The benefits of political harmony on energy efficiency

on 03 November, 2014

Josh Robson, head of public affairs at Knauf Insulation, emphasises the need for political agreement on a long-term energy efficiency policy.

The cheapest and most secure energy available is that which we don’t use. However, as energy bills are a pressing concern for many families, and instability abroad continues to make energy supplies uncertain, the UK does not have a long-term commitment to reduce the amount that we need in the first place.

Successive governments have sketched the aspiration for a ‘low-carbon transition’, greater ‘energy security’ and to ‘end fuel poverty’, but to date no practical policies to deliver these aspirations have been fully developed.

New research out this week from Cambridge Econometrics demonstrates just what a hugely positive story improving UK homes makes. Insulating 6m homes by 2025, as part of a wider energy efficiency plan up to 2030, will create 108,000 jobs. It will provide a threefold increase in GDP for every pound spent by government and grow the tax base too, returning £1.20 for every £1 the government invests.

These economic benefits will also be felt locally. Unlike many large-scale infrastructure projects, delivery of energy efficiency will be carried out across the country, meaning all regions will get their share of GDP growth. Given current concerns about energy security, it will also make our economy more resilient. Efficient homes will reduce foreign gas imports by 25%, making us less reliant on uncertain – and often volatile – energy supply routes to keep the lights on and the fires of the industry burning.

Most importantly it will help save UK homes £4.95bn a year in energy costs and lift millions out of fuel poverty. Warmer and more efficient homes have been shown to improve the health of the people who live in them.

At party political conferences this autumn, there was no firm commitment to deliver such a programme. The Labour Party indicated that energy efficiency should be a national infrastructure priority; they also announced a plan to re-organise the way existing energy efficiency schemes are delivered. But no party has yet set out a plan that matches the scale of the problem. Or to turn the language on its head – as this new report has done – no party has yet committed to take forward a home energy efficiency programme that will deliver a leaner, healthier, richer, more competitive country while also making HM Treasury money.

The first step towards getting a national roll-out of warm homes underway is giving businesses the confidence to invest. Yet for businesses delivering energy efficiency, there is no long-term certainty, in stark contrast to the way that other government priorities have been addressed.

The UK public will be spending £7.6bn a year on low-carbon and nuclear generation by 2021. The Capacity Market, designed to provide subsidy to traditional fossil fuel generation, will also have significant costs. In terms of offering long-term certainty for more generation:

  • New nuclear projects have a guaranteed rate of return from the UK public for 30 years
  • Renewables projects have a similar guaranteed rate of return for 15 years
  • Existing and new gas generation will be given confirmation of subsidy four years in advance, and then a contract for 10 years.

For energy efficiency:

  • The Green Deal Home Improvement Fund supporting solid wall insulation closed after six weeks with less than 24 hours’ notice
  • The current Energy Company Obligation has been extended to 2017 yet at a significantly reduced size. So reduced, in fact, that there is real concern that energy suppliers will have met these lower targets well before the programme completion date, causing this to close early as well.

The kind of short-term policy linked to energy efficiency will never develop the supply chains, innovative solutions and economies of scale needed. These all need long-term confidence and, to really give the UK public the benefits of a modern housing stock, much bolder action should be taken.

Recognition of energy efficiency as a national infrastructure priority by the Labour Party is a welcome step but if real difference is to be made, all political parties must also commit to realistic, long-term plans for energy-efficient homes. Only then will real changes come for the millions of people struggling with unaffordable energy bills.

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