Home energy efficiency and demand reduction Contents

Summary

Improving home energy efficiency is a ‘win win’ for households and the UK as a whole. It enhances the UK’s energy security, cuts the carbon emissions from our building stock, and reduces costs–the cheapest energy is the energy that we don’t use. From the consumer perspective, the benefits include lower energy bills, warmer homes that are more comfortable to live in, and improved wellbeing. Insulating draughty homes can also save vulnerable people from fuel poverty—a problem which remains unacceptably prevalent across the UK.

The Government’s recent efforts to improve household energy efficiency have consisted of supplier obligations—such as the Energy Company Obligation (ECO)—and the market-led ‘pay-as-you-save’ Green Deal. These policies have proved inadequate. ECO has delivered many improvements but at much lower rates than previous supplier obligation schemes. The Green Deal did not increase demand for energy efficiency significantly and fell far short of original ambitions for the scheme. Beyond well-documented issues around complexity and cost, the Green Deal failed to address the hassle factor that can prevent customers signing up.

The energy efficiency supply chain has also been affected by inconsistent and unpredictable policy signals as policies have been chopped and changed. In the last year the Government has announced an end to the Green Deal and it has reneged on a long-standing commitment to require all new homes to be zero carbon from 2016 onwards. Sudden policy changes in this area, like other areas of energy policy, have created uncertainty in the market. It is crucial that the Government establishes a stable long-term framework for energy efficiency.

While we welcome the fact that Government has set out plans for the energy efficiency supplier obligation beyond ECO in 2017, we have serious concerns regarding the Department’s proposed approach to tackling fuel poverty through energy suppliers. The importance of saving people from fuel poverty cannot be overstated, but we heard that the Government’s decision to use the new supplier obligation to do so may be misguided and that we are the only country in Europe to take this approach. Commercial energy suppliers may not be best placed to reach those households who need it most, and a scheme which places costs on the very households it is designed to help is inherently regressive. Moreover, given the huge number of homes yet to benefit from energy efficiency measures, the reduced ambition of the new supplier obligation is a major disappointment.

The Government must do much more to reduce consumer energy bills by improving the energy efficiency of new and existing homes. Locally-led and area-based approaches have great potential. There are examples of good practice across the UK—including in Scotland—that should be drawn on. Zero carbon homes was a positive and ambitious policy, which could have saved future homeowners money on their energy bills. It should be reinstated. Alternatively, the Government should set out a similar policy that will ensure that new homes generate no net carbon emissions and are inexpensive to heat and light. The Department must also reinvigorate the ‘able-to-pay’ market. There is now no support to help households who wish to install energy efficiency measures but cannot meet the costs upfront. DECC should contemplate using the ‘pay-as-you-save’ mechanism, as well as the infrastructure behind the Green Deal Finance Company, when considering how to assist ‘able-to-pay’ households in the years ahead. DECC must also seriously look to drive demand by pressing ahead with developing incentives such as the introduction of stamp duty and council tax reductions for efficient homes. The impact of these ideas must be properly assessed and support mechanisms must be in place to protect vulnerable consumers.

The Government must promptly demonstrate a renewed commitment to tackling energy efficiency by establishing adequate policies with long-term, ambitious objectives, which restore confidence to the industry. There are a huge number of homes yet to benefit from better energy efficiency. The UK housing stock is amongst the least energy efficient in the developed world. If the Government takes concerted action now it can help to insulate consumers from future energy price rises, while preventing the requirement for wide-scale retrofits and costly energy efficiency programmes in the future. Success in energy efficiency will only be achieved if a genuinely cross-departmental approach is adopted by Government. All of Government should see taking action on energy efficiency not as a cost today, but as an important investment for the future.




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Prepared 10 March 2016