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.
Ever since he took up his post two years ago, UK Energy Secretary Edward Davey has championed tirelessly the need for a binding target across Europe of a 40 per cent cut in carbon dioxide emissions between 1990 and 2030. It now looks pretty certain that his campaign will be successful.
The European Parliament has voted in favour. A large number of national governments are concurring. The European Commission has published a detailed policy paper, endorsing this figure.
So far, so uncontroversial.
But that target, Mr Davey argues, is sufficient by itself. He does not believe it necessary to have any related targets – whether covering renewables or energy efficiency. “Adopting an ambitious and binding greenhouse gas target will provide…a compelling reason for us all to do more on energy efficiency. But we should not prejudge the balance between increasing efficiency and deploying other low carbon measures to meet the greenhouse gas targets,” he maintains.
Others differ. Among those acknowledging the need for further statutory, as opposed to just aspirational, objectives are his opposite numbers from most of the western European governments: France, Germany, Denmark, Austria, Ireland, and many others.
Three energy targets
At present, the European Union does have three energy-related targets for 2020. Each is based upon an emblematic 20 per cent reduction. These are to cut greenhouse gases by 20 per cent; to boost the proportion of renewable energy to 20 per cent; and to improve energy efficiency by 20 per cent.
These may appear equal in timescale and objective. But they are not equal in stature. The first two both have the force of Community law behind them, effectively compelling each government to adopt appropriate policies. In contrast, the energy-saving target does not have the same status at all. It is far from compulsory, just an indicative aspiration.
Does this distinction matter in practice? You bet it does. The consequence of this “also ran” status is plain. Whereas there is confidence that the first two targets are on track to being met (indeed exceeded), you can find nobody who right now believes the 2020 energy efficiency “target” will be met.
The European Commission is due to publish in June its best forecast as to just how significant the under performance is likely to be.
But even before then, it has published some very telling evidence that suggests that those who pursue only a single 2030 target may well be guilty of deliberately frustrating many other worthwhile objectives.
It is official European policy that all new proposals must be capable of being justified via the accompanying economic impact assessment. Each new European Commission policy document is rightly required now to have a detailed Impact Assessment published alongside it.
This one demonstrates clearly that adopting complementary targets covering energy efficiency and renewables, as well as greenhouse gas emissions, would result in higher benefits relating to a whole variety of other public policies.
It is clear from this analysis that concentrating upon greenhouse gases alone means approaching the entire policy area from too narrow a standpoint. Granted the threat of runaway climate change requires effective action to contain its worst excesses. But there are a number of other policy priorities out with carbon abatement that all of Europe is seeking to address simultaneously.
The conclusion of the Impact Assessment is stark. And it is unequivocal. There would be many further benefits, above and beyond the climate changes ones, which would be obtained only via the adoption of new and very specific targets for both energy efficiency and for renewable energy.
These are adumbrated succinctly. To quote paragraph 85 of the Executive Summary of the Impact Assessment, they include: “improvements in fuel efficiency, security of supply, reduction of the negative trade balance for fossil fuels, localised environmental impacts, and health benefits.”
Fear of ‘lower GDP’
To cap it all, those who seek to limit Europe to a single, solely ecological, target – in the objective view of the Impact Assessment – are endorsing a policy that will “result in lower GDP and employment, compared to a framework based on more ambitious targets for renewables and energy efficiency.”
As you can see, the conclusion is pellucid. European climate policy should not be developed in a silo, concentrating upon just a single climate-oriented policy outcome.
We need also to be concerned about improving public health. And increasing Europe’s competitiveness. And creating new jobs, new industries. And reducing levels of energy imports. And indeed ensuring that we can keep the lights on.
For all these reasons, when later this year all the European institutions do formally agree a policy framework for both climate and energy policy in the period from 2020 to 2030, there can be no question as to the best outcome. Three places to head are better than one.
