Energy and Climate Change Committee - Fuel Poverty in the private rented and off-grid sectorsWritten evidence submitted by Mears Group PLC

Executive Summary

A typical annual bill for homes that do not have mains gas connection is around £250 higher than those that do.

There is a suite of heating options available to people living in off-grid social housing.

Air Source Heat Pumps can be a cost effective and unobtrusive solution for people living in off grid, individual dwellings.

Air Source Heat Pumps are not currently funded by the Renewable Heat Incentive and should be included within the range of options.

Social Landlords can only leverage the Renewable Heat Incentive for communal stock.

Some social landlords were redirecting the revenue generated by Solar PV Feed in Tariffs to address issues of fuel poverty in harder to reach groups such as those living in off-grid properties.

The lack of available funding options open to social landlords means that many off-grid tenants remain reliant on electricity which is the most expensive form of heating.

The Affordable Warmth fund should be extended to include people living in off grid properties in social housing.

I. Introduction

1.1 Mears are the UK’s largest provider of social housing maintenance and domiciliary care services. We also run 12 home improvement agencies, which provide advice and support to older private home owners. Mears works across a stock of 500,000 social homes and provides domiciliary care for 20,000 people. We support some of the most marginalised people within the UK, many of which would be defined as being fuel poor.

1.2 We have a long standing commitment to supporting the communities where we work and by working in partnership with Housing Associations and Local Authorities we are able to offer a range of initiatives which are aimed at lifting people out of fuel poverty.

1.3 We have micro generation accreditation and our work has been recognised with awards such as the Sustainable Housing Award (2011) for the “Sustainable Larger Housing Retrofit Project of the Year” and the 2009 award for “Low Energy Social Housing Project of the Year”. The judges were impressed by the range of solutions and products used in the project to deliver an 85% saving in the energy consumed in the house, a 1930’s terrace, a potential saving of £600 on annual energy bills. Judges commented “It is a great example of what can be applied to the social housing sector, addressing fuel poverty and CO2 emission targets”.

1.4 For the purpose of this submission we will concentrate our answers to our work with customers who live in off-grid properties. Mears currently services over 3,000 off-grid properties. We are currently developing our services for off-grid homes by investing in new technology to help us collate information and support tenants and landlords. Our aim is to review all off-grid social housing stock and provide priced options that detail the life cost of the proposals. We plan to illustrate the benefits to the social landlord and the resident and explain what funding is available to cover the costs of the work. We also provide energy awareness training. Mears works with social landlords to find the right option for individuals or a combination of options.

1.5 There are a suite of options available to people living in social housing which is off grid. These include, air source heat pumps, ground source heat pumps, solar thermal and solar PV. LPG and heating oil are rarely used in social housing stock.

1.6 When working across stock with differing levels of efficiency we and our partners have leveraged available funding to rebalance and help those who are most likely to live in fuel poverty such as those tenants in off-grid properties.

II. What are the barriers to tackling fuel poverty among off-grid consumers?

2.1 A typical social house heating and insulation package costs around £9,000. Social landlords have leveraged a number of different sources of funding to cover the works. CESP, CERT and RHI funding allowed social landlords to claim back approximately £1,200. Funding could also be leveraged through the Solar PV feed in tariffs scheme. The electricity generated from the FIT was around £836 per annum tax free. After the work was completed the improvements would reduce annual electricity costs for tenants living in the property from £450 to £300. The whole installation would pay for itself within an average eight years.

2.2 However, Renewable Heat Incentive only applies to communal properties and cannot be leveraged for individual dwellings and CESP funding was rarely used in areas of mixed tenure. This means there are few funding sources for social landlords looking to improve fuel efficiency and lower costs for their off grid tenants.

2.3 Social landlords looking for innovative ways to support off grid tenants redirected the funding received from Solar PV installation. The Feed-in Tariff Scheme became a valuable funding source for Registered Social Landlords looking to address fuel poverty issues.

2.4 Revenue generated by the feed in tariffs could be ploughed straight back into alleviating fuel poverty for other harder to reach tenants such as those in off grid properties.

