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Our response to the Mayor of London’s draft London Environment Strategy

ACE welcomes the vision and principles of the Mayor of London’s draft London Environment Strategy and the ambition for London to be a zero-carbon city by 2050.

We agree that the city’s most pressing environmental challenges are harming Londoners’ health and the city’s economy, and that the current pace of change is too slow. The Mayor highlights that big problems need ambitious responses. Therefore, we would like to see the Mayor’s activity and focus on air quality continue, but also expanded in relation to improving the energy efficiency of buildings, improving the lives and reducing health inequalities of those households that are in fuel poverty, whilst supporting economic growth in the environmental goods and services sector.

Our full response to consultation on this strategy can be found here.

 

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Our response to the Mayor of London’s draft Fuel Poverty Action Plan

ACE welcomes the publication of the Mayor of London’s draft Fuel Poverty Action Plan for London to help support the eradication of fuel poverty across the capital. We agree that fuel poverty remains at unacceptable levels and that it has not received the attention that the issue deserves.

ACE’s response covers four key topics:

  • Supporting the roll-out of borough referral networks.
  • Improving the energy efficiency of London’s homes, with a particular focus on improving standards in the Private Rented Sector.
  • Energy for Londoners.
  • How the Mayor should work with the UK Government.

Our full response can be found here.

 

 

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Private Rented Sector energy efficiency and the Clean Growth Strategy

Our Research Director, Kelly Greer, reflects on what the publication of the Clean Growth Strategy means for MEES in the Private Rented Sector and introduces our new project ‘the Warm Arm of the Law’. We are looking for evidence and support for this work, which examines proactive and strategic enforcement of minimum standards in the PRS.

Clean Growth Strategy

Soon after my last blog about Minimum Energy Efficiency Standards (MEES), the Government published the Clean Growth Strategy. Improving energy efficiency in the private rented sector makes a couple of appearances in the strategy.

The Government have committed to consult on how to make the MEES regulations more effective. However, we don’t yet know what this means…The introduction of a cost cap? Reducing the timescales associated with exemptions to enable landlords to take advantage of new sources of funding and finance? Providing guidance to landlords, local authorities and First Tier Tribunals around the validity of self-certified statements within the exemptions register?

There was also a commitment to look at a long-term trajectory for energy performance standards across the private rented sector, with the aim of as many private rented homes as possible being upgraded to EPC Band C by 2030, where practical, cost-effective and affordable. ACE welcomes this long-term trajectory as the message to landlords should be to take greater action now – beyond EPC band E – so that they benefit from not having to undertake additional works in the future.

The Government have noted that they will be considering options ‘with a view to consulting in 2018’. ACE will of course respond to these consultations once published.

Alongside the Clean Growth Strategy, a series of consultations and calls for evidence were published. Building a market for energy efficiency is seeking data, evidence and ideas on additional measures to encourage energy performance improvements and, while focussed primarily on the owner-occupied sector, some of the solutions identified may also be applicable to the private rented sector. ACE will be responding to this consultation and would welcome your views on the applicability of proposals to the private rented sector.

The Warm Arm of the Law: reducing fuel poverty in the private rented sector

ACE, working in partnership with CAG Consultants, has secured funding from Ebico Trust to look at how the Housing Health and Safety Rating System (HHSRS) and MEES can be proactively and strategically enforced to support the eradication of fuel poverty in England and Wales.  This project builds on previous research focused on HHSRS (*) and has support from a range of stakeholder organisations.

ACE and CAG would welcome local government practitioner views, as well as those from the wider industry, and are seeking evidence of best practice in terms of:

  • Raising awareness of minimum standards within local government departments.
  • Working with landlords and residents about their requirements and rights.
  • How to target enforcement action and ensuring resource levels within local government are maintained.
  • Examples of successful enforcement cases.

Please contact Kelly Greer on kelly@ukace.org to share any information that could feed into the project (information will be kept confidential where requested).

