It is 2011, and the Carbon Emissions Reduction Target (Cert) and Community Energy Saving Programme (Cesp) are aiming to tackle the horrible state of the UK housing stock. Energy is being wasted across the board as people living in Britain’s poorly insulated properties suffer a chilling experience every time the mercury drops.
With fewer than two years to go before Cert and Cesp disappear into the abyss, the government is plotting what to do next to continue the energy efficiency bloodline.
Roll forward to 2012, and the Energy Company Obligation (Eco), alongside the Green Deal, are chosen to tackle the scourge of drafty homes. “Improving household energy efficiency is also a key strand of our strategy to help address the needs of low-income and vulnerable customers from 2012,” proclaimed the Department of Energy and Climate Change (Decc).
However, like a lot of sequels, it failed to live up to its predecessors.
The numbers of homes receiving energy efficiency measures collapsed, and the costs of fitting the measures were higher than estimated.
The pressure of the “cost of living crisis” reached fever pitch in September 2013 after Labour leader Ed Miliband’s surprising promise to freeze energy prices, and the vexed issue of energy bills – which had continued to rise – came to the fore.
As the coalition government scrambled to respond, the focus turned to the “green crap” – a derogatory term for environmental and social subsidies paid through energy bills.
By October, prime minister David Cameron had promised to “roll back green levies” and in his Autumn Statement in December, chancellor George Osborne cut £50 from energy bills. These same bills had soared by around £100 recently as suppliers hiked prices.
The victim of the cutbacks was Eco, although Decc pitched the changes as an extension rather than a cut – and it in some ways, they are. The scheme is set to be prolonged from its original end date of 31 March 2015 to 31 March 2017.
The three elements of Eco –the Carbon Emissions Reduction Obligation (Cero), the Carbon Saving Community Obligation (Csco) and the Home Heating Cost Reduction Obligation (Affordable Warmth) – will be extended on a pro rata basis, and cheaper measures will be allowed.
As a bonus, the threshold for those eligible for Csco was changed from the bottom 15 per cent to the bottom 25 per cent of areas on the Index of Multiple Deprivation.
However, lurking in the shadows are the cuts. The Cero target is to be scaled back by a third; suppliers can miss their 2015 targets; receive a 75 per cent uplift on work they’ve completed; and carry over previous measures from Cert and Cesp. The reanimated version of Eco is set to lurch into life next month, but the damage has been already done to the supply chain, consumers, energy policy, and even those oft-cast pantomime villains – the energy companies.
Supply Chain
The supply chain struggled as Cert and Cesp morphed into the Green Deal and Eco.
The four-month bedding-in period saw the number of energy efficiency surveys – which are needed before the measures can be installed – fall by more than half. One company recorded a drop from more than 22,000 to fewer than 10,000 surveys.
However, between May and November 2013, things settled down, and the number of completed measures started to grow, with more than 82,000 measures installed in the penultimate month of 2013.
Mark McAlear, director at the EUM Group, which conducts Eco surveys, said: “There was a level of stability, and then the new consultation came out.
“We pretty much just shut up shop. It had a massive impact.”
The number of surveys, and energy efficiency measures, slowly dropped further, and Decc’s own figures revealed that in April this year no work was completed through the Eco brokerage system, down from a peak of £57.6 million in November 2013.
This fall is highlighted in the amount of work completed under Eco compared with Cert. In the last quarter of 2012 under Cert, 127,000 cavity walls and 340,000 lofts were insulated. In the first quarter of 2014 under Eco, only 109,116 cavity walls and 25,903 lofts were insulated.
Because of this fall in the amount of work completed, a result of both the new scheme and the proposed changes, about 20,000 jobs will be lost, according to estimates from the Institute for Public Policy Research (IPPR).
For the solid wall insulation industry, for instance, the proposed target has been set at 100,000 installations by 2017. More than 50,000 solid wall insulation measures have already been completed, so the work is expected to “drop off” significantly.
Neil Marshall, chief executive of the National Insulation Association (NIA), warns that delays and uncertainty while the government finalises its plans “could result in a lack of activity and projects being put on hold – or worse still cancelled”.
He says the industry faces another “transitional period” and that it is vital for Decc to “finalise and implement any changes as quickly as possible and ensure that appropriate measures are put in place to maintain momentum”, and prevent the impact on the sector getting worse.
Customers
The scaling back and cancellation of insulation and energy efficiency projects affects customers as well as suppliers. Peter Broad, energy policy manager at Citizens Advice, puts it simply: “Energy efficiency is the only long-term way to ensure that bills are controlled.”
Shadow energy minister Caroline Flint says Eco was struggling even to maintain the status quo. “Eco will lift fewer people out of fuel poverty in ten years than fell into fuel poverty last winter alone,” she states.
Labour is equally scathing about the changes to the energy efficiency scheme, claiming that 440,000 fewer people will benefit from Eco as a result of the changes made by the government.
