Speakers: Sophie Chirez, DNV GL; Dan Meredith, Senior Manager – External Affairs, E.ON; David Weatherall, Head of Policy, Energy Saving Trust
26 March 2019
All-Party Parliamentary Group on Energy Costs
‘What are the Barriers to Energy Efficiency?’
Chair: Alan Brown MP
Speakers: Sophie Chirez, DNV GL; Dan Meredith, Senior Manager – External Affairs, E.ON; David Weatherall, Head of Policy, Energy Saving Trust
Chair’s Opening Remarks:
I’d like to extend a warm welcome to you all to this, the 49th meeting of the All-Party Parliamentary Group on Energy Costs.
I am Alan Brown MP, the SNP’s energy spokesperson and a vice-Chair of this Group.
We meet this evening to discuss the barriers to energy efficiency.
In 2016 a report by UCL for the Committee on Climate Change (CCC) opened with the words “Most organisations do not invest in energy efficiency even when it makes sense to do so. This is the “energy efficiency gap” that policy makers have struggled with for over 40 years.”
The recent CCC report “UK housing: Fit for the Future?” states “Emissions reduction in the UK’s 29 million homes has stalled.”
Unlocking the full potential of energy efficiency has so far been an intractable problem however the UK is committed to achieving an 80 per cent reduction in carbon emissions by 2050.
So how are we going to deliver this? What are the barriers and do we now have the tools to make energy saving a reality?
We have three excellent speakers this evening to address this difficult issue.
Sophie Chirez, DNV GL Consultancy, Belgium
We are a Norwegian foundation active in different sectors, including energy. My unit mainly works with large companies from different sectors to improve their energy efficiency, so what I will share today is really based on our experience of working with those large companies.
We are talking tonight about barriers to energy efficiency so when you have a look at what happens in the field I would say that the first barrier is that energy lacks visibility. In many organisations today we don’t see energy because we don’t have data. This is true for all sizes and ages of companies. When we start a project with a company the first thing we do is to get the data and what we are usual given is just general information about energy consumption at the entrance to the plant or based on the bill, and that’s it. And that’s a big issue, because if you want to improve efficiency, you need more specific data. Having data also helps to create awareness in people because if they don’t know what it’s about it’s really difficult to engage an people in an organisation.
Another barrier is that although energy is important, it’s not always seen as a priority. I may be talking more about industrial companies, but their primary focus is on reliability and productivity, so looking at energy is seen as something extra, needing more resources, and it can be really difficult sometimes to engage people and raise awareness. For some companies where the energy costs represent a significant part of the product costs, energy is higher on the agenda but this is not systematically the case. In order to capture the savings potential and be efficient in the approach, we need to link energy with those two key parameters: productivity and reliability, so we need to find the right approach to make those links.
And the last one I would like to talk about is that when we talk about energy, it’s most of the time seen as a technical issue. But energy, and especially energy efficiency, is not only technical. In many companies where you have an energy management system implemented, it’s only a few people working on that and mainly a group of technical people and management. You need your technical people but they need to have more soft skills because energy efficiency is also about communication and engagement and it’s the whole workforce that needs to be engaged and committed or otherwise you can never be sustainable in your approach. Energy needs to be part of the company’s culture: the “Energy Culture”.
