Energy and Climate Change CommitteeWritten evidence submitted by the Department for Energy and Climate Change
GOVERNMENT MEMORANDUM TO THE ENERGY AND CLIMATE CHANGE COMMITTEE’S INQUIRY INTO GREEN DEAL WATCHING BRIEF
I welcome the opportunity to provide input to the Select Committee’s call for evidence of 6 December. The Green Deal, including the new Energy Company Obligation (ECO), is the Government’s flagship programme for energy efficiency and, like the Committee, I fully recognise the importance of tracking progress on delivery. The Green Deal and ECO will help bill payers make improvements to keep their homes warm and more energy efficient. It will benefit the UK by:
potentially saving 4.5 million tonnes of CO2 per year by 2020 through the Green Deal and ECO: saving carbon is the principal objective of the programme;
boosting the low carbon economy—in particular, now that Loft and Cavity opportunities are declining, Green Deal will be supporting new jobs in the developing Solid Wall insulation sector;
empowering consumers—providing new ways of funding and more options for making a wider range of energy efficient home improvements;
empowering businesses—enabling them to compete for energy efficiency opportunities in new and innovative ways;
levering in new private investment to improve energy efficiency in UK properties;
benefitting an extra 100,000 households in low income areas each year—making a total of around 230,000 households; and
ensuring that robust consumer standards are met—creating a market that balances consumer protection and burdens on businesses.
I very much hope that DECC will be able to engage further with the Committee as your inquiry develops. We already have plans in place to gather an extensive set of data from delivery partners as the Green Deal is rolled out. These include:
the managers of the Energy Performance Certificate database who will provide important information on assessments undertaken and Green Deal plans agreed;
OfGem as the administrator of the Energy Company Obligation;
The Energy Saving Advice Service who are providing impartial advice to consumers and businesses and who can provide valuable feedback on the volume and nature of calls received;
The administrator of our Green Deal Cashback Scheme that will provide £125m of incentives for early take up;
The Oversight and Registration Body who will provide important information on registered Green Deal participants and their areas of activity; and
The Green Deal Ombudsman who will deal with claims for redress where it is sought.
In collecting and analysing information against indicators, it is important to recognise some of the time lags involved. In some cases, this is because data only becomes available over longer timescales—such as the National Energy Efficiency Database, which reports on changes in actual energy use. In other cases, such as when building evaluation evidence, this can only be considered to be representative and robust when collected over a longer period of time.
1. What is the best way of assessing the level of uptake of the Green Deal?
We will track on a regular basis trends of:
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We will also want to understand how potential for take up is progressing by tracking the extent to which consumer interest is rising. We can do this through various means. For instance, analysis of calls to our national Energy Saving Advice Service and experience from our Core Cities and Pioneer Cities early demonstration schemes. We are also funding a specific evaluation study that will track awareness of Green Deal and appetite for installing energy efficient measures amongst consumers over a period of time.
2. What is the best way of assessing the level of energy savings being delivered?
3. What is the best way of assessing the carbon savings being delivered?
In the Green Deal and ECO, energy savings translate into carbon savings: indicators on one will directly relate to the other. At present, our estimates of the amount by which energy use will be reduced—translating into how much carbon can be saved—are based on a combination of current scientific estimates of the thermal properties of energy efficiency measures that could be installed under the programme, alongside our projections of the quantities and types of these measures that will be installed.
Once data becomes available, we will calculate overall savings based on expected performance of the different measures we know to be installed and over time add to our understanding of actual savings data both through more research on the performance of the measures and more actual energy use data (eg from the National Energy Efficiency Database and Smart Meters).
4. What is the best way of assessing whether the Green Deal is delivering value for money to consumers?
The Green Deal has been designed to achieve value for money for consumers over and above that which has been obtained under historical approaches to delivering energy efficiency improvements. This is through putting in place a market based approach: effective competition and well informed consumers working together so that those companies that win business are those that offer the best value and deals to consumers (ie those that most closely deliver to consumers what they want). This means that how well the market is functioning will be an important indicator of the value consumers are getting.
Specific indicators that could help us to understand whether the market is functioning well include:
analysis of the supply conditions in the market—including concentration, analysis of entry and barriers to entry to the market for actual and potential Green Deal participants—gathered through evaluation research;
the extent to which consumers are able to make informed and effective decisions—including how well the consumer protection regime is functioning and whether it is helping or hindering value for money for consumers;
other indicators that competition is promoting innovation or putting downward pressure on costs such as analysis of trends in the cost of manufacturing and installing solid wall insulation;
comparisons of different methods of financing, for example comparing the costs of a Green Deal to home improvement loans;
analysis that the measure installed achieves the energy savings used in the repayment calculation—taken from the scientific research being carried out; and
that the measures installed are of good quality—with information on any issues like mould and degradation over time gathered through complaints and uptake of warranties.
However, since this is a new market it will take time to develop, and such indicators can only be properly evaluated once it is more established.
In addition to this, we will analyse the extent to which the new Energy Company Obligation, specifically targeted and operating alongside the Green Deal, offers value for money as compared to a continuation of historical policies such as the Carbon Emissions Reduction Target. We will have a much improved understanding of the costs of delivering ECO from energy suppliers via OfGem. We will also have valuable information on ECO through the brokerage arrangements.
5. What is the best way of assessing whether the Green Deal is being effectively delivered?
The Green Deal will be delivered directly by new companies operating in a new market but with high standards of consumer protection, which will be monitored and enforced by the appropriate regulatory bodies including the Green Deal Oversight and Registration Body (ORB) and OfGem. The Green Deal Code of Practice sets out publicly the standards to which all Green Deal participants must adhere. The ORB will publish an annual report on the extent to which all participants have followed the Code and other relevant professional standards. Similarly, we will monitor information on complaints and consumer satisfaction, through surveys and data available from the ORB. Organisations responsible for dealing with complaints in the Green Deal—such as the Ombudsman Services—will also publish annual reports.
By its very nature, the policy design is encouraging effective delivery through competition, value for money and innovation. The indicators set out above for tracking whether the policy is delivering value for money for consumers will largely allow us to understand the extent to which delivery has been effective.
6. What is the best way of assessing customer satisfaction with the Green Deal?
Feedback from the Energy Saving Advice Service will be valuable as will regular analysis of complaints dealt with by the Ombudsman. Our evaluation research will also enable us to track satisfaction at different parts of the consumer journey.
7. What is the best way of assessing whether everyone who wants to is able to access the Green Deal?
The Green Deal is a market that we expect to grow over time as more companies with new offers join. This will increase the options open to consumers which is key as the programme is heavily based around consumer choice. Assessments, for instance, may encourage consumers to take out Green Deal plans for some or all of the feasible measures or they may choose to finance them through alternative means; either way an increase in energy efficiency has been achieved.
We will though support consumers so that, whenever possible, they are able to take advantage of this innovative funding mechanism. The Oversight and Registration Body and the Energy Saving Advice Service will make sure consumers, as well as other Green Deal participants, have clear information on the areas covered by individual Providers, Assessors and Installers as well as on the particular services they can provide. In addition to this, through an analysis of both operational data and through survey evidence, we will pay particular attention to the extent to which particular consumer groups are able to access the programme:
those consumers living in remote or rural locations. As the numbers of assessors and installers registered with the ORB increases, we are tracking their geographical coverage—in particular to ensure that, where we know early demand will exist (such as in Core Cities areas) this can be met; and
those who are least well placed to afford energy efficiency measures but potentially most in need. We will undertake analysis of operational data relevant to fuel poor consumers, including carbon saving communities, on a more detailed and frequent basis level than under past obligations.
January 2013