ACE has submitted its response to HM Treasury and DECC’s consultation on reforming the business energy efficiency tax landscape. We agree there is scope to simplify the landscape, but stress that in doing so, there is real emphasis on reporting publicly with board approval and ensure that cost-effective energy efficiency recommendations are acted upon.
This consultation forms part of the evaluation of the Energy Performance of Buildings Directive. Under the terms of the Directive, the Commission is required to carry out this evaluation by 1 January 2017, with assistance from a Committee of Member States’ representatives. The evaluation should reflect the experience gained and progress made since the adoption of the Directive. If necessary, the Commission should make proposals on the basis of the evaluation.
The evaluation also follows on from the Energy Efficiency Communication of July 2014, which indicated that additional measures to be introduced to improve energy efficiency would need to primarily address the energy efficiency of buildings and products if progress is to be made by 2030. The Energy Performance of Buildings Directive is the main legislative instrument in force at EU level covering the energy efficiency of buildings.
With a primary focus the UK energy efficiency market, our response to the consultation highlights: the uncertainty following the abandonment of the zero carbon trajectory; the missed opportunities with respect to driving higher rates of renovation; the low level of compliance with EPBD’s provisions and the virtual absence of enforcement; the question marks hanging over Display Energy Certificates; the need to make EPC data more widely accessible; and the need to plug skills and capacity shortages in the energy services and energy auditing sectors.
The Energy & Climate Change Committee is investigating the factors that contribute to investor confidence in the energy sector and wants to build an understanding of how DECC’s policy making process might impact on investor decisions.
DECC estimates that £110 billion investment is needed in our electricity infrastructure over the next decade. Stakeholders’ concerns that policy uncertainty was weakening the case for investment have led the Committee to prioritise the issue of investor confidence – without it, we hamper our ability to meet climate, energy security and affordability objectives. Energy efficiency and demand reduction is the cheapest contributor to these objectives, and this is what we highlight in our written response to the inquiry.
The Energy & Climate Change Committee says that energy efficiency and demand reduction is one of the most cost effective ways to cut carbon emissions, improve energy security and reduce consumer bills. It adds that the Government has announced the end of two key policies – Zero Carbon Homes and the Green Deal – without bringing forward any replacement schemes – and that the Energy Company Obligation is also due to come to an end in March 2017.
The Committee is investigating what lessons can be learnt from these and previous energy efficiency schemes. The evidence received will feed into its scrutiny of energy efficiency policies over the course of this Parliament.
ACE has submitted its written evidence, highlighting the successes of past programmes, the weaknesses of recent schemes and lessons that can be learned from them, including lessons from the US and elsewhere in Europe.
ACE’s Director reflects on some of the comments in the Secretary of State’s speech to the Conservative Party Conference.
In her conference speech, the Secretary of State suggested that ‘our energy policy should once again be driven by the people who pay the bills.’ Yes indeed, but let’s not forget that we already have relatively cheap energy and our dissatisfaction with our bills is more effectively tackled by helping us to use this resource more wisely than by focusing obsessively on marginal reductions in the cost of a kilowatt hour. ‘Getting a grip to protect families from endless worry about their energy bills’ should start with ensuring that their homes are energy efficient, not with providing secure supplies.
We too are delighted that the new National Infrastructure Commission will look at energy: but it must recognise that our energy infrastructure does not stop at the meter. Investment in demand side infrastructure needs to be fully and fairly considered alongside supply-side options.
We agree that the Government will help some people to keep their bills down by delivering its promise to insulate a million more homes over the next five years, and that is a good thing; but what about their heating systems, lighting and appliances? What if they need more than just the cheaper insulation options? And what about the other 25 million homes, give or take, that aren’t yet as energy efficient as they need to be?
The Secretary of State wants to get ‘the balance right between supporting new, low carbon generation and protecting bill-payers’: so she must enable energy efficiency to help her do this. If we use less, we can afford to pay a little more for each unit if we need to, without being out of pocket.