(*) Impetus Consulting Ltd, 2008, Tackling fuel poverty using the Housing Health and Safety Rating System (HHSRS); NEA, Impetus Consulting Ltd and Blooming Green, 2011, HHSRS: your power to warm homes in the private rented sector (policy report and toolkit)

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Local Story – Energy Efficiency in Castle Point

With winter around the corner, we are pleased to announce that our ninth Local Story focusing on the Castle Point constituency is now out: Energy Efficiency in Castle Point.

This report highlights how tens of thousands of local residents have benefited from local energy efficiency schemes in recent years, making their homes more affordable to heat and healthier to live in. However, nearly 11,000 homes in Castle Point still have the very worst energy efficiency rating of an E, F or G EPC. These homes waste hundreds of pounds worth of fuel each year, and living in them can be hugely detrimental to health.

Special thanks go to our two case studies for this report: LOCASE (Low Carbon across the South East) and Aran Services.   Nina Heigham from Aran Services said:

‘Working closely with the two local authorities enables us to assist them in helping improve their residents’ well-being and making their homes more comfortable to live in. We are still identifying homes in the area that need insulation and are entitled to 100% grant funding, and so we are asking residents to help spread the word. There are poorly insulated properties scattered throughout Castle Point and Rochford communities, and even if residents have already had work completed, they may know someone who may benefit’

Castle Point MP Rebecca Harris added:

‘After seven years co-Chairing the Parliamentary Group on Fuel Poverty and energy efficiency I know that fuel poverty remains a significant issue, and many of my constituents were very concerned about the cost of heating their homes last winter. The energy efficiency of the housing stock and businesses across the Castle Point has improved in recent years and I commend the work that local installers and programme managers have done to implement energy saving features in homes…’

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Local Story – Energy Efficiency in Eddisbury

A week after the launch of the Government’s Clean Growth Strategy, we are pleased to release the eighth in of our series of constituency-focused local energy efficiency stories: Energy Efficiency in Eddisbury. The report has been welcomed by local MP Antoinette Sandbach, who said:

“I know that fuel poverty is a significant issue, and that many of my constituents were very concerned about the cost of heating their homes last winter.I welcome the report by the Association for the Conservation of Energy, which sheds light on the energy efficiency of the housing stock and businesses across the Eddisbury constituency and commend the work that local installers and programme managers have done in recent years to implement energy saving features in homes, such as better insulation and more efficient boilers. This report does however demonstrate the need for a long-term energy efficiency policy to tackle these issues.”

The report shows how tens of thousands of local residents have benefited in recent years from proper insulation and efficient boilers, making their homes more affordable to heat and safer to live in. However, it also shows that 3,500 homes in Eddisbury still have the very worst energy ratings of F or G, which is more than twice the national average. These homes waste hundreds of pounds worth of fuel every year. The report goes on to identify the huge untapped potential for delivering to the remaining residents the benefits their neighbours have seen.

We welcomed the input from Peter Owen and Ellie Abernethy from the independent social enterprise and environmental charity, Energy Projects Plus; Emma Edwards, project officer involved in the interest free energy efficiency loan scheme ‘Cosy Loans’ and Councillor Karen Shore, Cabinet Member for Environment, Cheshire West and Chester council.

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ACE’s initial response to the Clean Growth Strategy

Dr Joanne Wade, CEO of the Association for the Conservation of Energy (ACE) welcomes the aims, targets and aspirations outlined within the Clean Growth Strategy. There is recognition of the value of energy efficiency at very core of the strategy and a commitment to further developing policies, and we see the strategy as a clear step in the right direction.

The scale of the opportunity of energy efficiency in buildings is huge. ACE research shows that the net present value of energy efficiency to the UK is at least £45 billion in energy efficiency savings[1]. The UK’s building stock is in dire need of urgent action. Therefore, we welcome the government’s intervention to stimulate energy efficiency markets in both the domestic and non-domestic sectors – to deliver the scale and pace of change that is required to meet current and future carbon budgets. However, there is a lot of work still to be done to drive energy efficiency in the UK and to develop a low carbon economy that works for everyone.

We welcome the government’s proposals surrounding the energy performance of domestic buildings, especially the proposal to further consult on the Minimum Energy Efficiency Standards (MEES) regulations, an enhanced trajectory for the regulations – taking homes in the private rented sector to band C by 2030 – and a commitment to looking at replicating the target in the social housing sector.

