‘We can’t afford another wasted decade on energy efficiency’

The Green Homes Grant (GHG) should have been the first step on the green recovery. But, six months on from its launch, the project is in disarray and there are reports it could be scrapped altogether. David Blackman examines what went wrong and what lessons there are for the next wave of decarbonisation policy.

‘The Blunders of Our Governments’ was the title of a tome by Professor Sir David King, who was a fixture of the BBC’s election night for more than 20 years until 2005.

If the lugubrious Canadian hadn’t died in 2017, the botched introduction of the GHG would have provided a fresh chapter for his volume, which explains how various government initiatives since the poll tax have crashed and burned.

“Absolute shambles” is how one energy policy expert describes the scheme, which has so far only delivered a tiny fraction of the 600,000 home upgrades originally meant to have been installed by the end of March.

How did the GHG go so wrong and what lessons should the government learn from the exercise as it embarks on an unprecedented wave of energy policy activity?

What makes the shambolic implementation of the GHG so painful for many in the industry is that it started out with such high hopes.

A programme to tackle energy efficiency was the key ask of the industry as it presented its post-pandemic recovery wish-list last summer.

There seemed to be no downside to investment in improved energy efficiency, which promised to cut both emissions and bills, while tackling fuel poverty. The added benefit for a government confronting the spectre of escalating dole queues was that installing insulation and low-carbon heating devices would also create plenty of jobs.

“It ticked every single box,” says Simon Markall, Energy UK’s head of public affairs.

Last July, chancellor of the exchequer Rishi Sunak unveiled the GHG as part of his Summer Jobs Plan, the centrepiece of which was his Eat Out to Help Out scheme.

But the seeds of the GHG’s woes were planted at this early stage when it was decided that the programme should be up and running by September and delivered in full by 31 March this year.

It was understandable that the government wanted to see quick results, given the urgent need to stimulate the economy.

As late as August though, barely a month before the scheme was due to go live for application, industry sources were telling Utility Week that they were still largely in the dark about how it would work.

By the time the scheme’s systems and processes were up and running in September, the department had yet to establish whether there were sufficient tradespeople to carry out the work across the UK, says Markall.

“It (the timetable) was always an extremely short period of time,” says Caroline Bragg, head of policy at the Association for Decentralised Energy.

Markall acknowledges that the government was under pressure from industry and campaigners to get moving on the GHG.

While not involved with setting up the scheme, ex- department director of clean growth at the Department for Business, Energy & Industrial Strategy (BEIS) Tim Lord sums up the pressure that the government was under at the time to deliver. “Damned if you don’t and damned if you do.”

But the initiative would have benefited from better planning, says Bragg: “Putting processes in place are really important.”

‘Over-zealous’ management

The major problem once the scheme was up and running, says Solar Energy UK’s senior external affairs adviser Jack Dobson-Smith, was the contracting out of the scheme’s administration to US-based company ICF.

The outsourcing outfit proved to be “over-zealous” in how it managed the scheme with many quotes rejected for either being “too high or too low”.

However, installers were left in the dark about the specific amount they should be targeting due to BEIS’ desire to ensure a competitive bidding process, he says: “Applications for funding are being arbitrarily refused with no clarity about why.”

Replying to a written question in Parliament last week, energy minister Anne-Marie Trevelyan said applications must be thoroughly checked for compliance with the scheme rules to “help ensure value for money, consumer protection, and detect malpractice”, meaning waiting times “can vary.”

It was important to ensure robust procedures were in place to safeguard public money, says Lord: “We have to have a scheme that people can be confident in, providing appropriate protection against fraud and ensuring that the right kind of works are being carried out.”

According to the first set of GHG statistics, nearly half (46 per cent) of applications for vouchers had yet to be processed at the end of January due to requests for further information.

Delays in issuing vouchers then deterred installers from getting involved in GHG funded projects because they are wary about not getting paid, says Dobson-Smith: “Installers who have encountered problems won’t take on new GHG scheme work until they can be sure that they will be paid for it: otherwise they place themselves in real cash flow problems,” says.

He says the drop off in applications for vouchers following the spike in October recorded in BEIS’ GHG statistics, is due to cautious installers pulling back from the scheme, which was particularly problematic in a sector predominantly driven by such companies.

The result, says Lord, was that a “vicious rather than a virtuous circle” developed as reluctance to apply for the scheme grew.

These delays were compounded as coronavirus infection rates increased during the autumn.

Lord, who has recently left government to become senior fellow, net zero at Tony Blair Institute for Global Change, says: “The problem is trying to provide that stimulus in the middle of a lockdown when people don’t necessarily want to have work done inside their homes.”