As most EiBI readers will know, the only nationwide subsidy programme for residential energy efficiency, the Energy Company Obligation (ECO), took a hammering in last month’s Autumn Statement. Its main energy/carbon saving component was cut overnight by 34 per cent.
This occurred in the wake of the Prime Minister’s pledge to reduce environmental levies (“all that green crap,” as the Sun’s front page quoted him as saying), in order to cut domestic fuel bills. Perversely, the only such policy to be cut happened to be the only programme specifically designed to cut fuel bills.
However, the government intends to introduce this April some new schemes, which Energy Secretary Edward Davey maintains will entirely restore the carbon dioxide savings of 2.9m tonnes which the scrapped part of ECO had been set to deliver.
The following is a piece written by Andrew Warren and published in ENDS Report 467, January 2014, pp. 30-31.
The past three and a half years for Eric Pickles appears to have been a litany of failure, countering the prime minister’s energy efficiency aim for Britain.
Prime minister David Cameron has set a challenge for his cabinet: “I want Britain to be the most energy-efficient nation in Europe.” But seemingly there is one member working in the opposite direction.
Eric Pickles has been the secretary of state for the Department for Communities and Local Government since the coalition took office in May 2010. During that time, he has presided over, indeed sometimes personally made, a series of policy decisions which completely undermine Cameron’s objective.
The list of failures is as consistent as it is long. In each case Pickles seems wilfully to have sought to obstruct progress. This is despite his having been the chairman of the Conservative Party which promoted the catchphrase “vote blue, go green”.
At the start of the century, the government and the building sector came together to agree a pathway to higher new-building energy standards, at a time when they were many years behind European countries with similar climates. In exchange for a roadmap providing relative certainty on timing and extent of change, the construction industry invested in training and product development, towards zero-carbon (or very low-carbon) buildings.
The deal stuck. In 2006 and 2010, the improvements were made smoothly. The next round of changes were due to start last April – the final round before zero-carbon homes were due to be introduced in 2016. Despite issuing a consultation document in January 2012 promising these upgrades, they did not go ahead as scheduled. Instead they will come into force 12 months late, in April 2014.
Even when they do proceed, they will deliver far less than intended: a 6% rather than a 25% improvement for new homes and a 9% rather than a 20% improvement in non-residential buildings, based on 2010 levels.
But it has long been established that vast numbers of new homes fail to comply with the minimum building regulation standards. Almost inexplicably, there appears to be no government system for monitoring compliance.
If a washing machine or refrigerator is put on the market that does not deliver the promised energy savings, the National Measurement Office can take out criminal proceedings. Yet nobody has ever been prosecuted for failing to comply with the energy conservation parts of the building regulations. And countless independent studies have revealed that, once you get beyond one or two bedroom apartments, it is a minority of homes that meet even the minimum energy standards. The rest are all breaking the law and Pickles is apparently wholly unconcerned.
The position is, if anything, worse for existing buildings. New EU laws state that all advertising for a building sold or leased should include its A-G energy label. And each new occupant must receive energy performance details and how it can be improved.
Independent surveys have revealed that these legal requirements are seldom observed. Pickles’ department has not only failed to adequately monitor compliance, it has not ensured that council trading standards officers are monitoring the advertising requirements – so buyers and lessors are not informed of buildings’ energy efficiency standards. But last September Pickles had to compensate the scheme administrators, Landmark (a Daily Mail subsidiary), with a whopping £5.7m from public funds, because at least six million lodgement fees of £5.36 for energy certificates had not been paid.
An earlier EU directive had led to display energy certificates being displayed in the foyers of 42,000 public buildings. Renewed annually and reflecting annual energy usage, they were stimulating big efficiency improvements. But since 2010 there has been no pressure to keep these updated: so many are not, in part because now Pickles has also whimsically decided that smaller buildings need only renew every ten years. And he is not requiring the commercial sector to display such certificates, but instead mandating that “in a prominent place” there will only be details of a building’s theoretical performance. His department has been unable to cite any support for such a perverse interpretation of a European directive.