Dan Meredith, Senior Manager – External Affairs, E.ON
I don’t know how much you all know about E.On, described as a “Big Six” energy company and a large multi-national across Europe and the US. I’m not entirely sure the “Big Six” tag is as relevant today as it used to be. E.On specifically has moved towards quite a different strategic model over the last few years. Our heritage has been fossil fuel power stations in this country and elsewhere, but we’ve sold off our large-scale power stations now and we are just focussing on networks and the customer side of things, and we’ve got a big asset-swap type deal with RWE to go further down that route and we’ll be very much embedded in that smart future of energy that is decarbonised and decentralised. So energy efficiency is something that we can bring a lot of technical expertise on. We were instrumental on pushing down the costs on large-scale renewables, particularly offshore renewables, across Europe. The costs for those plummeted because of some of the work we did with Government and other players in the field. I think we’d like to bring the same kind of expertise to heat and transport and how we decarbonise those. Energy companies in this country have borne the brunt of energy efficiency as we’ve had an obligation on us for a number of years. It does feel quite strange that we’re the only player with any responsibility for energy efficiency but, that said, in this country at least we’ve tried to take things forward and fulfil our obligations in as constructive a way as possible. We’re probably the leader in the field in terms of the suppliers: we’ve built a supply delivery company, and a project delivery company that delivers projects and has worked with probably every local authority across the country. We’ve delivered £1bn or even £1.5bn of efficiency measures over the last ten years to different homes. So there’s been quite a silent revolution going on in energy efficiency.
The problem is, things have changed in terms of policy and we’ve got quite a lot of understanding of what the barriers are, at least in this country. We’ve probably taken a different tack to the wider barriers to large-scale domestic take-up of energy efficiency. So moving to those, to keep things short, I just want to outline what we see as the positives to energy efficiency, because there’s a lot more than the obvious. The impact of energy costs for people’s homes can be huge. If you take a family living in a home that is an A or B rating on the energy scale, the annual bill is likely to be in the region of £500. For the same family living in roughly the same home rated F or G, the bill can be in the region of £2000 – an enormous difference. I think the message to policy makers is pretty clear on that: if you are interested in giving your voters hundreds of pounds off their energy bills, the first lever you need to be pulling is the energy efficiency lever, simple as that. If you add in all the other benefits, such as health and wellbeing benefits, there is pretty compelling evidence that for every pound you put into energy efficiency, you get at least £3 out to GDP and probably £1.30 in tax revenue as well. So, it seems to me that there are so many positives. So what are the barriers? Why aren’t policy makers jumping up and down to get this done?
There are effectively two buckets of problems as I see it. The first is that Government isn’t ambitious enough about energy efficiency. For example, a policy might look good on paper but not work in practice, or it’s not enforced because there’s not enough resource to enforce it. Secondly, and most importantly when it comes to domestic energy, there is no perceived value, particularly in the housing market, for the investment you make into energy efficiency. You can spend money but it’s expensive and you won’t get that money back, so there’s no driver at the moment. Clearly there were some fingers politically burnt from the Green Deal, and that was the first attempt to get something through. I’d like to see that there is an opportunity this year to make a change. There is a comprehensive spending review coming up this summer and there is a building standards review coming up as well. Both of those things are instrumental in getting some policy through on this. And to be clear, we will not make our carbon commitment targets for this country unless we tackle heat in buildings, and that means energy efficiency, so we have to tackle it at some point. The Chancellor has said that we are looking to have no gas connections on new builds by 2025 but there are still houses being built today that are C or D or even lower standard. Neither are they are built with future charging of electric vehicles in mind as they haven’t got the right wiring, and if they are going not going to be connected to the gas grid then they do need to be built with some idea of low carbon heating as well.
In terms of policy, we’ve been in favour of injecting some value into the housing market by playing with stamp duty. That’s never looked upon favourably by the Treasury for obvious reasons, but nevertheless that’s an effective way of doing it. From a customer point of view, getting stamp duty back by taking energy efficiency measures would clearly be attractive, but there are all sorts of other ways of doing it, including tax-neutral ones.
We’d also recommend, post-Brexit, taking off VAT for a host of low carbon energy solutions. We also think there’s quite a lot of scope to some kind of partner scheme to the help-to-buy scheme. I know there are problems with that in terms of how it’s impacted the building industry but nevertheless it has got traction with people so if you then have a partner scheme that is some kind of help-to-improve scheme that may be attached to a Government-backed ISA so that you have an investment vehicle for people to put money in with the Government matching some of those funds to spend on energy improvement.
