Energy efficiency: Where to from here?

In the wake of the recent general election, calls have been made for the government’s flagship energy efficiency scheme, the Green Deal, to be reviewed, saying it requires a “radical overhaul” to meet its objectives. In addition the major fuel poverty scheme, the Energy Company Obligation (ECO), has an uncertain future and a worrying funding gap on the horizon. And with the new ministers yet to declare the future of either of these schemes, industry concerns that energy efficiency has lost its way is mounting.

The time is ripe for a fresh approach.

At the launch of the Green Deal in 2013 Greg Barker proclaimed that if the scheme didn’t have 10,000 plans by the end of the year “he would have many sleepless nights”. 2014 was no doubt a year of little sleep for Barker. Even now, two and a half years later, completed measures at the end of April 2015 total only 7,817.

At the same time, the future of ECO is only confirmed up until 2017, but with energy suppliers on track for completion by Q1 2016 there is effectively less than 12 months left of the scheme.

There are many reasons touted for the Green Deal’s failure. The National Insulation Association’s (NIA) chief executive Neil Marshall simply believes it is “fundamentally flawed” and is one of those who would be happy to see a fresh approach. The Energy and Utilities Alliance chief executive Mike Foster told Utility Week that the scheme is just plain bureaucratic. In particular, Foster says “red-tape” surrounding accreditation for installers – something he thinks is ‘unnecessary’ – and highly uninviting interest rates, should both be addressed in any review.

Marshall believes there is “a role for an attractive pay as you save scheme – which is essentially what the Green Deal is – to help create a market for energy efficiency measures rather than just relying on subsidies,” but that currently the golden payback rule is “restrictive”.
Removing bureaucracy is necessary in review of both schemes, with Marshall summing up ECO’s flaws in one simple sentence “complicated, bureaucratic, unnecessary, costly, and a lack of continuity”, not helped by governmental meddling moving the goal posts, which brought about the predicted funding gap, but potentially solved by longer obligation periods. A simpler more consistent approach is needed, he says.

All these approaches would inevitable tinker with a fairly unchanged format, but there are some who have more revolutionary ideas.
Citizen’s Advice has called for fuel poverty schemes, such as ECO, to be taken from energy suppliers and given to local authorities to deliver. Suppliers have received slack for their role in failure, mainly by Barker, who told The Independent that the big six had not “seized the opportunity” provided by the Green Deal by not “providing a comprehensive package” as he had expected them to.

Citizens Advice’s main reason for council governance is that they are better placed to identify local need, something Foster agrees with.

He says there is “some merit in having local councils deliver fuel poverty strategies, they are quite a trusted partner,” and that “the identification of individuals is the key to the success.” However Foster points out that this identification would need to be funded above the levy applied to energy bills for the work itself.

Foster’s other fears include the waste of resources that would come by not having a targeted approach, and that councils would look to partner with big efficiency suppliers and ignore the little, often local, players.

Marshall believes it shouldn’t be an “either or” situation, believing that reliance on one mechanism is just too restrictive and fears this approach too would end in something “very bureaucratic and time consuming.”

Another idea focuses on the one real success of the Green Deal; the number of assessments. As of April 2015 there have been more than half a million assessments carried out under the Green Deal scheme. But only some 12,000 actual projects are in progress or have been completed through the scheme. Labour peer Lord Whitty says that once an assessment is completed, many people choose to use other methods to fund the identified measures needed rather than use the scheme’s loan system, perhaps because they are put off by the high interest rate.

Whitty suggests that the high assessment rate should be capitalised on by combining an assessment with the smart meter roll-out, which he says would bring about a “step-change” in energy efficiency in Britain. His reasoning makes sense.

“The Green Deal hasn’t worked, there has been a cut back on the energy efficiency improvements that come under ECO – although the government will deny that – and we don’t know what’s going to happen beyond 2017. But we do know that we are going to have a smart meter programme rolling for at least another five years and that will mean access to every single house in the country.”

Whitty says the assessment figures support his calls. “Once [the improvements] have been pointed out, [people] are prepared to find ways of meeting it. Whether people take it forward from there or not will to some extent be up to them, but at least [the assessments] will all have been done.”

If this were given to the Distribution Network Operators to do, the approach could also achieve economies of scale. It would also provide an element of consistency as the rollout itself is due to last at least three and a half years.

Marshall hopes that whatever approach the government takes, it is a collaborative one. “What should happen is government work with industry, consumer groups and local authorities to agree the most effective delivery models. Rather than the government saying this is what we are going to do, now you go away and deliver it.”

What is clear from all sides is the future of energy efficiency remains up in the air, and calls for a fresh approach are deafening.