We are also pleased that the Energy Company Obligation (ECO) will be extended to 2028, providing longer term certainty for the energy efficiency industry. While it is right that ECO will focus on eradicating fuel poverty, ACE questions whether the investment needed in this area needs to be higher.

The Government have demonstrated leadership in enacting a target to reduce carbon emissions from the public sector, however we are disappointed that the target is voluntary rather than mandatory. We welcome the call for evidence consultation to further develop policies and programmes.

The team at ACE are taking the time over the coming days to analyse the Clean Growth Strategy and supporting documents to identify where there are still gaps in the market, and will then begin to develop the evidence base that the government have called for, thus ensuring that the voice of the energy efficiency industry is heard.

 

[1] £26 billion for homes, and £20 billion for business, ACE & RAP (2016) Buildings and the 5th Carbon Budget.

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MEES: a missed opportunity?

Our Research Director, Kelly Greer, reflects on the publication of guidance on the minimum efficiency standards for homes in the Private Rented Sector.

BEIS has finally published the guidance for landlords and local authorities on the minimum level of energy efficiency required to let domestic property under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. We welcome the publication of the guidance and the clear message that it sends about the benefits to landlords and tenants of improved energy performance. But we worry that it contains loopholes that will mean that action to eradicate fuel poverty and improve the energy efficiency of properties may not be taken.

The legislation sought to improve the energy performance of the worst properties to an acceptable standard of energy efficiency (EPC band ‘E’ or above) and thus to improve living conditions for around 300,000 private sector rented households across England and Wales. However, the potential for landlords to claim an exemption and the reliance on local authority enforcement suggest that the regulations in their present form could potentially have little effect.

This is particularly worrying since the guidance’s introduction highlights that ‘Living in private rented accommodation significantly increases the likelihood of a household being fuel poor, so much so that around a third of all fuel-poor households in England live in the private rented sector, despite the sector accounting for only around a fifth of all households in England and a seventh of the households in Wales.
Amongst EPC F and G rated properties in the sector, recent data shows that 45% of households are classified as fuel poor. Put simply, the PRS has a disproportionate share of the UK’s least energy-efficient properties and fuel-poor households. Installation of energy efficiency measures can help address this’.

Inaction will therefore leave thousands of tenants paying higher energy bills for years to come. Climate Action charity 10:10 estimates that this could leave tenants paying an extra £200 million in energy bills every year.

ACE, with other key stakeholders in the sector, fought for the introduction of a cost cap within the regulations, below which landlords would be expected to fund improvements to bring their properties up to an EPC E standard, in place of the current ‘no cost’ provisions.

This principle of ‘no cost to the landlord’, within the current regulations, means that landlords of F or G rated homes will only be required to make improvements to these properties where they can do so entirely using third party finance from one or more sources.  Sources of funding landlords can access include the Energy Company Obligation (ECO), which has been significantly reduced in size and scope over the past few years; local authority grants, which are somewhat thin on the ground in these times of austerity; and the now privatised Green Deal Finance Company (yet the government’s own impact analysis of the regulations suggest that 30% of private rented sector homes wouldn’t be able to meet the Green Deal’s ‘golden rule’ and therefore wouldn’t be eligible to take up the finance).

The ‘no cost’ requirement also makes the regulations far more administratively complex, both for landlords and for local authorities as enforcement agents.  If a landlord chooses to register an exemption from the regulations on the basis that the changes would involve cost to them, they simply have to provide a self-certified narrative explanation for why no suitable funding could be obtained to fully cover the cost of installing improvements. How can local authorities check the validity of self-certified statements? ACE has recommended to BEIS that more detailed guidance on this area should be produced for both landlords and local authorities.

Local authorities can serve enforcement action on landlords who they believe are not meeting the regulations, and landlords can appeal the decision via the First Tier Tribunal process.  This will be an interesting area to monitor as the regulations come into force in April 2018, as with housing enforcement local authorities take a cautious approach. They will not risk using their resources to robustly defend cases that may be quashed on appeal by tribunal judges. It is therefore essential that any guidance produced is also disseminated to tribunal panels.