We’re quite strongly involved in the idea of energy-efficiency mortgages, we’re part of the e-map project across Europe, which is most of the financial institutions in Europe and we’re the energy provider. We’re trying to build some kind of green mortgage, which will be piloted in this country. The idea is to open up a link between a long-term mortgage and a shorter-term loan to help fund investment in energy-related or low carbon-related improvements to the home.
The key thing is tackling the comprehensive spending review in an appropriate way for housing and for tackling those building standards.
David Weatherall, Head of Policy, Energy Saving Trust
I was asked for 5-10 minutes to talk about barriers to energy efficiency, and this something that people spend whole academic careers on! So it’s quite an interesting challenge.
To narrow it down, the Energy Saving Trust does now work much more broadly than just with households: we work on transport, with businesses, etc. but I am going to focus on homes and specifically just on the hard measures we need to install in our homes to make them energy-efficient, the additional insulation and the efficient heating systems in particular. And that’s not because we don’t help people with the steps individuals can take in terms of behaviours such as switching off lights and so on, but all the evidence is that the achievable energy savings from those behavioural measures, even when supported by digital feedback technology, are dwarfed by savings in energy use that are achieved by locking in energy efficiency through a well-insulated, efficiently heated home.
So the classic economic story is that energy efficiency is a market failure. People don’t choose energy efficient measures even when it makes sense for them and save them money in the medium term. And that market failure may be because people aren’t in some ways economically rational – they put much more value on money they’ve got in their pocket now than in future savings. Or it might be informational, because people don’t know how to do it, or they don’t recognise a more energy-efficient home when they see it. Or the failure might be financial: they want to do it but they can’t afford the upfront cost. And so to overcome that market failure, traditional energy efficiency policies have focussed on three policy solutions: 1) information and advice to make sure people know what they can do and how; 2) use of various types of financing measures to enable people to access funding for improvements; regulation: 3) requiring people to act in their own energy saving interests by taking out of the market some of the least energy-efficient products.
So that’s the simplest possible story of energy efficiency barriers and policy response, but there are a lot of more complicated analyses. But I think even taking that perspective it’s interesting to think about where we are in England today in terms of the policy framework for energy efficiency in homes, because in England we’re not really seeing the first of those two basic instruments being used extensively for mainstream householders. There’s now no public sector financing support for mainstream householders to make improvements, and the information and advice support has been cut back significantly. That’s something we feel very strongly about because for 26 years we’ve provided the expert helpline for England on energy efficiency, and now there is only a website with no support for people from advisors.
Even for low-income households the advice and information support has been cut. We’ve heard a little bit about the ECO (Energy Company Obligation) programme which, whatever you think about it, did and does work in terms of getting measures into homes and that has been halved in scale over the years, and of course the axing of advice services that I’ve referred to affects fuel-poor households as much as wealthier ones.
On regulation we may be doing a little better. We are seeing next week the coming into effect of some robust minimum energy efficiency standards in the private rented sector, so if you are the landlord of a very cold home you will have to spend £3500 to improve it, and if you don’t, you won’t be able to rent it out. We think that’s a good step, and maybe the level of cap should be a bit higher, but that’s an important development and England is ahead of other countries in the UK and Europe in doing that. We’ve also got other measures in place: the building regulations that were introduced in 2005 are leading to a steady replacement of the least efficient boilers in our homes, for example.
But I think overall the cutbacks in terms of financing, advice and support are showing through in terms of efficiency statistics. I’m quoting from the Official English Housing Survey that came out about a month ago: the energy efficiency of English homes has increased considerably in the last 20 years but has not increased since 2015 – there was no change in the average SAP rating of homes between 2016 and 2017 in any tenure.
What’s odd in terms of where we are is that there is really no shortage of ambition and good ideas – we had the clean growth strategy in December 2017 setting out the ambition for as many homes as possible to have EPC band C by 2035 and for rented homes or fuel-poor households to meet that standard by 2030. We’ve seen the ban on new gas boilers from 2025, and over all of this the Government has asked the CCC (Committee on Climate Change) to look at a zero emission target to replace our 2050 80% target and if they do that, that will undoubtedly require a much stronger programme of improvements in energy efficiency in buildings.
