to pay at least £1,000 upfront.

Green Deal assessments, the starting point for the scheme, need improving and the bulk of them need to be provided free of charge.

In this report we make several recommendations which, taken together, represent a retrofit for the Green Deal – one which would enable it to fulfil its great potential.

The Green Deal interest rate needs to be lowered; we suggest how it could be. We also argue for a government-backed incentive scheme for Green Deal retrofits. This would help to close the Green Deal funding gap, but it would also encourage many households to use the Green Deal as an assurance scheme without having to use Green Deal finance.

We make recommendations for improving the assessment process, for encouraging more small businesses and traders to be engaged in the scheme, and for the Green Deal to have a stronger impact in streets and local communities.

This report was written by Nicholas Schoon on behalf of BioRegional and The Association for the Conservation of Energy.

BioRegional ACE Retrofitting the Green Deal Report

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Best Practice,Buildings,Energy Efficiency Finance,Evaluation

Financing energy efficiency in buildings: an international review of best practice and innovation

ACE Research, in partnership with Joanne Wade, was commissioned by the European Council for an Energy Efficient Economy (eceee) and the French Environment and Energy Management Agency (ADEME) to identify and review a wide range of energy efficiency finance schemes from around the world for the World Energy Council (WEC). The research is part of a suite which informed 2013’s World Energy Congress in Daegu, South Korea, this October.

You can download the full report including national case studies here. An overview of what we addressed in the review follows:

Energy savings are among the fastest, highest impacting and most cost-effective ways of reducing greenhouse gases emissions. Low cost energy efficiency measures have long been regarded as the ‘low-hanging fruit’ in delivering a clean energy economy.

However, the groundswell of general interest observed does not in itself produce specific, bankable energy efficiency investment opportunities without other factors being in place. Even with high and volatile energy prices, energy security issues and awareness of climate change policy drivers, there is a mixed picture of actual demand for energy efficiency from both private and public sector clients. Despite the proven cost-effective opportunity to reduce energy consumption, a significant proportion of the energy efficiency improvement potential is not being realised.

A key reason for this relates to the financing of energy efficiency. Barriers to financing mean that, in the past, energy efficiency has not been able to attract significant amounts of private capital.

These barriers take a range of well-recognised forms. The Buildings Performance Institute Europe reported in 20101 that information failure, high subsidies, lack of technical expertise, uncertainty over savings, and externalities still characterise the energy efficiency market, while ‘split incentives’ discourage both building owners and occupiers from investing in energy efficiency measures if direct benefits are not perceived. Financial barriers include the initial cost barrier, high transaction costs, long payback time, and risk exposure. Furthermore, lack of knowledge among finance providers about energy efficiency prevents customers from accessing capital, and the absence of standardised measurement and verification practice further increases transaction costs.

To examine these and other barriers in greater detail, eight case study schemes – from a range of different economies and contexts, targeting different sectors and employing different financing methods – were selected for systematic evaluation and to understand how such barriers are addressed in a wide range of different contexts – covering schemes in China, Estonia, Germany, India, Japan, Kenya, New Zealand and the USA.

The analysis of the case study finance schemes encompasses a comprehensive barrier analysis, highlighting the ways in which schemes have addressed and overcome typical barriers to energy efficiency take-up and finance provision. The barriers identified can be identified as falling into four distinct groups: Finance; Institutions and Stakeholders; Measures and Buildings; and Consumers and End-Users.

Given the diversity of the case studies assessed, and the breadth of the World Energy Council’s membership, recommendations for decision-makers and practitioners in energy efficiency finance are necessarily non-prescriptive. In order to accommodate this breadth and diversity, we highlight broad contextual considerations – in addition to the barriers analysed – that must be taken into account in the design and operation of any finance scheme. These relate to the nature of: political, legal and institutional contexts; social and demographic context; economic and industrial contexts; the built environment; and climate and geography.

