Memorandum by the Cavity Insulation Guarantee
Agency and the National Insulation Agency
We refer to the call for evidence in relation
to Government Energy Efficiency policies, and welcome this important
initiative by the S&T Select Committee. On behalf of the Cavity
Insulation Guarantee Agency and National Insulation Association
we would like to put forward the following points for consideration
by the Committee.
1. The biggest energy-related challenges
facing UK Government policy are Climate Change, security of supply
and fuel poverty. Almost uniquely, energy efficiency can tackle
each of these challenges in a positive manner by saving CO2
emissions, reducing the need for imported energy (particularly
natural gas) and cutting fuel bills in a sustainable fashion.
2. When considering the need for greater
energy efficiency in the domestic sector, the biggest CO2
emissions arise from our demand from hot water and heat (over
50 per cent). In delivered energy terms, over 30 per cent of national
energy consumption relates to the domestic sector, of which 60
per cent is for space heating, 23 per cent water heating, 13 per
cent lighting and appliances and 3 per cent cooking.[3]
Furthermore in terms of energy security, direct fossil fuel use
by households is over 3.8 times the energy delivered from electricity.[4]
3. Thus the most important short term activities
needing to be undertaken are each insulation related: cavity wall
insulation (CWI), topping up inadequate levels of loft insulation,
draught proofing and solid wall insulation. Currently, the first
two measures are very cost effective but more research needs to
be carried out into developing lower cost and/or more effective
solutions for tackling the UK's 7 million solid wall properties.
We hope the new UK Energy Research Centre being established by
the Research Councils will make this one of its priorities.
4. Whilst the Building Regulations Approved
Document L controls standards of thermal performance for new buildings,
the very low rate of building stock turnover (around 160,00 houses
built, ie 0.7 per cent of the total stock per annum, compared
to only around 15,000 homes destroyed annually) means that any
net improvement takes many years to impact.
5. The current consultation covering a 2006
review of the Building Regulations part L is welcomed as for the
first time contemplating consequential upgrading of existing building
fabric during extension works. However, this will inevitably take
some time to be felt in the market.
6. The challenge therefore is the retrofit
of insulation measures to the existing housing stock. For example
for the most important insulation measure, CWI, only one third
of all the households with cavity walls have been insulated since
the 1970s—there are over 10 million properties still without
insulation.
7. Once installed, insulation does not depend
on correct adjustment or maintenance, and typically loft insulation
is assumed to last for 30 years and cavity wall insulation 40
years, although in practice they might be expected to last the
lifetime of a building.
8. It is for these reasons that Government
policies recognise the importance of upgrading the standards of
insulation in existing housing stock through proven retrofit measures
such as loft and cavity wall insulation.
9. The current primary initiative aimed
at upgrading the building stock is undertaken through energy supplier
obligations, the Energy Efficiency Commitment (EEC) formally delivered
via Energy Efficiency Standards of Performance.
10. In addition to energy efficiency aims,
improved levels of insulation can also help alleviate fuel poverty,
and initiatives such as Warm Front and the equivalent devolved
administration schemes also deliver improvements in the thermal
performance of buildings.
11. Despite these initiatives, there are
around 10 million cavities that are not insulated. In the case
of loft insulation the uptake has been somewhat greater, with
around 60 per cent of properties having 100mm or greater depth
of insulation.
12. The current Consultation on phase 2
of EEC envisages a doubling of current rates of Cavity wall and
loft insulation over the period 2005 to 2008.
13. The economic case for loft and cavity
wall insulation is strong, and even before discounts or grants,
paybacks are typically 2-5 years. However, the primary barrier
to increased uptake of insulation is customer apathy and lack
of knowledge, which represent a market failure.
14. Because installing insulation is not
a distress purchase, as is the case with a replacement freezer
for example, and because there are no obvious aspirational benefits,
a fundamentally different approach is required from those applied
to white goods.
15. The insulation industry maintains (supported
by the evidence to date) that this will only be achieved by either
requiring insulation by regulation (eg at the time of sale of
a property) or by increasing the demand from householders (a long
term culture change), and, in the short term, by creating a fiscal
lever—a carrot or a stick. Our contacts in government have
given a clear impression that the fiscal rather than regulatory
approach is "preferable at this stage". Such a mechanism
needs to be simple in both concept and operation, preferably built
onto an existing revenue mechanism and likely to produce the desired
step change in insulation activity; it also needs to focus predominantly
on owner-occupiers[5]
and yet not penalise those households living in fuel poverty or
that have no access to capital. The insulation industry has considered
various funding options against these criteria, including adjustments
to Council Tax, personal tax allowances and a penalty or rebate
of Stamp Duty. Although we noted personal tax allowances have
been used in other countries, we believe that a fiscal mechanism
based around a Stamp Duty penalty or rebate would best meet the
above criteria.
16. Finally, the industry believes that
a combination of measures will be required to fully exploit the
available energy savings opportunities from improving levels of
insulation in the existing housing stock:
— A sustained Government umbrella communications
programme focussing on the threat of Climate Change and the role
that individual householders have in taking simple steps to contribute
to the alleviation of Greenhouse Gas emissions.
— Fiscal incentives such as Stamp Duty
to overcome the market failure.
— Implementing the proposed 2006 review
of the Building Regulations part L to cover upgrading of existing
building fabric during extension works.
— Research and development into cheaper
and more efficient ways to insulate solid wall properties.
17. In conclusion, we believe that the above
clearly demonstrates that insulation has a central role to play
in delivery of a variety of government energy-policy aims, but
that achieving the required step change in consumer uptake will
require an effective Government communications programme coupled
with fiscal incentives to overcome the identified market failures.
18. We hope that you find the information
provided helpful and we would of course be pleased to have the
opportunity to give verbal evidence before the committee if this
was felt appropriate.
25 October 2004
3 Domestic Energy Fact File 2003, BRE Bookshop. Back
4
Digest of UK Energy Statistics 2003. Back
5
The Government has already taken welcome steps to improve the
energy efficiency of rented dwellings through its "Decent
Homes" initiative and via measures announced in the 2004
Budget for private landlords. Back
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