Green Deal: energy saving or hot air?
In March 2013 I wrote about the launch of the Government’s ‘Green Deal’. In that article I set out what the vision was (ambitious) and the compromises that had been made to get it off the ground (messy), while expressing the hope and some cautious optimism, that despite the complications inherent is the programme as it finally emerged, it had the potential to make a difference.
Energy issues, already high profile a year ago have become even more so since with the regular pillorying of the ‘ big six’, the Labour Party price freeze promise, tantrums over ‘fracking’, the launch of yet another doomed nuclear power programme, and a sudden awakening to energy security issues with the crisis in Ukraine. Never has a Green Deal seemed so important. The Green Alliance’s prescient report (The great resource price shock) put its finger neatly on the two key issues – for both food and energy security, the need for the UK to use these resources wisely so as to minimise waste, and the strategic imperative to significantly reduce its reliance on imports. In such a set of circumstances how couldn’t the Green Deal have been a rip-roaring success? A year or so into the programme some conclusions can be drawn and they aren’t pretty.
The problems that have emerged with the Green Deal were ones that were forecast before it began. Essentially these were doubtful value for money, bureaucracy and a lack of real commitment both by energy companies and the Government. The three have combined in a particularly unhelpful manner and the result has been an incredibly low level of take up even by the massively scaled down ambitions at the time of its launch. The last of these, the ‘mood music’ so to speak, has been especially puzzling, with the initial enthusiasm for the Green Deal overshadowed by the Prime Ministers alleged assault on ‘green crap’, a reference to the Energy Companies Obligation (ECO), a £47 a year levy on energy bills intended to support the installation of energy efficiency measures in low income households. After the rows about the big six energy companies profiteering at the expense of households, the ECO scheme was abruptly scrapped in the autumn. Message to householders, energy efficiency measures are a waste of time, ‘crap’ even.
About 100,000 households signed up for a Green Deal assessment in the first year, the first stage of a process intended to lead to the installation of energy saving measures. But only 458 households actually took out the Green Deal financing for new boilers, loft cavity wall or external wall insulation, or the other measures covered in the programme. The Department of Energy and Climate Change (DECC) themselves admit that the finance package isn’t working, a spokesman saying (Guardian 18 Jan 2014): ‘The Green Deal has not just been about selling finance plans. It has been a call to action to help people make their homes more energy efficient.’ He went on to say that many people who had obtained an assessment had chosen to finance the improvements themselves. This sounds like an admission that the financing package is too expensive for most people. At 7-9% pa this is hardly a surprise. Related legal issues haven’t helped. Green Deal finance packages are supposed to ensure that nobody pays more in repayments on their loan that their original bill, the so-called ‘golden rule’. But of course what might be acceptable to one householder may not be to another on sale of the property – and a finance package goes with the property not the householder. Early repayments are penalised so apart from the penal interest rates, the incentive to take out a green deal finance package if a householder thinks they might move in the next 20 years are reduced again.
Looking at the finance package, another problem is that DECC’s own National Energy Efficiency Data Framework (NEED) which has tracked over 20,000 households installing energy efficiency measures has come up with data that suggests that the savings from energy efficiency measures are only about half the levels suggested by the Energy Savings Trust (EST) and widely publicised by the industry. Loft insulation reduces gas bills by 1.7%, cavity wall insulation produces a 7.8% reduction and an new boiler 9.2%. Perhaps unsurprisingly households have overwhelmingly opted for a boiler replacement as their investment of choice. Of the 8,456 measures fitted in homes using the Green Deal launch cash back scheme, 94% were for new boilers. More worryingly, independent analysis of the data by energy expert Chris Goodall on his blog (Carboncommentary.com) suggests that the savings may be even lower. Goodall, in figures disputed by DECC, suggests that rather than loft insulation saving about £180 pa for a typical household, the real saving is only £15.50 pa and that new boilers save only £70 pa not the £310 pa claimed and widely publicised by installers like British Gas. The problem with this is that it means any Green Deal finance package based on potentially fanciful savings could in fact be costing a householder. Goodall estimates that householders with such packages are probably £200 pa worse off on average. Quite a lot over a 25 year repayment schedule. Meanwhile EST have recently adjusted their savings figures in light of the NEED data, reducing the claimed saving for internal and external wall insulation from £460 pa to £270 pa. Boiler installation savings have been cut too – but only marginally. This will help by giving households a more honest assessment of savings, but makes the Green Deal finance package even more uneconomic.
The vision of a successful Green Deal whereby 1.5 million households would over a 10 year period, be enabled to install cost effective energy efficiency measures, has to say the least got off to a bad start. In a context where politicians are lamenting the hard choices some households have to make between heating and eating, while the simplest and most cost effective solution to energy security concerns – as a nation use less, are being studiously ignored, is nothing short of a tragedy.
This article first appeared in the March 2014 issue of Town and Country Planning.