She wants to ‘celebrate and back the businesses and innovators who will transform our energy system’: quite right, but why no mention of the high specification insulation systems that have been developed in recent years, of triple glazing systems that enable natural light to flood in without heat flooding out, of LEDs, of smart heating controls and ventilation… I could go on…
In closing, Ms Rudd invoked the spirit of Margaret Thatcher, to demand that we tackle climate change whilst being ‘tough on subsidies […] pro-innovation and pro-consumer’. The energy efficiency sector is ready to do just this; it now needs the Government to notice this, and get on with setting the policy framework that will let this happen.
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.
The news for energy efficiency in the past week has seemed grim: an EU ruling on VAT rates that will increase the cost of energy efficiency investments by 14% and the announcement of a £40 million cut in DECC’s subsidies for energy efficiency.
But let’s not despair. The French treat the issue of VAT differently; using general refurbishment of domestic buildings serving as an economic stimulus as their rationale for lower rates of VAT (10% for all retrofit works instead of France’s standard 20%), rather than the social benefits argument that the UK has used. If we adopt their approach, which additionally stimulates energy efficiency investment by lowering the rate of VAT even further (from 10% to 5.5% in France’s case) for energy-related retrofit, we’ll incentivise more action on the energy performance of our homes than the 5% VAT rate alone has done.
And there are better ways for DECC to deliver its energy security and climate change objectives, through cost-effective energy efficiency investments, rather than handing out market-distorting subsidies. ACE has long called for a more long-term, robust framework that will enable the market for energy efficiency to develop sustainably, and now is the perfect opportunity for DECC to develop this.
The French VAT reduction scheme is just one example of a more systemic incentive that could be offered. Revenue neutral stamp duty or council tax incentives for the domestic sector could lead to between 650,000 and 1.75 million additional retrofits every year. Similarly, differential business rates could encourage small business owners to invest in improving the energy performance of their buildings. If these incentives are combined with a long-term plan for minimum energy efficiency standards for all buildings, together with improved access to a range of finance options, we could begin to see the change in market demand for these measures that is needed.
The incoming government promised in their manifesto to cut carbon emissions as cost-effectively as possible. As energy efficiency remains the most cost-effective source of emissions cuts, can we therefore look forward to a much needed shift in policy focus?
At first glance, it may seem not: there is little explicit mention of energy efficiency in the Conservative Party manifesto, and absolutely no recognition of how its multiple benefits can contribute to other government policy aims.
But increased energy efficiency can help deliver more competitive businesses and less wasteful public sector organisations. Investment in warmer homes helps families to stay healthy. And local energy efficiency investment can stimulate local economies, creating worthwhile jobs for local people.
These are all arguments that should make sense to the government: it is up to us to make them persuasively and show how our sector can help them deliver on their election promises.
Last Wednesday Communities Secretary Eric Pickles concluded an unusually swift and unpublicised (at least, by him) “public consultation” into whether there is any purpose in requiring Display Energy Certificates (DECs) for public buildings.
These are the A to G ratings which for the past seven years you should have expected to find exhibited “in a prominent position” in any of the 58,000 buildings occupied by the public sector, that you might be visiting. That means central and local government offices, libraries, sports centres, schools and colleges, hospitals and surgeries, museums, and so on.
This very Thursday – just six working days after his “public consultation” closed – Pickles is due to receive from his officials their considered conclusions. How do I know this?
I am the present chair of the British Energy Efficiency Federation. The membership of BEEF is made up of 18 of the trade associations most directly involved with the energy efficiency market: it was created by the then relevant Department back in 1996, and has continued to meet on a quarterly basis under the auspices, and in the offices, of whichever Department holds the energy efficiency brief (currently DECC).
Reducing demand is better value than continuing to plough money into increasing energy production. So why do we continue to favour energy production?
In almost all circumstances, it is cheaper to avoid having to use energy than it is to produce it. This is a mantra with which most will be familiar: it has been enunciated by practically every objective strategic energy study for decades. Again this month the European Commission repeated it forcefully, in its magisterial paper setting out the case for a full Energy Union.
So, if demand management is much better value than generating new supplies of energy, why do our political leaders in the UK consistently set out to handicap energy saving – while energetically promoting production?