There’s a bit of dissonance between those announcements and those ambitions and those targets and the level of policy activity that we’ve seen on energy efficiency in homes. And it’s not just us, campaigning organisations and statutory advisory bodies are also saying that there is a need for greater concrete funding policies in this area. So, as we’ve heard, the comprehensive spending review must be a key moment for a new focus on policies that can really deliver on those welcome announcements and ambitions that the Government has put forward in this area.
Questions and Comments:
Jeremy Nicholson, Alfa Energy: Everything you have said is also applicable to the business sector, and as you mentioned the lack of access to funding in the domestic sector, with business energy prices being amongst the highest in Europe, the one thing business can do potentially is get those costs down through efficiency. The Government has put a certain amount of money aside as part of its industrial policy for industrial processes, and also BEIS has a call for evidence at the moment on a possible scheme for SMEs, who need all the help they can get. That might be an area where there is a market for help. Do you have any thoughts on that? Have we got the right policies in place for the business sector as well?
Dan Meredith: I think from E.On’s point of view, it’s the kind of world as I described that we want to see – we want to get all of those businesses involved and able to use energy efficiency above all to put money on their bottom line. We’ve been a strong advocate of the view that if you’re a business it’s easy to put money on your bottom line by taking some sensible energy efficiency measures. We think it’s pretty easy for most businesses to get a 20% energy reduction and we’ve got a long history of doing that. For example, our energy efficiency business has helped Marks & Spencer. Through their well-known “Plan A” all of their work on energy has been through E.On’s expertise: we have a Glasgow HQ that actively tackles and flexes all of their 500 stores on our system. So it’s not just energy efficiency for large business – it’s unlocking all of the power of the smart new way of looking at energy with that kind of approach and a flexible, dynamic grid and demand-side response in that larger scale is just as important as energy efficiency in the smallest SME. I don’t think we’ve got the right set of policies at the moment. I think the kind of things they’re looking for with SME’s is a good idea and the energy audit system they’ve got at the moment is great, but it doesn’t give you any driver to actually act on it. We need a change of culture, and as I said earlier, a lot of it is getting into the board room for businesses – to stop them thinking of energy as something for the Facilities Manager to deal with. The real key may be to unlock some of the revenue sources.
David Weatherall: In Scotland we make finance available to SMEs and the thing that we find is key is the hand-holding support, so I think SMEs are like households in that sense. It’s not just about making money available: you have to help them to identify solutions and support them as well.
Sophie Chirez: I agree that information and guidance for SMEs is really important. It doesn’t have to be long and complicated: even basic information can make a big difference.
David Lewis: A company making cars will spend a lot of time and effort to shave a fraction of a cent off the cost of a bolt. Why are they not focussed on energy in the same way?
Dan Meredith: My view is that it’s partly cultural and I’ve often talked about an analogy where you can talk to HR Managers and you can point at any person and they will know exactly how much that person costs, and their history with the company and so on. But if you point at a computer or a light switch or something like that nobody has a clue about the cost. It’s an overhead and the responsibility to negotiate the lowest possible price has been left to e.g. the Facilities Manager. So it’s partly cultural and it’s partly been a lack of data, but now we’re having that cultural shift because we’re getting far smarter data across through meters, and businesses have been able to get a much better understanding. Now that is starting to penetrate down to SMEs as meters are rolled out across smaller and smaller businesses. So we will start to see that more and more.
Sophie Chirez: I agree with the cultural aspect. When we are working with businesses we try to integrate energy efficiency into an existing structure, e.g. every business nowadays has a safety culture and people understand it. Introducing an energy culture means that people engage with it and can appreciate their own impact at their level.
