Fast-track £5.8bn of energy efficiency and clean heat funding as crisis continues, UK Government urged
The UK Government should pull forward spending on energy efficiency and heat pumps from the latter half of the decade, if it is to meet its climate targets and shield the public amid the current gas price crisis.
That is the call to action headlining a new report from the progressive think-tank the Institute for Public Policy Research (IPPR), which warns that the government is “critically undermining” its own climate and social sustainability pledges by delaying further investment into weaning homes off of gas.
At the Autumn Statement late last year, Chancellor Jeremy Hunt set out a new ambition for the UK’s industry and buildings to reduce their energy consumption by 15% against current levels, promising a collective saving on bills annually of £28bn. He announced £6bn of additional energy efficiency funding to achieve this, but delayed its allocation until 2025 and onwards.
The IPPR report warns that the new 2035 goal – plus other existing ambitions, such as the target of 600,000 heat pump installations annually by 2028 – will not be met without additional investment this Parliament.
It also accuses the Government of failing to get on track to delivering its commitment to £9.2bn of energy efficiency spending this Parliament, made in the Conservative Party’s 2019 General Election manifesto. It outlines how only £6.6bn has been allocated to date.
Regarding the additional funding, the report recommends that £2.4bn is brought forward to this parliament to improve home energy efficiency. Research last year by the Grantham Institute concluded that the UK is home to the least energy-efficient building stock in Europe, with many losing heat three times more rapidly than those on the continent. This is a climate issue and, amid the current energy price crisis, is increasingly being recognized as a social issue also.
The UK Government is aiming for all existing homes to reach Energy Performance Certificate (EPC) grade C or higher by 2035, but is not on track to deliver this, the UK’s climate advisors confirmed last summer. The Climate Change Committee documented a litany of ‘stop-start’ policies including the Green Deal and Green Homes Grant, which have led to homeowners and tenants finding retrofitting complicated and beyond their budget.
The IPPR is advocating for the 2035 EPC target for homes to be pulled forward to 2030 for owned homes and 2028 for privately rented properties.
Moreover, the Net-Zero Review, published by Chris Skidmore MP last week, recommends that stronger EPC targets are set for non-domestic buildings.
Heat pump focus
The new IPPR report also recommends that £3.4bn of additional Government spending on heat pumps is provided through to 2025.
As noted above, the UK will need to sharply increase heat pump installation rates through to 2028 if it is to meet its target. The Government is currently framing heat pumps and heat networks as preferred options for home heating without individual fossil-fueled units and has delayed a decision on the future role of hydrogen in home heating until 2026.
The Heat and Buildings Strategy in late 2021 confirmed the a £450m boiler upgrade scheme. Under the three-year scheme, homes will be able to claim grants of up to £5,000 each to help them replace gas boilers with heat pumps. BEIS claims that this will mean that homeowners will pay a similar sum for a new heat pump as for a new boiler. Critics have pointed out that heat pumps still remain unaffordable for many even with the scheme, which will not fund the majority of UK homes due to its budget and time constraints.
Government-backed trials of heat pumps in homes last year found that most of the general public are deterred by the upfront costs of heat pump systems and the disruption of the installation. Nonetheless, with its offer of financial support and free practical advice, the trials were more than ten times oversubscribed.
The IPPR has previously stated that all of England’s homes need to be upgraded with either energy efficiency measures, low-carbon heating or both if climate targets are to be met. It has emphasised the job creation opportunity of this activity, touting up to 2.7 million direct and indirect full-time equivalent roles if the Government intervenes to properly close the skills gap.
A one-stop shop
As well as calling on the Government to provide more funding over the next two years, the IPPR’s report recommends that policymakers intervene to make it easier for members of the public to access appropriate grant and loan schemes.
It advocates the consolidation of existing schemes and the launch of a new ‘one-stop shop’ providing information and advice on energy efficiency and clean heat, which it calls ‘GreenGo’.
GreenGo could also have a team dedicated to closing the skills gap regarding retrofitting and low-carbon heat, in collaboration with businesses and unions, and another completing audits of the UK’s building stock to identify appropriate retrofit interventions. This latter team could also oversee government monitoring of retrofitting on a street-by-street basis, in collaboration with local authorities.
“Creating a scheme like GreenGo, a one-stop shop for grants and loans, and for advice, is a no brainer,” said the IPPR’s associate director of energy, climate, housing and infrastructure Luke Murphy.
“It could help Rishi Sunak deliver on his key objectives of reducing inflation, tackling the cost of living, and growing the economy as well as reducing carbon emissions.”
Sunak laid out these priorities in a New Year speech earlier this month, in which he made no mention of environmental sustainability.
The Government’s next major opportunity to announce new spending will be at the Budget in mid-March.
In related news, a coalition of business associations, investor networks and corporate collaborations have published an open letter calling on the European Parliament to reach a strong agreement on its Energy Performance Buildings Directive (EPBD).
The Directive was first introduced in 2010 and is currently being updated in a bid to align it with the EU’s 2050 climate goal. A vote on proposed revisions is taking place in early February, and there are concerns that the measures agreed upon will not be far-reaching enough nor that the timelines will be adequate to accelerate action in the near-term.
The letter states that properly addressing building energy efficiency can no longer be delayed, with further delay likely to make meeting forthcoming climate targets more expensive and challenging. It also highlights that a failure to improve efficiency now has social implications, including the wellbeing of building occupants related to cold homes and missed opportunity to create new jobs in retrofit.
It tells policymakers that businesses and investors are ready to play their part in delivering stronger targets. Spearheading the letter are the Corporate Leaders Group Europe, the Climate Group and the Institutional Investors Group on Climate Change (IIGCC). An additional 15 organisations are also signatories.
Corporate Leaders Group Europe’s head of EU regulations Ursula Woodburn said: “The EU needs to get building energy performance right. Ambitious standards in this key legislation would drive down emissions, households’ energy consumption, and literally insulate Europeans from high prices and the import of fossil fuels. Businesses are looking to the European Parliament for clear and ambitious signals that will deliver the pace and scale necessary to achieve our climate targets – this is critical both for investment and for businesses to drive deep retrofitting.”