ACE also has particular concerns about the 5 year timeframe for exemptions, and how there is no mechanism to take account of changes in the funding landscape within this period. Those working in the energy efficiency sector know that the funding landscape can change dramatically on a frequent basis.  This long exemption timeframe means that chances to access funding are a missed opportunity to maximise the effectiveness of MEES. We must stress that it is important to strike a balance on this timescale – too short and it is too burdensome for landlords, but too long and the effectiveness of MEES is reduced.

We could take a positive view of the situation, and assume that landlords, understanding the benefits to themselves and their tenants of higher energy performance, will simply choose to pay for lower-cost measures themselves rather than seeking funding or an exemption.  For many, the cost could be as little as £600.

Any action by landlords, whether paying for improvements themselves or actively seeking funding sources, relies on landlords assuming that enforcement will be robust, however we believe that it will not.

A key point raised by ACE in the past is whether or not local authorities will enforce the standards. Both Environmental Health and Trading Standards departments, who are set to enforce these regulations, have seen significant cuts to their resources. The fallout from under resourcing local government can be seen in various ways. For example, the decline of living standards in private rented housing as well as the re-emergence of food safety scares. There are suggestions that Trading Standards are not actively enforcing the requirement for rental properties to have EPCs, and we are concerned that this will happen with the MEES regulations.

Another element missing from the guidance is how the government plan to strengthen the energy performance requirements over time. The message to landlords should be to take greater action now – beyond EPC band E – and that they will benefit in the long run by not having to undertake additional works in the future.

The introduction of these standards is a real step in the right direction, and could lead to significant improvement in some of our worst properties.  But unless government make it simpler for landlords to undertake works than to try and avoid the regulations, it risks failing to deliver.

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Local Story – Energy Efficiency in Norwich South

As households begin to switch on their heating, we are releasing our new report Energy Efficiency in Norwich South – the seventh of our series of constituency-focused local energy efficiency stories. The report has been welcomed by Norwich South’s MP Clive Lewis as well as local businesses and charities. Clive Lewis MP added:

Many of my constituents told me they couldn’t afford to heat their homes last winter. I welcome the report by the Association for the Conservation of Energy, which sheds light on the energy efficiency of the housing stock and businesses in Norwich South constituency and commend the work that the City Council, local installers and programme managers have done in recent years to implement energy saving features in homes, such as better insulation and more efficient boilers. 

The report shows that there is a huge need to improve the efficiency of almost three quarters of workplaces and over 40,000 homes in Norwich South. But current national policy commitments would see a paltry 343 homes helped each year to 2020.

Not only is this selling our environment short, it’s such a false economy for our public finances. For example, for every £1 invested in renovating cold homes the NHS saves 42 pence in reduced hospital admissions and GP visits.

This government needs to stop handing out multi-billion pound tax cuts for a selected few. Instead it should invest in energy efficiency measures which benefit all of us now and by reducing carbon emissions will benefit all of our children in the future too.

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Cost of Energy Review: will it deliver lower bills?

Yesterday, BEIS announced details of its ‘Independent review to ensure energy is affordable for households and businesses’.  Here are my initial thoughts on whether or not it will deliver lowest cost, sustainable energy services for consumers.

First the ambition: the government defines this as ‘for the UK to have the lowest energy costs in Europe, for both households and businesses’.  Assuming that they mean energy service costs, rather than fuel costs, I have no problem with that as a starting point.  But, looking at the detail, I do have one or two concerns.

The review will be led by Prof. Dieter Helm and will look at how the cost of electricity can be kept as low as possible, as we meet our climate targets.  Which is my first concern: is electricity really the only form of energy that we should be concerned about?

No, it isn’t.  Electricity use accounted for only 17.5% of final energy use in 2016 (DUKES, 2017), whilst gas accounted for nearly 30% and petroleum products almost half of total use.  Of course, for this review we are interested in the cost to the consumer, rather than the amount used.  And electricity costs are dominant for industrial and commercial users.  But in homes, expenditure on gas and electricity account for roughly equal shares of the money spent.  And for our transport, virtually all our fuel expenditure is on petroleum products.  So, shouldn’t the review be looking at the costs to consumers of all energy services, not of any given fuel?