David Weatherall: It’s really important not to lose sight of the landlord/tenant aspect of this, as 50% of industrial and business premises are rented. Some of the measures, insulating walls for example, would be outside the control of the business owner. English freehold/leasehold law is not very helpful in this area at all and I think more generally finding routes to engage tenants is a really big issue.
Iain Beveridge, Ecological Energy: Can anybody cast an idea on what they think the Industrial Energy Transformation Fund is going to look like in practical terms? We have a number of clients who are large energy users who haven’t been able to take advantage of DSR because they don’t have the capacity to turn down and they don’t have space for large containers or batteries. The month has been announced and the consultation is happening, but can anybody hazard a guess as to what form that might take?
David Weatherall and Dan Meredith: Your guess is as good as mine I’m afraid. We’re looking forward to finding out.
Andrew Large, Confederation of Paper Industries: We’re an energy-intensive industry very much involved with BEIS in pre-consultant design discussions. We’ve been encouraging BEIS to look at inspiring themselves from existing structures, because the last thing that the industry needs is another set of hoops to go through, and another set of evidence to gather and data to collect. From the purely parochial point of view of my own sector, we find that the heat recovery scheme has worked quite well, it’s been easy enough to engage with and we’re going to be encouraging BEIS through the infrastructure of the decision-making processes of the scheme to inspire themselves as much as they can on the existing heat recovery schemes for industrial users because we think that they work quite well.
Dan Meredith: Yes, I’ve heard that from the wider domestic sector as well. We’ve always tried to think of the customer-centric view and the energy industry tends to find that hard but we’re getting better and better at it, and BEIS needs to catch up. If you’re a home-owner and there are umpteen different schemes to get things working efficiently, you’re not going to tackle it because it’s just too complicated. Situations need to be thought about from the customers’ point of view.
Andrew Large, Confederation of Paper Industries: One thing that annoys me is when policies seem to go in opposite directions, particularly if you have onsite CHP. For example, you can be trying to do something that utilises technology and is environmentally desirable, and yet Ofgem is trying to make it a lot more expensive through network charging and so on. I just wish the Government would make up its mind and start all going in the same direction.
Dan Meredith: One of the things I wanted to pick up as well, was what I said at the start, that things can look good on paper, but if you don’t enforce it, it doesn’t work. This is especially true where enforcement responsibility lies with Local Authorities because as we know they are all stretched to breaking point and just don’t have the resources. In all of these things, where there is policy, we need to make sure that the ability to enforce it is also there.
Chris Gunt, One Housing Group: We’re a responsible landlord with shared ownership, sole ownership and general tenanting. One of the solutions for new builds being energy-efficient would be to enforce the pre-planning requirement of the Section 106 planning obligations, to say that the requirement for a rating of A or B has to be adhered to. The biggest challenge for us is that there are two things not working in synergy together: one is the building standards review and, most important for us as a social housing provider, the Hackitt Report and removal of cladding. Unfortunately that’s moved on to the removal of other flammable cladding systems. Those flammable materials also provide most insulation for buildings. We need help from industry to come up with a product that a) is not flammable and b) absolutely hits the energy requirements at a reasonable cost not picked up by our leaseholders or tenants.
Dan Meredith: That’s a really good point and obviously is a difficult obstacle to get over because it’s been such an emotive topic. The innovation point that you make I think is spot on. We’re working a lot with different providers to try to get those solutions, although I don’t know details of any specific cladding. I do know the costs for example on domestic homes of wall insulation, and I know that it also takes a long time to put on – several weeks. If it can be done in days with a new product that could dramatically reduce the cost. We think that’s possible and we think there are a lot of opportunities for economies of scale. If we had a policy signal that to make properly energy-efficient infrastructure a national priority, the innovation would follow. We’ve seen that happen in renewables and other areas.
David Weatherall: I didn’t get a chance to mention social housing earlier but I think that it is really important that we get a new decent homes standard for social housing that incorporates the C target for energy efficiency by 2030. In Scotland and Wales there are standards for social housing, including energy efficiency targets, and the National Infrastructure Commission fully recognises that and part of what they’ve said was that there should be a £3.8bn investment in social housing to help achieve that.