Such idiocy occurred largely because he omitted to consult about how the final text of the new buildings directive should be implemented. Perhaps it is because he knows that, even if he does run a public consultation, he may subsequently reverse his position – even if 82% of respondents endorse his original proposal. This is what happened in the case of his infamous ‘consequential improvements’ consultation – a policy he now rejects despite having initially claimed an £11bn saving to the economy and the stimulation of 2.2 million Green Deals.
Other examples of bad faith include the failure to set any energy efficiency targets in the revised guidance for local authorities for the Home Energy and Conservation Act. And it is an open question whether landlords really believe that DCLG is committed to enforcing the requirement of the Energy Act 2011 that F and G-rated properties cannot be leased after 2018.
Pickles is currently consulting on removing from the statute book the Planning and Energy Act. This permits local authorities to set higher minimum standards for new buildings – an act much deployed by the London mayor Boris Johnson, who requires new commercial and residential buildings to deliver 40% better energy performance than the regulations mandate.
A damaging u-turn
This act was an unusual one. It was put onto the statute book in 2008 by opposition Conservative backbencher Michael Fallon (now an energy minister) cheered on by his then party chairman as an excellent mix of localism and environmentalism. Who was this chairman? Why, Eric Pickles, who five years on is apparently seeking another personal u-turn, further damaging the environment.
I am not qualified to form a judgment on Eric Pickles’ effectiveness in other policy areas but what I do know is that to date his period in office has been an almost unmitigated disaster so far as the energy efficiency agenda is concerned – and certainly so far as achieving the prime minister’s declared objectives.
As Cameron reminds us: “In a race for limited resources, it is the energy efficient that will win the race.” Perhaps Pickles should be donning his running shoes?
In response to recent announcements regarding changes to energy efficiency policies (including this DECC press release), ACE have asked DECC to answer the following questions:
1. On the announcement of a “Stamp duty rebate” for home-movers who install efficiency measures:
- Is this really a stamp duty rebate (implying a return of money at some point after purchase for homeowners who can prove they have installed measures) or is it just a cashback by another name? What will the delivery mechanism be?
- Does this money come out of the existing £200m cashback pot, or does it come from somewhere else? Is this Exchequer funding?
- It is anticipated that 60,000 homes a year will be helped. But what if a large number of homeowners opt to have more expensive measures installed?
- If the share of the £450m allocated to this scheme runs out prior to April 2017, does this mean that the scheme will be closed?
2. Help for private landlords:
- The press release talks of a “scheme to support private landlords” and promises a share (unspecified) of £450m will be available to fund this. However, the press release goes on to say that this scheme will consist of “funding available through the Green Deal”. It is therefore confusing as to whether this will be Government funding channelled through the Green Deal, or else some “tweaking” of Green Deal finance, or else some extension of the LESA scheme?
- In an article in The Sun newspaper (1st December), Nick Clegg and David Cameron refer to “cash incentives to landlords of the least energy efficient properties”; the press release meanwhile talks of “helping landlords bring their properties up to minimum standards” – the implication of both of these statements is that the funding for landlords will only be available to landlords of F and G rated properties. Can this be clarified/confirmed?
- In the article in The Sun, Nick Clegg and David Cameron talk about the incentive being available to landlords “when they are between tenants” – will the incentive only be available during void periods?
- Government is claiming this will deliver 1.8Mt of carbon savings . If it is geared to existing F and G-rated homes, surely all these savings must already be built into Government carbon estimates from the time the Energy Bill 2011 made it mandatory to outlaw F & G rated properties. Therefore there will be no new carbon saved – it will just be a sweetener for landlords to get them to obey the law.
- There are 440,000 F & G rated properties in the private rental sector. The new scheme will incentivise just 45,000 of them over three years, e.g 10% of the total. Can this be confirmed?
3. Spending breakdown:
- We’re told that there will be £450m of new investment for the two new measures above. What is the breakdown of spending as between the two measures?