Perhaps those who defined the scope of the review believe that the future is all-electric.  Indeed, a report published last Thursday by Forum for the Future included the following quote from Prof. Helm:

‘Decarbonisation should eventually bring about the end of fossil fuels, but they face a much more immediate threat.  That threat is digitalisation. Everything digital is electric.  The future of energy is therefore electric too.’

And we have seen recent government announcements of future bans for fossil-fuelled vehicles, albeit 20 years hence.  So, perhaps we are heading towards an all-electric energy system.  But what about heat?  Will this become all-electric?  And, if so, how quickly?  National Grid’s Future Energy Scenarios 2017 offers four future scenarios, and in only one of these (admittedly, the one in which we meet our climate aims) does gas use in homes decrease dramatically.  Even in this scenario, the replacement of gas takes more than 30 years. And, surely, the next 30 years of consumers’ energy bills is something that we should be thinking about.

Which brings us to my second concern: the review ‘will consider the whole electricity supply chain – generation, transmission, distribution and supply’.  What about demand?  As we all know, one of the most cost-effective ways to reduce consumers’ energy costs is to reduce the amount of energy they have to buy.  Indeed, in the National Grid scenario, one of the main drivers that reduces gas demand is the fact that consumers ‘live in housing stock that is good at retaining heat’.

The terms of reference do give some hope.  They state that the review will consider ‘the key factors affecting energy bills’, and energy efficiency is included in the list.  The question is whether demand reduction and response – particularly for heat and transport – will be given sufficient weight, given the clear emphasis on the electricity supply system in the minds of those who have shaped the review.

If the review does not fully consider the costs and benefits of energy demand reduction, it will not deliver on the government’s aim of the lowest bills for consumers.

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Mind the Gap

Higher energy efficiency makes mortgage repayments more affordable, because less money spent on fuel means more money available for other bills. This is the core message that inspired the LENDERS project to explore how the energy performance of a home could be included in calculations of mortgage affordability.

The UK has the largest mortgage market in the world, with £234bn lent in 2016. At today’s launch of the project’s final report, BEIS Minister Claire Perry urged the mortgage industry to maintain the UK’s leading reputation for financial innovation and grasp the opportunity that improved home energy performance offers. She pointed out that higher energy efficiency improves and protects the collateral against which mortgage providers are lending, and improves home-owners’ ability to repay their debt.

The project has developed a tool that estimates the energy costs of a given property more accurately than the methods currently used by the mortgage industry. The tool can be used to show home buyers how the energy efficiency of their chosen home will affect their monthly fuel bills, and it could also be used in full mortgage affordability calculations, potentially affecting the maximum amount people can borrow – increasing this for more energy efficient properties and decreasing it for those with worse energy performance.

The ability to borrow additional money on a more efficient property will only affect directly the minority of borrowers who actually borrow close to their maximum mortgage amount. But the bigger prize is the potential effect on homebuyer perceptions: the option to borrow more on a given property could increase its attractiveness to buyers, whether or not they actually take up the larger mortgage amount; this in turn could lead to faster sales of more efficient properties and eventually to higher prices.

The Minister is clearly looking to industry to play a leading role in building demand for energy efficiency investment. And – to an extent – industry is willing to respond, as evidenced by the active involvement of mortgage lenders in the project.

However, the report acknowledges that making changes to affordability calculations is a significant process change and could take the industry some time, although promotion of the existing stand-alone tool by lenders and estate agents could begin now. The key question is: will either of these things happen?

Is the potential for additional mortgage lending to those who currently take up the maximum loan available to them a big enough financial incentive for lenders? Probably not.

Is the longer-term increase in lending on higher value energy efficient homes (together with a possible decrease in lending on less valuable inefficient properties) any incentive at all?

And is the ‘improvement in, and protection of, collateral’ that the Minister identified a clear enough motivator for lenders to invest time and money in promoting this new information to home buyers and in changing their systems?

If the answer to any or all of these questions is ‘no’, then there may well be a large gap between government’s expectations of an industry response and what actually happens, which would be a real opportunity missed. The questions then are: how do we close this gap? And whose job is it to do this?

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