Simon Harper, BEAMA: We’re a trade association for the electrotechnical sector and as a smallish association our companies sell mostly to wholesalers and we’re not very engaged with the consumer side of things. However we know that rolling things out to consumers in the mass market is going to be a big challenge for the future and information on decarbonisation suggests that everything is going to cost a bit more to the consumer. That’s probably a perennial problem of how to communicate. To give an example of the kind of thing we are going to have to talk to consumers about in the next few years, homes off the gas grid are going to have to have a different type of heating system when their current one breaks down. How do you think the Government are going to go about communicating that – without getting a great big kicking from the general public?
David Weatherall: I don’t know! I think in a way we’re at the stage before that, and the discussion we need to be having now is exactly that question. I don’t think anybody really has the answer yet, but it is really vital that we start a dialogue with the public about the fact that heat decarbonisation, indeed a significant improvement to the energy efficiency of homes, is coming. One of the things we could do is start to communicate much more broadly to the public so that they know that there is a need and a drive from the Government to make significant improvements to the energy efficiency of our homes and support many home owners in changing their heating systems. The Organisation 10:10 who are very good at this kind of thing are running a conference on this topic in the next few weeks. We need to start from now, but I don’t have a good answer.
Dan Meredith: I would say actually that the Government has wanted to push this aside for some time. Most of the energy price rises have been some way linked to investment tackling climate change, and we’ve seen how people have accepted them and the Government has been quite happy to not take the blame. So I think it’s good that that will continue. A real issue that we shouldn’t lose sight of is the fact that it will cost money, but there are some actual tangible benefits to this. We talk in terms of energy efficiency benefits, of energy cost reductions, and that’s good for people and the economy, but householders don’t see their bills go down because that’s going to happen a year hence. But there are actual tangible benefits when we go out to homes, especially social housing areas, and do a whole street with external wall insulation because what they do see is that they live now in a nice comfortable warm home which also looks nice. They don’t see the impact on the economy and the fact that we’ve used local suppliers, but those tangible benefits and improvement to wellbeing shouldn’t be underestimated. There’s quite a bit of evidence to suggest that it’s wellbeing that drives voting behaviour, so if I was a policy maker I’d be trying to get hold of some of that.
Iain Beveridge: I’ve only just heard the news about no new gas boilers from 2025 and that’s not very far away. What are the technical alternatives and what are the cost implications for the people who are going to live in those homes? Electric heating at the moment is extraordinarily expensive by comparison with gas. We might be reducing emissions but we’re going to massively penalise the occupants of these houses.
Dan Meredith: I agree and it’s something we shouldn’t shy away from. A new boiler is £3000-£4000 but a new heat pump is around £10000. If you’re putting a heat pump into a new building that is built to standard, then it’s a different proposition altogether, and it’s something that we would say has to happen so it’s a case of working out how to make it work and to make it politically acceptable in terms of cost. Fundamentally for me, the long-term has got to be heat pumps and electrification and I would argue strongly that we need to learn the lessons from how we dealt with renewables. It wasn’t that long ago that we were talking £150+ per MWh for offshore wind but it’s crashed down to around £50 per MWh because we’ve done the projects again and again and again and we’ve got manufacturers in this country who will now produce the turbines and so on. We’re talking to a number of different heat pump manufacturers and if they see the signals in this country they will put manufacturing facilities here. Short-term I think there’s a lot of promise in hybrid heat pumps being retrofitted. I’m disappointed in Government because so far I’ve only really seen hydrogen and green gas as a solution from the Energy Minister and policy circles. I think electrification is probably a better way to go for a whole host of reasons. I think electric vehicles will definitely take off and become within reach of most people within five years and once people want to plug in their electric vehicle at home they’re going to need the wiring for that and that’s going to start a conversation about energy efficiency generally and it will drive everything towards electrification. The Chancellor is signalling that we don’t want new gas connections but he hasn’t signalled what the policy will be and I think we could work out some kind of punitive type of tax on new gas connections associated with knocking off the VAT on some of the lower carbon solutions to force the cost differential to be lower more quickly. We need action though, and soon.
