Home energy efficiency and demand reduction Contents

Conclusions and recommendations

Stop-start nature of energy efficiency policy

1.We recognise that, through the Energy Company Obligation, large energy suppliers have delivered well over one and a half million energy efficiency measures over the past years, as well as significant bill savings for consumers. However, we have heard that targets are much lower and less ambitious than under the previous supplier obligations: the Carbon Emissions Reduction Target and the Community Energy Saving Programme. There has been a disappointing decline in energy efficiency installation rates. This is seriously concerning, especially given that there are a huge number of homes left to benefit from insulation and other measures. (Paragraph 24)

2.The Green Deal is widely regarded to have been a failure. It fell unacceptably short of original ambitions and it is clear that the scheme has not driven any significant demand for energy efficiency measures in the ‘able-to-pay’ sector. The problems preventing Green Deal from large scale take-up were well documented by our predecessors. Disappointingly, they were not addressed. The failure of the Green Deal has been further exacerbated by the unhelpful and competitive interplay between the scheme and the Energy Company Obligation. (Paragraph 25)

3.Policy changes, under both the previous and current Government, have led to a degree of uncertainty within the energy efficiency market. This has led to a complex and confusing landscape for consumers to navigate. This lack of stability has also been detrimental to the supply chain, which has suffered job losses. (Paragraph 26)

Data issues

4.The importance of tackling fuel poverty cannot be overstated. However, we have serious concerns that the Government’s decision to use the new supplier obligation to do so may be misguided. The evidence we have received clearly indicates that this is the wrong approach. A scheme which places some of the costs of its delivery on the very households it is designed to help is inherently regressive. Commercial energy suppliers are not best placed to deliver fuel poverty action. Moreover, access to and sharing of individual household data is currently not possible and would probably require primary legislation. (Paragraph 46)

5.We recommend that DECC reconsiders its decision to use a supplier obligation to tackle fuel poverty. As a consequence the Government must re-evaluate what the best approach is to tackle fuel poverty. In order to do this, the Department must first publish the evidence which was used to determine that a supplier obligation is, in its own words, the “best mechanism” for tackling fuel poverty. This evidence must be open to public scrutiny. (Paragraph 47)

6.DECC should consult on alternative approaches to tackling the serious and urgent problem of fuel poverty. DECC must give particular attention throughout this consultation to addressing how to tackle fuel poverty for those living in rural fuel poor homes. (Paragraph 48)

7.Accurate, accessible data on property characteristics, energy use and income are the key to tackling fuel poverty. Such data would also help drive a more targeted approach to delivering energy efficiency measures through various policies. We recommend that the Department assess what legislative changes would be needed to improve wide-scale access to- and sharing of data. DECC must provide us with details on what specific changes would need to be made to establish a comprehensive national database to support the delivery of energy efficiency measures. In its response, the Department should set out a timetable for these changes. (Paragraph 49)

Transition to the new supplier obligation

8.The impending transition period between the Energy Company Obligation and the new supplier obligation must not repeat the mistakes of the badly handled transition from the Community Emissions Reduction Target and the Community Energy Saving Programme to the Energy Company Obligation, which had unintended consequences for industry and the supply chain. (Paragraph 52)

9.In the light of industry concerns regarding a carefully managed transition period, and our earlier recommendation that DECC reconsiders its decision to use a supplier obligation to tackle fuel poverty, we recommend the following:

i)ECO, in its current form, should be extended until March 2018 in order to provide stability to the supply chain while a new supplier obligation is developed.

ii)A transition period should be established between the end of the Energy Company Obligation and the new supplier obligation—this should run from April 2018 to March 2019 as a minimum—with the new obligation commencing no earlier than April 2019;

iii)The Department must immediately launch a consultation on the design of the new supplier obligation to be introduced in 2019. (Paragraph 53)

Stimulating the ‘able-to-pay’ market

10.It is crucial that the Department renews its efforts to drive demand for energy efficiency for the ‘able-to-pay’ in this Parliament. It is disappointing that DECC is not prioritising addressing this issue, especially after the failure and subsequent ending of the Green Deal and given that the shortcomings of this scheme have been known for a long time. We set out below the action we believe the Department must now take to encourage and drive demand for energy efficiency in ‘able-to-pay’ households. (Paragraph 58)

Re-introducing attractive financing options

11.The establishment of the infrastructure behind pay-as-you-save based lending is an important legacy of the Green Deal. This infrastructure could play an important role in facilitating future energy efficiency measures in the ‘able-to-pay’ market. We recommend that the Government carries out an assessment of the value of reinstating a pay-as-you-save mechanism based on the GDFC infrastructure. (Paragraph 64)

12.DECC must specifically detail what assistance and tools will be available to landlords, some of whom will have to make considerable and costly improvements to their properties in order to comply with the minimum energy efficiency standards (MEES) to be introduced in April 2018. (Paragraph 65)

Driving demand through incentives

13.We welcome the fact that the Department is looking into using varied stamp duty and council tax rates as levers to incentivise households to undertake energy efficiency improvements. We urge the Department to work with the Treasury to develop straightforward policy options and publish an impact assessment of these options. Complex policies must not get in the way of delivering energy efficiency objectives. The Government must ensure that support mechanisms are in place to ensure that vulnerable households and fuel-poor consumers are not negatively impacted from the introduction of such incentives. (Paragraph 68)