To facilitate systematic thought about finance scheme design and operation for a wide variety of different purposes and in a broad range of contexts, we provide an energy efficiency finance scheme ‘decisions map’. This takes the form of a matrix containing conclusions and recommendations for each of the main barriers, mapped out across each of the areas of context. It illustrates the importance of a thorough approach to energy efficiency finance which builds on the vast wealth of experience already accumulated from around the world, and is designed to facilitate this type of approach.

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Edward Davey,Energy Company Obligation,Green Deal

Green Deal and ECO: Operational Issues – A View from the Industry

Purpose of this paper

The genesis of this paper was the speech made by the Secretary of State for Energy & Climate Change, the Rt Hon Edward Davey MP, at a reception on the Terrace of the House of Commons on September 3 hosted by this Association.

In his speech, he challenged the Association, on behalf of our industry, to put forward recommendations as to how the effectiveness of the Green Deal/ECO programmes might be improved immediately. This paper sets out a series of practical proposals regarding ways in which a series of operational issues should be addressed.

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CERT,CESP,Energy Company Obligation,Green Deal

Urgent action needed to boost Green Deal take-up and tackle plummeting insulation rates

Reacting to today’s publication by DECC of the Green Deal statistics up to June, the Association for the Conservation of Energy called the figures “disappointing”, highlighting in particular the 88% drop in insulation installations compared with the same period last year. They called for a raft of interventions to help boost the Government’s flagging flagship scheme.

Jenny Holland, Head of ACE’s Parliamentary Team, said:

“The Government was bracing itself for today’s statistics – and rightly so. Over 38,000 assessments have yielded only 245 requests for Green Deal plans, with only 4 of these actually signed. Given earlier Government predictions of 10,000 Green Deal plans in 2013, the scheme would need to ramp up 2,500-fold in the next six months in order to achieve these dizzy ambitions.

“As we have warned for many months, the insulation industry has been particularly badly hit – with installations of cavity wall, loft and solid wall insulation dropping by around 88% on the equivalent period last year. These installation rates are respectively only 5%, 8% and 7% of what the Committee on Climate Change told us yesterday we need to be achieving to be on track to meet our 2022 carbon target.GDstats“Today’s statistics reveal how urgent it is to launch a rescue package for this flagging flagship scheme. The Government need to take a long hard look at how high interest rates are deterring consumers. They should urgently consider introducing council tax or stamp duty incentives to help boost take-up – something they have been considering for years, but have apparently kicked into the long grass.

“They should also ditch the requirement for measures delivered under the cash-back scheme to be installed by an approved Green Deal provider, thereby excluding many reputable local builders and heating engineers from participating. Finally, they should reverse their perverse decision not to go ahead with plans to require householders who erect extensions or convert their garages to make further energy efficiency improvements to the original building – a policy that they themselves said would lead to energy saving improvements to 2.2 million homes.

“It’s not surprising that DECC chose to bury today’s statistics under seven other announcements. The Green Deal is falling well short of being the “game-changer” that Government Ministers promised us it would be – they must act swiftly and decisively to put it back on track.”

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Green Deal

Great expectations run ahead of the reality

The Government trumpeted the Green Deal as its energy policy flagship. But some quiet backtracking is eroding companies’ confidence to invest.

There was no doubting the initial ambition of the Green Deal. “We are launching a revolution in energy efficiency,” said Chris Huhne, then Secretary of State for Energy and Climate Change, introducing the enabling legislation in 2010. “A once-in-a-lifetime refit of our outdated homes to make them fit for 2050.”

It is the Coalition’s energy policy flagship, itself regularly billed by his successor, Edward Davey, as his “number one policy priority.” His ministerial colleague, Greg Barker, adds that the majority of homes – some 14m – must be reached within the decade.

But lately there have been some really worrying signs that these ambitions are being seriously tempered. Initially subtly, increasingly overtly, the signals are being sent about lowering expectations regarding actual results.

By doing so, the Government is effectively setting a vicious circle to work, weakening the confidence of established companies, reducing the willingness of new players to invest.

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