David Weatherall: It’s important to note that this refers to new homes. Some of the coverage of this implied that the Government plans to ban gas boilers from 2025 as if they were going to be stripped out of existing homes. The critical thing we have to get right to make it possible and affordable is the energy efficiency. With robust energy efficiency standards an electric heating system should not cost people more than a few hundred pounds a year. There’s absolutely no problem with this but it has to be a well-insulated home meeting standards and we have to make absolutely sure that new homes do meet these standards.
Robert Marcantoni, One Housing: One of the issues we encounter is the ongoing maintenance of some of these innovative things that are put in place. For example, with CHP systems we all know about the Green Deal and what that’s done, i.e. we have a wood-chipper sitting in the basement that has never been commissioned. Really it seems to be individual strands a lot of the time rather than a cohesive approach, and looking at that fully sustainable model in respect of affordability both in terms of consumption of energy and unit cost and the maintenance going forward, it should be a lot cheaper to maintain than some of the current CHP systems. That seems to be a barrier from the consumer perspective, looking at what it is costing them through the service charges that they pay for the energy efficiency of their scheme right now.
Dan Meredith: Yes, that’s a good observation. I agree and I think one of the greatest barriers to energy efficiency that we haven’t talked about is the practical aspects of how it’s handled in Government as it doesn’t sit comfortably in any one department. It’s BEIS, it’s Treasury, it’s Housing, it’s Health – it’s no wonder that we get a number of different streams going in different directions. If we could get Government to work together and know what the left hand and the right hand are doing it would help.
Andrew Large, Confederation of Paper Industries: A question for Sophie: Who do you see across Europe who is doing this well, and what are they doing?
Sophie Chirez: Something we didn’t talk about when you asked the question about larger industrial businesses, a solution for energy efficiency which is also sustainable is a management system for energy. We have at the moment the energy efficiency directive, which puts an obligation on large companies and you have to show that you are meeting your obligation through energy audits or an energy management system. Many companies choose audits because it’s a quick exercise, but what happens next? Often not very much, especially in the UK. Energy management systems are much better because they really produce results, and Germany leads the way with these because incentives in the form of tax breaks have been offered to companies. In some cases this is a huge amount of money. France has followed this example by reducing energy transport costs to companies which have an energy management system and again, the amounts involved are quite large. With one big chemical company we worked with, the saving from implementing the system was €1m per year, so that’s a good driver for the companies. On the other side, an energy management system is also sustainable and can help companies in the long term.
Dan Meredith: I lived in Germany for some years and my understanding is that housing companies in Germany lobby for higher standards than here. I also think there’s an element of not understanding the concept of “fuel poverty”, which somewhat gets in the way of policy in this country in the sense that in other countries it’s not a thing – it’s just “poverty”. If people need help and buildings need policy to help those people, they are separate issues and I think we’ve got ourselves into a situation where we can blame energy companies like mine and others as a reason that energy prices are too high and therefore people are in fuel poverty, and that’s not quite right. I think we should have a welfare state that looks after people who need help and look at building policy separately. I think we are a unique country in the way we handle this.
David Weatherall: I think in terms of Europe and fuel poverty, they’ve got very excited about the concept of fuel poverty in the last 18 months or so. My twitter feed is full of cross-European initiatives to assess levels of fuel poverty and think about how it can be tackled and there’s very interesting patterns being played out. For example Portugal has a surprisingly high level of energy poverty, so I think it is a useful policy context across the continent. Secondly I don’t think there’s a big contradiction in integrating a focus on fuel poverty within our programme for decarbonising buildings. Let’s just focus on making homes more energy efficient and we’ll hit both those carbon and fuel poverty objectives and we can worry about the complexity of different tensions a bit further down the line.