4. Carbon savings and public buildings:
- What are the carbon savings associated with each of the above, and how much additional carbon saving is assumed to come from the £90m being allocated to schools, hospitals and other public buildings? What shape is deployment of this £90m – is it a grant? Or an extension of a finance mechanism (presumably Salix)?
We hope DECC will soon provide clarification on these important points.
It is absolutely disgraceful that the big energy companies have orchestrated this unscrupulous campaign, that appears to be succeeding in blackmailing the UK government into cutting by half its established policy to require energy companies to help customers stop wasting money by wasting fuel.
There has been no increase whatsoever in the levels of social and energy saving obligations placed upon the Big Six this year. This concerted attack on the Energy Company Obligation is predominantly a distraction technique, designed to draw attention from the price gouging they are practising. The extent to which the Big Six currently overcharge customers is estimated by the founder of one of their smaller competitors, Ovo, at £3.7bn a year.
Home energy use has dropped by a quarter since 2005, largely owing to the installation of energy saving measures. This has cut the energy companies’ turnover badly. That is why they are trying to destroy the only nationwide energy saving programme. But because the costs per kilowatt hour have more than doubled over the same period, the proportion of household budgets spent with the Big Six energy companies has risen sharply.
It is completely perverse logic , to help cut fuel bills, to cut the one programme that helps householders cut fuel bills. There are already 7,000 fewer people employed today than in November 2012 in delivering energy efficiency in homes. The result of halving the ECO programme will be that at least 10,000, possibly 13,000, fewer people will be employed in our sector next year than anticipated. These are mostly not in household name companies, nor even in SMEs. Decimating the ECO hits hardest at precisely the kind of micro start-up businesses which the UK has been dependent upon to lead us out of recession.
Association for the Conservation of Energy
Westgate House, 2a Prebend Street
London N1 8PT
Tel: +44 20 7359 8000
Fax: +44 20 7359 0863
Properly 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.
The following is an article published in Building magazine on the 22nd November 2013.
At the Association for the Conservation of Energy we’ve done the maths on what a cut to ECO would mean to jobs, it’s not pretty.
I was going to write this week’s blog on the implications of proposed cuts to the Energy Companies Obligation on jobs in the sector. However, my colleagues at the Association for the Conservation of Energy and I, have already put together a detailed analysis as part of a report to government on the issue.
I couldn’t say it any better than that. So here, in full, is the analysis of the impact on jobs from ECO cuts taken from our report.
In July 2012 we projected and today still estimate that 33,000 people are employed this year in delivering insulation under the Energy Companies Obligation. Many more are employed in delivering heating systems, boilers and heating controls. We do not currently hold the necessary data to make robust estimates of the number of jobs supported by heating improvement activity under the ECO (which takes place principally under the Affordable Warmth and Carbon Saving Communities Obligations).
Our employment estimates are made by looking at projections from the government’s own Impact Assessment on ECO and Green Deal: of how many insulation measures need to be delivered by the ECO, and using government assumptions, also from the Impact Assessment, of how many people are needed to deliver them. These assumptions relate to the number of installers required (direct jobs), and the number of people employed as a result across the supply chain (indirect jobs). The supply chain encompasses manufacturing, supply, distribution and development. All jobs estimates are expressed as full-time equivalents (FTEs) – one FTE is one person employed full-time for one year.
We have modelled a number of new scenarios based on watering down or removing the ECO. These are:
· Halving the Carbon Emissions Reduction Obligation (CERO)
· Extending the ECO by two years to March 2017, without increasing the size of the obligation
· Removing the CERO
· Scrapping the ECO
As a reminder prior to presenting the employment implications of weakening the ECO, we present in Figure 1 the original estimates from our earlier July 2012 study. The 2012 estimate has been updated as we now know the actual number of measures delivered by the CERT and CESP programmes over the course of 2012. In that year, we estimate nearly 57,000 people to have been employed to deliver insulation under CERT and CESP. We estimated that 33,000 would be employed full time to deliver insulation under the ECO in 2013, based on the final impact assessment’s projection of the number of insulation measures required. As the ECO has been expected to ramp up gradually, the number of FTEs increases in our estimates to 2015: 40,500 in 2014, and 46,000 in 2015. DECC say that up to 60,000 could be employed in the industry by then.
