Where now for domestic energy efficiency policy?
While the UK Government concentrates policy effort on developing new, more flexible energy sources, there is an increasing realisation that there is another side to the equation. Perhaps the single most significant measure we could adopt to secure our energy future and to reduce carbon emissions is to make more efficient use of energy by reducing demand and wasting less.
The UK unnecessarily throws away almost a third of the energy it uses. This represents a major cost to consumers and the environment. Implementing further energy efficiency measures would reduce carbon emissions, create jobs and ultimately save more money than it costs. However, at the household level, policy and schemes that have been tried so far have made little impression on the opportunity.
The Government’s Green Deal scheme was scrapped in 2015 after a disappointing take up. While more than 300,000 assessments were undertaken, less than 2,000 resulted in active projects, a conversion rate of less than 1%. The Green Deal was a ‘pay-as-you-save’ scheme with loans made available to pay for energy efficiency measures. These were to be repaid over a period of up to 25 years through electricity bills from the financial savings that resulted. However, the 7% to 10% APR interest rate charged to home owners proved unattractive, unsurprisingly perhaps given that it was several percentage points higher than ordinary bank loans available at the time.
So where will Government policy guide us next? High cost loans have not worked. While many householders have implemented low cost energy efficiency measures, it seems that incentives may be necessary to persuade them to go further. The goal must be to encourage them down the route of implementing more effective measures such as insulation, renewables and energy efficient heating, but policy tools are needed to deal with the high capital costs and often long return periods.
Maybe there is a clue towards the future direction of policy travel in a glimmer of hope in the public sector, where there is an increasing interest in Energy Performance Contracts (another ‘EPC’). These formal partnerships between a public body and its energy services company (ESCO) were introduced by The Energy Efficiency (Encouragement, Assessment and Information) Regulations 2014. The contract covers the design and provision of specific energy-saving measures and on-going monitoring. It guarantees that the measures will generate sufficient savings to pay for the project, ensuring a secured financial saving over the period of the agreement. Any savings beyond the end of the contract go to the customer.
While it is early days, one EPC between E.ON and Leeds City Council is tackling energy efficiency in nine public buildings, including schools, leisure centres and data centres. The seven-year contract is projected to achieve a 26% saving in energy costs through a range of measures, such as new lighting, boiler and voltage optimisation, and upgraded building management systems. E.ON is responsible for the up-front investment, and has guaranteed that the savings over the seven years will cover all equipment and installation costs. In addition to being able to fund the repayments from the savings made, Leeds City Council will see reductions in energy costs over the long-term, improved building performance and the project is helping it meet its own environmental aspirations and obligations as a public sector body.
Book an EPC to find out how you can make your home more energy efficient.