David Lewis: When we talked about the UK and the private rented sector, if we look at somewhere like Germany a much smaller proportion of people own their own property and yet Germany seems to do a lot better. What’s the difference?
David Weatherall: My understanding is that in Germany it’s more typical for people to rent for a lot longer than here, so they have more of a culture of renters investing in homes. We have a very deregulated private rental market and I know that landlords in Germany can’t rent freely. There’s also quite a dialogue about making energy efficiency improvements in exchange for being allowed to increase rent. These measures are just not available to us in our deregulated market.
Nick Geddes, ESP Consulting: Are there any opportunities to align some of the incentives? You talked about some of the benefits and we tend to do things in quite a siloed way in some respects. With respect to health benefits, an energy company implementing energy efficiency measures doesn’t see those health benefits whereas a local authority does.
Dan Meredith: I agree and we’re working on a couple of pilots on exactly this. People living in cold, damp homes clearly impact the NHS budget. If we can start looking at tackling that in a more preventative way, even accessing some of the funding of the NHS budget, to reach some of those homes in association with local authorities then that is a win-win. I suspect that there is a net positive to the NHS budget in doing that so we’re trying to work with a few local authorities to implement a pilot project to see if we can start to unlock some of those benefits. A similar project which is easy for local authorities to see is getting empty homes back into circulation as these are a real problem for most local authorities. We hope to see some results by the end of the year.
Iain Beveridge: A question for David: If we roughly split up domestic housing into developer new build, landlords and owner-occupiers, developers and landlords (with the exception of progressive housing associations) aren’t going to do anything unless we regulate them, but the large swathe of owner-occupiers you mentioned has quite an issue in terms of unpicking the plethora of technology and the plethora of schemes at this moment. How do we stimulate energy efficiency in that market? As you said, funding has been cut but what needs to be done to try to simplify things and get the message across, along with practical support to people to advise which option is best for individuals and which funding mechanism will achieve it?
David Weatherall: I think leaving aside the funding question, there is interesting work being done by the Government and others to try to bring in private sector finance that people can access to install measures but there is clearly just an issue around getting people interested and engaged. There are lots of people in the owner-occupier sector who should be keen to make these improvements without worrying too much about payback, and I think we have to work hard at creating that early adopter market. In Scotland, where we are resourced to provide a really comprehensive advice service, a very large part of that is focussed on the fuel-poor households. But we also provide support for better-off households, so if you are in Scotland and you’re thinking about a heat pump, you can call up Energy Scotland and we will send round an advisor to assess your home and look at what that measure needs. Now obviously we’re not going to be able to do that for ever, and as the technology becomes more mainstream it won’t be as necessary, but I think in terms of starting to drive the market and get wider uptake I would really like to see more support for those sorts of programmes across the wider UK. There’s been other interesting work done, for example Sussex University put out a call for local deep-retrofit centres so that people who are motivated to make changes to their homes for environmental reasons can get help.
But we are where we are and we do need to cut carbon emissions and so I do feel that we need a regulatory trajectory. We shouldn’t just be looking at minimum energy efficiency standards for rented homes, but we should be saying (as Scotland has started to say) to owner-occupiers that they have 10-12 years’ warning that homes that need to meet minimum energy efficiency standards by 2030 otherwise there will be restrictions on them being put on the market.
Sophie Chirez: It was very interesting to hear those aspects of housing and consumers as well as large businesses, because what we see is that if you adopt a behaviour at home you will do the same at your workplace, so it’s really important to motivate and engage at the consumer level because you will see the benefits at other levels as well.
Dan Meredith: We have a duty to ensure that every smart meter installation is accompanied by energy efficiency advice and I have brought along copies of the booklets we issue at these installations. It’s important because it’s probably the only time that an energy company has the chance to go into people’s homes and have a chat with them, so we’ve tried to make the information as useful and engaging as possible.
After some further discussion, questions and comments, the meeting closed at 7 pm.