‘Neglected’ Green Deal failed on energy savings, report finds

The UK Government's recently-folded Green Deal scheme to insulate and provide on-site renewable generation to homes delivered just 30% of what predecessor schemes achieved in terms of carbon reductions, a new report has found.

The Green Deal, which ran from January 2013 to July 2015, has been scrutinised in a new report from the National Audit Office (NAO), which claims that the programme cost taxpayers around £400m while reducing carbon emissions from homes enrolled in the scheme by 24 megatonnes – a third of the savings produced by previous Energy Company Obligation (ECO) initiatives.

The NAO’s head Amyas Morse said: “The Department of Energy and Climate Change’s (DECC) ambitious aim to encourage households to pay for measures looked good on paper, as it would have reduced the financial burden of improvements on all energy consumers.

“But in practice, its Green Deal design not only failed to deliver any meaningful benefit, it increased suppliers’ costs – and therefore energy bills – in meeting their obligations through the ECO scheme. The Department now needs to be more realistic about consumers’ and suppliers’ motivations when designing schemes in future to ensure it achieves its aims.”

Bitter pill

The report notes that, while DECC achieved its target to improve one million energy-poor homes with the £240m scheme, only 1% of households actually applied for green deal loans, collectively costing the taxpayer around £17,000 per loan.

Responding to the report, the UK Green Building Council’s policy advisor Richard Twinn said: The Green Deal was a pioneering attempt to bring private finance into the home retrofit market, but poor management ultimately set it up to fail.

“High interest rates limited the amount that could be borrowed under the scheme, and a lack of long term incentives meant there was insufficient demand from householders. This was compounded by constant policy changes which made it very difficult for the industry to invest.”

Warwick Business School’s assistant professor of global energy Fred Dahlmann said: “This independent assessment is a bitter pill for a several consecutive governments that had hoped to address the challenges of the energy trilemma. It points to the difficulty of devising schemes that are both cost efficient and deliver maximum impact in terms of energy bill and greenhouse gas reductions across Britain’s homes.

“It also suggests that perhaps utilities are not the best lever to pull when it comes to the implementation of such schemes. While utilities would appear to be the obvious first choice given their close relationships with energy customers and their homes, administrative complexity, a lack of organisational capability and alignment with customer interests quickly neutralise governments’ best intentions.”

Punishment by neglect

The ECO scheme’s cost to energy suppliers reached £3bn – 12 times the amount that DECC spent on the scheme – as companies attempted to meet energy obligations. The NAO report notes that the overall cost per tonne of carbon saved by the programme reached £94.

The Green Deal was meant to be an example of a ‘pay-as-you-save’ scheme, where loans are repaid over time from the financial savings created by the efficiency measures implemented from the programme. But as sustainability consultant and author David Thorpe points out, the high interest rates and ‘deep retrofit standards’ required made the deal unattractive to customers, and was unlikely to provide the 700,000 renovated homes needed each year to achieve 2050 carbon targets.

“One of the reasons for this failure was pointed out right at the start by critics, but ignored by government officials responsible for designing the scheme,” Thorpe said. “This was that the 7-10% APR interest rate on the loan to householders was too high – in fact several percentage points higher than ordinary loans available on the high street. It was simply not affordable.

“Meanwhile the country is waiting for an urgently needed replacement for the Green Deal to help bring down high energy bills and tackle the huge problem of fuel poverty in this country, which can be characterised as punishment by neglect.”

This report is the latest wave of criticism aimed at the Government over its domestic energy efficiency schemes. Last year, green groups and house building organisations lambasted the decision to axe proposed zero-carbon Allowable Solutions and carbon offsetting schemes for UK homes.

Following the policy changes to green buildings, the Zero Carbon Hub – an influential public-private body tasked with transitioning all new homes to be built under zero-carbon regulations – was forced to close last month.

Matt Mace

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