2.5 The Government’s decision to reduce FIT rates across the board has made solar PV installation unviable for social landlords. This combined with the lack of alternative funding schemes for individual social house dwellings is a major barrier to tackling fuel poverty.

III. To what extent is fuel poverty in rural areas driven by a lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible?

3.1 A typical annual bill for homes that do not have mains gas connection is around £250 higher than those that do. Lack of access to the gas grid is a significant cause of fuel poverty among off-grid tenants. While access to the grid is not easily remedied the barriers to social landlords providing more cost effective heating solutions can and should be addressed.

3.2 DECC should address the lack of funding for the purchasing and installation of Air Source Heat Pumps for off grid social housing. These can be one of the most cost effective solutions for people without access to the gas-grid. RHI should be extended to cover air source heat pumps and individual social house dwellings. The current situation means that most tenants are reliant on electric heating which is one of the most expensive forms of heating.

3.3 Reliance on electric heating often creates a double whammy for off-grid tenants. Many are on the cheapest plans which heat a property at off peak times (through the night.) Given that many of our older or unemployed customers may be in their property throughout the day or may require hot water and heating in the afternoon – they can be reliant on additional plug in heaters to top up. This pushes their heating costs even higher.

3.4 Housing Condition is also a factor among individual social house dwellings, as they can miss out on the regular inspections and cyclical works that communal estates are subject to. On many estates there are weekly inspections to identify and correct damage at the earliest possible stage. With fewer inspections, housing conditions in individual dwellings may not be at the same high standards of larger estates.

3.5 Individual dwellings are also not eligible for funding streams that social landlords leverage for communal areas. This means that improvement works on these isolated properties are often reliant on wider funding programmes such as the decent homes standard. While the Decent Homes Programme has enabled social landlords to improve the overall condition of housing stock the funding did not cover the installation of alternative heating sources for off grid tenants.

IV. Given that the OFT found no evidence of a competition problem in the heating oil market, what (if anything) can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather?

4.1 Social housing tenants are typically among the poorest people in the UK. Fluctuations in oil prices can result in severe financial hardship or going without heating. It is important to remove the dependence on oil. Air Source Heat Pumps are the most cost effective long term solutions for individuals with no access to the grid. About the size of an air-conditioning unit, they are relatively easy to install, less intrusive than other measures and fix to the outside of any property.

V. How could DECC’s policies for tackling fuel poverty among off-grid consumers be improved?

5.1 DECC could improve its policies for tackling fuel poverty by recognising that social landlords redirected funding leveraged from the FIT to tackle fuel poverty across the wider housing stock including off grid properties. A dual tariff should be created which distinguishes between not for profit schemes (such as those run by Local Authorities, Housing Associations, ALMO’s and charities) which require the higher tariff to incentivise solar installation but plough any revenue back into reducing fuel poverty and private schemes which have no impact on tackling fuel poverty.

5.2 Renewable Heat Incentive should be extended to cover Air Source Heat Pumps and should be available to fund installations in individual social house dwellings.

5.3 ECO has a critical role to play in tackling fuel poverty through helping households to improve the energy efficiency of their homes and reduce heating costs. The Affordable Warmth element of ECO is designed to provide support to those low income and vulnerable households least able to heat their homes to an adequate standard. As the Green Deal and ECO consultation document states “It is clearly crucial that this ring-fenced element of the overall obligation is targeted at those households where it can make the most difference, and will form a key part of the Government’s programme to tackle fuel poverty”.

5.4 However, The Green Deal and ECO consultation makes it clear that the intention is to restrict Affordable Warmth eligibility to properties in private tenures. The question asked within this consultation is: Do you agree that eligibility for Affordable Warmth measures should be restricted to households who are in receipt of the benefits and tax credits similar to the CERT Super Priority Group and who are in private housing tenures? A restriction in this way would prevent social housing tenants in off grid properties from gaining access to ECO Affordable Warmth funding – which seems unfair and unreasonable. As a minimum, off-grid social housing should be able to access Affordable Warmth Funding and should not be disadvantaged.

December 2011

Prepared 4th July 2012