Government spokespeople have blamed social distancing for the slower than anticipated uptake of the scheme, although the risk of a fresh wave of the pandemic were pretty clear last summer when the GHG was being drawn up and tradespeople have been allowed to carry on working in homes.

The government’s explanation doesn’t wash with industry sources.

“You can’t say the scheme is unpopular when you have 100,000 vouchers ready to go,” says Dobson-Smith.

Bragg agrees. “If you look at the number of applications, it’s not really a problem of demand.”

Doug Parr, policy director for Greenpeace, takes a dim view of what he sees as an attempt to shift blame.

“They were in a hurry and made mistakes, which was perhaps understandable.”,

“What’s not forgivable is take those mistakes, pretend they didn’t exist and blame ordinary people for not being interested which is blatantly untrue and cut the money.”

Taking a long-term view

The scheme is not a complete write-off, Markell insists, but could have been rolled out in a more considered way.

“It was the right programme and the right idea: they just needed a little longer to make sure they created the right set of processes.”

“A sizeable chunk of people have taken advantage of it, but there could have been a hell of a lot more if there hadn’t been a lack of tradespeople.”

Mike Foster, chief executive of the Energy and Utilities Alliance, agrees. “As welcome as the cash over the two years is, the scheme needs to be long-term taking us to 2050.

“This way, sustainable businesses can plan properly and deliver high-quality installations. Short-term schemes encourage a ‘get rich quick’ mentality, which isn’t the responsible thing to do.”

Markall says the introduction of the GHG provides clear lessons for how the government should approach the decarbonisation of heat, which he describes as an “arguably bigger” challenge.

These include much closer engagement with customers and the businesses which will deliver the programme.

The government should have already learnt these lessons from the failure of the Green Deal, the energy efficiency loan which was scrapped in 2015 due to paltry take-up, Dobson-Smith says: “Don’t put out half-baked schemes, give the opportunity to go over the details and make sure they work.

“We support the government showing ambition but ultimately we need to make sure that any scheme is created in consultation with industry and works for installers and contractors.”

Pointing to the success of the offshore wind rollout, the main lesson is the need for a long-term strategy, says Lord.

Another is that the government must find ways of delivering, he says: “There is a lot of local capacity out there: the more we can access local capacity, the more effective these things can be.”

Pointing to the so far successful vaccine rollout, Lord says: “We’ve benefited from the local capability of the NHS. With energy efficiency, we have further to go, but there are some areas of real expertise and knowledge. The more we can develop and build that capacity, the better.”

Observers agree that the £500 million Local Authority Delivery Scheme element of the GHG programme, which is handled by councils and targeted at fuel poor households, has worked well.

Bragg says the administrative delays in the larger voucher scheme are improving thanks to work between ICF, BEIS and industry.

‘Fix it, don’t scrap it’

However, The Times reported last week that the scheme is set to be axed after it emerged that hundreds of millions of pounds of GHG cash likely to be unspent this year will not be rolled over into 2021/22.

The scheme should be fixed rather than abandoned, says Dobson-Smith: “We want the government to intervene and address the failings in the scheme and make sure they fund it. If they roll over the budget until the pot is spent, that’s fine.

“Pulling it altogether would be disastrous for members who have engaged with the scheme and disastrous for what was a flagship clean energy policy.”

Lord agrees the government must “not to fall at the first hurdle”,

The imperative to deliver a version of the GHG remains strong, says Markall: “This needs to happen. Whether we do it now or five years: we may as well do it now because it will be cheaper than if we do it in five years.”

Parr expresses fears that abandoning the GHG, only years after the Green Deal scheme bit the dust, will make companies in the supply chain “twice bitten, thrice shy”.

The case for the GHG is stronger than ever with the economic downturn proving to be longer lasting than envisaged last summer, says Parr.

In addition, dropping such an important programme would undermine the environmental credentials that prime minister Boris Johnson was so keen to parade to his fellow world leaders at last week’s G7 meeting, he says: “It is impossible to see how we deliver the sheer reductions in emissions for the 5th and 6th carbon budget without doing something about the performance of housing.

“The logic is still there but instead of sorting through the different issues they’ve created, they’ve cut the money, which is stupid.”

Noting that the scrapping of the Green Deal set energy efficiency policy back ten years, Lord expresses the hope that the GHG won’t be abandoned.  “The fundamentals of the scheme are good. We can’t afford another wasted decade on energy efficiency and low carbon heating. If the scheme is withdrawn, there is a real imperative (for the government) to say what is going to replace it.”