The government’s flagship programme to transform the energy efficiency of 14m homes in the next decade will fail and only reach only 2-3m households, according to an unprecedented attack from the government’s own climate advisers.
The warning comes from the Committee on Climate Change (CCC), which on Tuesday for the first time published an open letter criticising government policy. It follows soaring energy bills and the news that one in four homes are now in fuel poverty.
The “green deal” plan, which will start in October 2012, will allow homeowners to take out loans to pay for insulation, with the guarantee that the savings on their energy bills will be greater than the loan repayments. Currently, energy companies have a legal obligation to enable their customers to improve their energy efficiency.
“The [green deal] proposal is to take away that obligation and say ‘let’s leave it to the market’,” said David Kennedy, the CCC chief executive. “We think there is a significant risk in leaving it to the market, as that has never worked anywhere in the world and is unlikely to happen in the UK. We are talking about the transformation of the entire building stock of this country.”
“There is going to be a complete collapse in the insulation market,” said Andrew Warren, director of the Association for the Conservation of Energy, who described the CCC’s intervention as “unprecedented”.
“We will see an 80% drop in the cavity walls being filled,” he added.
Luciana Berger MP, the shadow climate change minister, said: “With little more than 10 months until the green deal launch is expected, minister’s plans are in chaos. The [CCC] letter casts serious doubt about whether consumers will actually take up the scheme. It is highly significant that the CCC is raising its concerns publicly in this way.”
The government’s impact assessment forecasts that several factors will severely limit the take-up of the scheme, including the hassle of having builders in, the fear of cowboy contractors and being unaware of the scheme or the benefits to their homes and energy bills. There are 6m lofts in the UK that are poorly lagged, but the impact assessment suggests just 10% of this will be properly insulated by 2020 as a result of the green deal. Of the further 6.3m cavity walls yet to be insulated, just 1.7m are forecast to be treated under the plan.
Kennedy told the Guardian: “The paradox is that the government’s own impact assessment suggests the policy will not deliver its objective. There is a difference between the rhetoric and their own assessment.”
The CCC letter tells energy and climate change secretary, Chris Huhne, that the solution is to continue placing an obligation on energy companies to insulate lofts and cavity walls, via the new Energy Company Obligation (ECO).
The ECO requires energy companies to continue delivering energy efficiency improvements and is paid for by a levy on all energy bills, currently about £50 a year for a typical household.
But as it stands, a quarter of the £1.3bn a year ECO fund will be targeted at fuel poverty, with the rest used to subsidise so-called hard-to-treat homes, in effect solid-wall insulation for those with older homes lacking cavity walls.
“We think that with the same pot of money Decc [the Department of Energy and Climate Change] envisages, you could do a lot more than their own impact assessment suggests,” said Kennedy. “We think that there is a bigger bang per buck to be had [by allowing the ECO to pay for lofts and cavity walls].”
Failing to upgrade loft and wall insulation would put a big hole in the nation’s carbon budgets, noted Kennedy, meaning the government would have to buy offsets in the international market, which makes “no economic sense”.
Peter Smith, policy manager at National Energy Action, said that allowing this would further compromise the use of ECO to reduce fuel poverty: “It would enhance our concern that financially disadvantaged households will have to subsidise to works carried out on behalf of more affluent households, through a levy on their energy bills.” Smith said strong incentives to take up the green deal were needed, such as council tax or stamp duty rebates.
But Kennedy said the CCC was not proposing full subsidies for all home loft and cavity wall insulation: “There are people who can and should pay for their insulation, but need an extra incentive to act.” For example, he said, a company could offer £100 off the £500 cost of cavity wall insulation.
A Decc spokeswoman said: “Once the green deal is in place we envisage there’ll be plenty of cost effective offers on loft and cavity wall insulation, making it easy for households to install with no need for any subsidy. So we want to use the Energy Company Obligation to target older, harder to treat homes and provide extra help for the fuel poor.”
Energy experts have long argued that energy efficiency measures are the cheapest way of cutting the carbon emissions that drive global warming, particularly as the UK has some of the least energy efficient property in Europe. The measures are also central to the government’s argument that the cost of building a low-carbon, sustainable energy system for the country can be entirely offset by eliminating the wasting of energy.
“The daft thing is that at the same time [as delivering the green deal plan], the government has put out a national carbon budget plan that states with complete confidence that they will get all the lofts and cavity walls done – but there is no programme to do it,” said Warren.
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