Communicating the broader benefits of energy efficiency

14.There are multiple benefits to improving home energy efficiency. However, these benefits have not been clearly communicated to households, which is a principal reason behind the failure of previous schemes to drive demand. We welcome that the Department recognises that making home energy efficiency improvements is not simply driven by financial incentives. (Paragraph 74)

15.DECC should bring together health services, charities, housing developers, supply chain representatives, industry groups and consumers to form a group to consult with and determine the most effective way to communicate the benefits of energy efficiency to ‘able-to-pay’ households. The Department should also commission, and publish, research to help it understand behaviour change in energy efficiency and demand reduction. This will help to identify how to use the right message at the right points of intervention. We also recommend that the Department works with industry to develop and publicise ‘roadmaps’ which set out and make clear what steps individual households can take to improve their energy efficiency. (Paragraph 75)

Enabling locally-led delivery

16.Locally-led and area-based approaches have the potential to greatly improve the delivery of energy efficiency policies if these are well planned and sufficiently resourced. (Paragraph 83)

17.We recommend that the Department develops a national framework to facilitate and support locally-led delivery of energy efficiency. Within this framework, the Government should set out good practise and a guide to different ways in which local authorities can work in partnership with other key players (charities, health services, energy suppliers and other relevant organisations) to deliver energy efficiency measures. Examples of good practice include HEEPS in Scotland and the use of ‘warm zones’. (Paragraph 84)

Making energy efficiency a cross-Government priority

18.We recommended in our recent report on ‘Investor confidence in the UK energy sector’ that the National Infrastructure Commission must consider the infrastructure requirements of meeting the UK’s carbon budgets and long-term legally binding carbon reduction targets. Energy efficiency will be a crucial part of the mix. The Government and the National Infrastructure Commission should assess the potential benefits of designating energy efficiency as a national infrastructure priority. (Paragraph 89)

19.The establishment of an ‘inter-ministerial group on clean growth’ to drive cross-departmental collaboration on issues relating to the carbon budgets and de-carbonisation is a positive step by the Government. However, it is unclear to us how the Government’s current position to supress information on the group’s membership and the frequency and timing of its meetings protects the integrity of the policy making process. It is unclear whether energy efficiency is discussed within this group. (Paragraph 92)

20.We recommend that the Inter-Ministerial Group on Clean Growth is re-cast as a formal Cabinet Committee. Its membership must be published. We recommend that the Secretary of State for Energy and Climate Change is Chair and that it should include representatives from the Department of Health, Department of Communities and Local Government, Department of Work and Pensions, Department for Business, Innovation and Skills, Department for Transport, Department of Environment, Food & Rural Affairs and the Treasury. (Paragraph 93)

21.Alongside this, we recommend that the Government sets up an Implementation Taskforce for energy efficiency. We recommend that representatives from the same Departments outlined above are members of this Taskforce, which should also be chaired by the Secretary of State for Energy and Climate Change. The terms of reference for the Taskforce should be: Driving energy efficiency across the UK as part of a wider strategy to tackling the energy trilemma. The Taskforce should publically report, on an annual basis, the Government’s progress towards achieving a step-change in driving energy efficiency across the UK. (Paragraph 94)

Developing robust regulation for new homes

22.Zero carbon homes was an ambitious policy which was a positive step towards ensuring that all new homes are energy efficient. Whilst we recognise the Government’s desire to stimulate housebuilding, the unexpected decision to end the policy was disappointing to many businesses that were ready to deliver the Government’s original objectives. The decision damaged confidence in the low carbon economy and will lock in the requirement for future wide-scale energy efficiency measures and costly retrofits. We recommend that the Government reinstates the zero carbon homes policy or sets out a similar policy that will ensure that new homes generate no net carbon emissions. (Paragraph 99)

Conclusions

23.Improving energy efficiency in homes provides major benefits. It helps households to reduce their energy bills, it contributes towards a reduction of carbon emissions and, by reducing demand, also contributes towards energy security. Improving energy efficiency of homes can play a significant role in helping the country tackle the energy trilemma. Moreover, it provides valuable benefits to individual consumers, such as improved well-being, increased comfort and homes that are nicer to live in. Driving demand for energy efficiency measures should therefore be one of Government’s top priorities. Addressing the issue should be seen not as a cost today, but as an investment for the future. (Paragraph 100)

24.There is no ‘silver bullet’ to improving home energy efficiency. A combination of regulations, subsidy programmes, obligations, targeted grants and long-term structural incentives must all be used in a concerted effort. The Government needs to understand that different approaches are required for different households, from the vulnerable fuel-poor, to the private-rented sector, to those who can afford to improve the energy efficiency of their homes. It is also important that the Government recognises that it is individual households who ultimately interact with these different policies, and any future approach must consider the importance of a smooth and rewarding journey for consumers seeking to improve the energy efficiency of their homes. (Paragraph 101)

25.It is crucial that the Government establishes a long-term framework for energy efficiency by taking the following actions:

26.A key part of this approach is to consider the real potential to drive targeted energy efficiency by facilitating the release of and widening access to valuable data on property characteristics, energy use and income. The Department must also recognise the need to be flexible enough to respond to, and maximise the potential of, disruptive technologies such as smart meters. Success in driving energy efficiency will only be achieved if its importance is recognised throughout Government and a genuinely cross-departmental approach is adopted. (Paragraph 103)




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Prepared 10 March 2016