The insulation industry has already been through a very tough time adjusting to the abrupt transition from CERT and CESP to the ECO.As can be seen in Figure 1, there are approximately 24,000 fewer FTEs in 2013 compared to 2014 as is. According to the National Insulation Association, this has resulted in 5,500 mostly direct job losses by June alone. It is hard to track wider supply chain job losses, but these are likely number many more than 5,500.
Assuming that the ECO is watered down by halving the size of one of its obligations from 2014 (the Carbon Emissions Reduction Obligation, CERO), and that half the number of measures get delivered under CERO as a result, then 23,000 people would be employed in delivering ECO and the Green Deal next year: 10,000 fewer than in 2013. If the ECO were to continue as originally planned, then ACE estimates 40,500 people would be employed in delivery in 2014. So, 10,000 jobs would be lost compared to 2013, and an additional 7,500 new jobs in delivering ECO and Green Deal would be foregone. Indeed, these 7,500 jobs foregone in 2014 apply to each of the scenarios presented in this section.
Extending the ECO by two years to March 2017
This scenario sees the ECO extended without its target being increased, in essence diluting the level of activity required to meet its targets. As shown in Figure 3, the effect on employment is worse than in the scenario above, with just 20,000 FTEs required to deliver the ECO in 2014, a loss of 13,000 jobs compared to 2013.
Unlike the previous scenario, this one dilutes the delivery of all three obligations, not just the Carbon Emissions Reduction Obligation. It results in half the number of measures being delivered under the Affordable Warmth and Carbon Saving Communities Obligations – i.e. to those people who need support the most.
This scenario sees the loss of 28,000 FTEs in 2014, and leaves the ECO a true shadow of what it has been to date and could have been. Affordable Warmth and Carbon Saving Communities Obligations are in principle fully maintained. However, it is quite likely that this level of activity reduction sees the loss of economies of scale in installation, delivery and administration costs, with the result that value for money worsens.
Scrapping the ECO
This scenario sees the loss of 32,000 FTEs in 2014. Just under 1,000 people would remain employed in delivering loft and cavity wall insulation via Green Deal finance. This is based on making the perhaps generous assumption that 20% of the lofts and cavities projected to be installed under the Green Deal and ECO framework would still be delivered by Green Deal finance on its own. To date, 219 Green Deal finance plans have been completed.
As you know, the Energy Company Obligation is smack in the Government’s firing line as the main target of David Cameron’s demand to “get rid of the Green crap”, according to the front page of Thursday’s Sun. Plans are being made for a dramatic reduction in its already inadequate size, even total eradication, in the Autumn Statement on December 5.
We have prepared the attached magnum document , seeking to collate all the arguments, statistics etc. which might help the case for the ECO. We hope you find the ammunition useful.
Can somebody please explain why a drive to cut fuel bills is seeking to cut the only scheme designed to cut fuel bills?
It all got started at a rowdy session of Prime Minister’s Questions late last month in the House of Commons. Large price rises had just been announced by many of the energy suppliers. So David Cameron promised to instigate a hard look at the impact green taxes might be having upon fuel bills, with a view to announcing changes in the Chancellor’s Autumn Statement.
This perfectly reasonable announcement instantly prompted a quite unseemly hubbub of misinformation and special pleading. Initially, all the focus was placed upon the specific requirements placed by government upon the large electricity and gas retailers, which the Department of Energy & Climate Change said, categorically, was adding just 7 per cent at most to an average household bill.
DECC continuously examine these figures. These reviews consistently show that these particular “green taxes” ultimately ensure our bills are on average lower in the years to come than they would be without them, thanks to energy efficiency and reduced reliance on imported gas.