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The Chancellor’s announcement of £3 billion for energy efficiency measures is just what the sector ordered. But, David Blackman asks, are we geared up to spend the money?
The latest set of Office for National Statistics (ONS) employment figures, published last week, underlined the gravity of the looming joblessness crisis facing the UK.
The 649,000 fall in company payrolls, recorded by the ONS since March, will fuel fears that the Office for Budget Responsibility was not wide of the mark when it predicted earlier this week that unemployment could top 4 million by the end of the year.
While ‘Rishi’s meal deal’ eating out discount
may have garnered most headlines immediately following last week’s Summer statement, the chancellor’s decision to shower £3 billion on energy efficiency measures will have longer lasting consequences.
A plethora of industry bodies have been queuing up for weeks with a consistent message: energy efficiency can deliver jobs while tackling carbon emissions.
But jitters were widespread in the run up to last week’s announcement as reports swirled that Dominic Cummings found the topic “boring” and that the prime minister’s chief advisor was much more enthused about cutting edge technologies to suck carbon dioxide out of the atmosphere.
In the event, Cummings’ pet Direct Air Capture project received £100 million of support but the big bucks went to energy efficiency.
James Griffiths, energy efficiency policy officer at the Association for Decentralised Energy, was taken aback to see the traditionally Cinderella subject get so much attention during Sunak’s showpiece statement.
“It was surreal to hear the Chancellor talking about energy efficiency because it’s the forgotten area of policy.”
Two thirds of the £3 billion will be ploughed into a new Green Homes Grant programme. This will fund vouchers, which homeowners and landlords can apply for to cover two thirds of the cost of energy efficiency works up to a ceiling of £5,000. Poorer households will be able to recoup the entire cost of measures, like insulation, up to a higher cap of £10,000.
The other main plank of the energy efficiency announcement is £1 billion to improve the energy efficiency of public buildings, including schools and hospitals.
The government has also said that its previously announced Social Housing Decarbonisation Fund will be kickstarted with a £50m demonstration project this year. The government claims that the programme aims to upgrade more than 600,000 homes across England, while creating more than 100,000 jobs.
Griffiths says: “The number of jobs seems to have been the argument that won over the Treasury.
“It’s right for the current situation because of the need to address joblessness and across the country.”
Peter Smith, director of policy and research National Energy Action, says it is a “major landmark” that the government has put energy efficiency at the forefront of its economic recovery plans.
Tom Steward, senior policy & regulation manager at specialist renewable supplier Good Energy, believes that the government has finally woken up to the poor standard of the UK’s housing stock. “It’s a potential game changer,” he says.
It matters too that the announcement came out now rather than in the autumn when Sunak is due to unveil his second Budget, says Smith: “It’s really important that support is being made available now and we don’t have to wait until autumn so we can get on with this from September. We can deliver on jobs and save lives this winter.”
In addition, the grant programme’s single year nature will incentivise homeowners and landlords not to wait before applying, argues Dr Jonathan Marshall, head of analysis at the Energy and Climate Intelligence Unit.
He says: “It creates a sense of urgency. You are going to apply for it straightaway whereas if they said it was a three-year scheme, you might wait for a year or two. By doing it like this, anyone thinking about doing it will do it immediately, which is what you need for a stimulus package.
“I imagine so many people will apply that the money will run out pretty quickly.”
However, others worry that this short time frame could prove the scheme’s Achilles heel if there are no follow up measures. This is particular worry for energy efficiency installers and materials manufacturers, who have been previously burnt by the stop start nature of the government’s past approach to the sector.
The supply chain ramped up to respond to the last Labour’s government’s energy efficiency grant programme. However much of this of this pipeline of work evaporated following the introduction of the coalition’s replacement Green Deal loans initiative that many home-owners found overly complex.
Figures published by the Department for Business, Energy & Industrial Strategy (BEIS) earlier this year show that the number of domestic energy efficiency measures have shrunk to an eighth of their 2012 level.
“Installations fell through the floor, which did huge amount of damage to the supply chain,” says Steward.
The need for a visible pipeline
This backdrop means that while this month’s award is undoubtedly welcome, the energy efficiency supply chain will need the sniff of a longer-term pipeline to justify investing in new staff, says Griffiths.
Without such a prospect, the SME contractors who install the bulk of insulation jobs are likely to use their existing workforces rather than take on new staff, he says: “It’s going to be a risk for businesses to invest. They will take what they can and do it themselves: these are SMEs and deciding to take on someone is a big risk.”
This matters given that the key point of the announcement was to create career opportunities for young people, Griffiths says: “If you want to create careers and not just jobs, it (the investment) needs to be rolled into a sustainable programme.
“There is a big risk that we go all out for one year and then at the end it’s removed and the rug is pulled from under the industry. We will be back to square one and a lot of people will have had their fingers burnt.
“We need to see soon how this is going to be part of something bigger because people need certainty to make big investments and take on apprentices.”
Training matters too because of the importance of creating a skilled workforce to roll out what will be a 30 year project to decarbonise the UK’s relatively old and leaky housing stock, he says: “Creating a skilled workforce will be crucial to meeting net zero targets not just for the next year but over the next two decades.”
Steward agrees “If we want to really support jobs and decarbonise it has to be over the long term.
“We don’t want to get to March and there’s nothing else. We want to make sure it’s not a quick headline grab and build resilient supply chain: otherwise we will end up with a boom and bust.”
In for the longer term?
On this score though, Steward was heartened by a reply from the energy minister at an industry stakeholders’ forum earlier this week. Pressed on whether the grants would only be available for one year or part of a longer term commitment, Kwasi Kwarteng is understood to have provided an assurance that the latter will be the case.
Nevertheless there are concerns about whether the supply chain can cope with the sudden increased volume of work. These fears are shared within Whitehall, says one energy efficiency insider. “There is a lot of concern in government about delivery.”
Mobilising the supply chain in time for September’s launch date will pose challenges, says Simon Markall, head of public affairs and engagement at Energy UK:
“It will take a bit of time to get that workforce up to speed. It’s good problem to have but we will have to train people to deliver,” he says, adding that it will be important to match reskilling opportunities with those living in areas likely to be particularly hard hit by job losses.
One way of providing confidence for the supply chain would be offer leeway on when cash must be spent by, says Steward: “The government could help by saying that if not spent by March, the money will still be there.”
This kind of long-term signalling could also help to avoid the inflation that could result from too few installers chasing too many grants, he says: “There need to be long term signal for the market to be able to ramp up in scalable way.”
This more systematic approach should extend to getting local authorities more heavily involved in the energy efficiency process so that installations can be carried out on a street by street rather than more piecemeal house by house basis.
Concerns were expressed following Sunak’s announcement that it contained little support for other aspects of the energy transition, such as electric vehicles. Markall singles out hydrogen as an area where the government should signal support, given other countries and the EU have swung behind the technology over recent weeks.
But the ECIU’s Marshall argues that the focus of last week’s announcement on energy efficiency was the right one. The workforce involved in the renewables industry, for example, is smaller and more specialised than the much wider pool of skilled tradespeople who carry out energy efficiency jobs, he says. “If there is one area to focus on, it is housing.”
For once, the government appears to have been listening to the industry.
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