As a direct consequence of the changes, some of the schemes run by the suppliers – most notably a British Gas project in Nottingham – were cancelled because they were no longer financially viable.
Those who were expecting to benefit from the government-led initiative – paid for by consumer bills – were left without help.
And with the latest statistics revealing that 2.33 million households will be in fuel poverty this year, there is a grave need for the energy efficiency projects to deliver warmer homes and lower bills.
Gillian Guy, chief executive of Citizens Advice, adds: “It is easy to forget when the sun is shining, but the reality for many, particularly in the colder months, is that horrifically cold homes, low incomes and high energy prices are trapping people into fuel poverty.”
So the fuel poor are set to remain trapped in the nightmare of cold homes that are expensive to heat.
Energy companies
The big energy companies, so often painted as the villain in the energy sector, have also suffered because of the way Eco has been abruptly chopped and changed.
British Gas cancelled a project in Nottingham in January this year, leaving 1,900 properties out of 4,700 without solid wall insulation. A British Gas spokesperson said: “These changes mean we can no longer fund some projects.”
Cue public outcry and vitriol directed at the company for leaving consumers in the lurch. One resident who was part of the scheme and was told it was being cancelled before he had any insulation installed said: “British Gas should have been made to honour their commitment. They make enough profit.”
However, Citizens Advice says suppliers “are not to blame” for the cancellation of some Eco projects – in particular the more expensive solid wall insulation projects – because they are trying to deliver the energy efficiency measures as cost effectively as possible.
EDF Energy has told Utility Week that although the proposed changes had “not had a significant impact on the type of activity we undertake”, the impact has come on the volume of measures it is installing “in order to limit the cost”.
The work that has been done, with more than 770,000 measures installed under Eco, is lost in a sea of yet more negative publicity.
Government and energy policy
In terms of negative publicity, the government has had its fair share.
It was its decision to “roll back green levies” which led to the ailing energy efficiency agenda being all but killed off.
Eco and its stablemate were launched to tackle fuel poverty and improve the terrible state of the UK’s housing stock. The Green Deal was set to boost Eco, giving it a helping hand and providing an opportunity for measures to be installed along the way. But the Green Deal has not even hit the 2,500 plan mark.
So while Eco was struggling to meet its target and come in on budget – the government came up with a plan to shake up the Green Deal. This was the £360 million Green Deal Home Improvement Fund, which is available for three years.
Coupled with the changes to Eco, the two schemes, according to Broad, are now on a divergent path, no longer closely intertwined, leaving Eco set to fall even further short of its original goals.
Without support from the Green Deal, measures have proven to be more expensive to install, exacerbating the energy efficiency conundrum. In their eagerness to be seen to be on top of energy prices, the government looked to the costs it could cut – namely funding for Eco.
The desire to take action was widely welcomed. Executive director at Which, Richard Lloyd, says this was a “good start”, but not executed in the best possible way – leaving those in need of insulation potentially losing out.
Decc itself admits the changes to Eco are trying to strike a balance between providing immediate help by lowering bills, “while maintaining help for low income and vulnerable households”.
Alongside this, part of the goal of Eco was to lower the carbon emissions from heating the UK housing stock – more efficient homes require less energy; less energy means equals less carbon emitted.
Less money for energy efficiency and lower targets means fewer homes get retrofitted, and more energy, carbon – and bill payers’ cash – is wasted.
Summary
The energy efficiency agenda in the UK has fallen prey to political circumstances, with Eco degenerating into a horror show that leaves all parties disappointed.
The end of Cert and Cesp saw the only centrally funded energy efficiency programme in England disappear, and the Green Deal has failed to provide suitable support for Eco.
Homes are still wasting energy, fuel poverty is set to increase, energy companies are being blamed and bills are still likely to increase in the long term.
The political point-scoring and one-upmanship has also left Eco bruised and battered as MPs use it as a political football.
At face value, the changes to Eco sound great – make it cheaper, make it longer, and let more things qualify for installation.
However, it is not so simple.
By proposing to radically change the scheme only a year in, uncertainty has grown.
By cutting the costs, the industry has almost cut the supply sector to the bone and when demand picks up, the insulation industry will struggle to ramp back up – with all the costs that entails. Suppliers, keen to minimise costs, will prioritise the cheapest projects – leaving the more expensive measures, usually solid walls on properties that need it most – until last.
The government has tried to strike a balance, but at the same time attacked both its social and environmental goals.
Fewer poorly insulated homes treated means more energy and carbon wasted. The changes are well-intentioned, but the long-term goal should be the focus. Energy bills may be increasing, but the best way to lower bills is to use less. To use less, homes must be more energy efficient.
For homes to be more energy efficient, a stable policy and framework is needed.
Let’s hope the industry and politicians take note, and exorcise Eco’s demons.