The National Audit Office in the UK has concluded that the Department of Energy and Climate Change’s (DECC) £240 million Green Deal has achieved virtually nothing. David Thorpe, independent consultant and author of several books on energy efficiency in buildings, explains what went wrong. He compares the British approach with the successful German scheme and argues that a new scheme is urgently needed.
According to a report from the National Audit Office published on 14 April, the Green Deal, an energy efficiency scheme initiated by the Department of Energy and Climate Change (DECC) in 2013, “has not achieved value for money”. The scheme, “which cost taxpayers £240 million including grants to stimulate demand, has not generated additional energy savings. This is because DECC’s design and implementation did not persuade householders that energy efficiency measures are worth paying for”, writes the National Audit Office.
So what went wrong? The Green Deal was an example of a ‘Pay-as-you-save’ type scheme, where loans are taken out to pay for the energy efficiency measures, and repaid over time from the financial savings created by these measures. It seems like a no-cost solution and an obvious winner. But not the British government’s version of it. 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. 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.
It also made many measures unaffordable within its own context – the ‘Golden Rule’. This rule was embedded into the legislation and stipulated that the savings generated by energy efficiency measures must lie within the cost of the measures. The Green Deal was initiated in 2013 under the 2011 Energy Act. It came with no target or grants. It combined accredited energy advice and installation with finance to be repaid in a period up to 25 years. Finance was attached to the property, and recouped through extra charges on the electricity bill (even if the savings were made on a different fuel, say gas).
The result? 300,259 total Green Deal assessments resulted in only 1,815 ‘live’ plans – a conversion rate of just 0.6%!
There is now a policy vacuum – and investment in tackling fuel poverty is much worse than before the Green Deal
Contrast this with the ‘EnEv’ programme in Germany, implemented from 1 February 2002 then amended in 2007 and 2009, and replacing the flagship CO2 Building Rehabilitation Programme. Here, the interest rate on the loan of up to € 50,000 from the public bank KfW for the replacement of the heating and domestic hot water systems of a residence (and ventilation and cooling systems installed earlier than 2009) was 1 – 4 %. The energy and could be up to €50,000.
The goal here is to use public policy to refurbish the entire housing stock and all public buildings in Germany by 2030. A million old homes have been retrofitted and 400,000 new highly efficient homes built (this is not just a retrofit scheme). Annual energy consumption was reduced by 900 gigawatt hours as well as energy costs of participated companies by €150m per year.
Here’s how the two schemes compare:
Source: Unlocking the Energy Efficiency Opportunity, Element Energy for the SEAI, 2015
Now compare the UK’s scheme’s failure to the scale of the job required. To achieve 2050 carbon emission reduction targets, the UK’s 28 million domestic properties would need to be renovated to a high energy efficiency standard at a rate of 700,000 a year in order to have renovated them all by the year 2050. They also need to be renovated to a high standard, what is called a ‘deep retrofit’.
In Germany under the EnEv scheme, costs in the region of £20-£40,000 per property were common. Given that most homes are only renovated once every 30 years on average, not to do a complete job while the builders are in is a wasted opportunity as total costs would be lower. But the Green Deal was only meant to take care of the ‘low hanging fruit’ – efficient boilers, cavity wall and loft insulation. The German scheme goes much further.
In general it’s better value to invest in energy efficiency than energy generation
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, and to help reduce CO2 emissions.
Calculations compiled by the UK government on CO2 tonnes saved per £ spent on differing technologies have consistently shown that in general it’s better value to invest in energy efficiency than energy generation. However as the NAO report shows, this is negated if investors demand a high return on investment and there is excessive bureaucracy. For the sake of combating the worst buildings for fuel poverty (with, therefore, associated savings on health and productivity), and for saving CO2, the case is now clear that governments should just spend the money directly on improving buildings with deep retrofits. As it is, there is now a policy vacuum – and investment in tackling fuel poverty is much worse than before the Green Deal.
David Thorpe (email@example.com) is the author of: Best Practices and Case Studies for Industrial Energy Efficiency Improvement (with Oung, K. and Fawkes, S. UNEP, 2016), The Passive Solar Architecture Pocket Reference (ISES/Routledge, 2016), The Earthscan Expert Guide to Energy Management in Buildings (Earthscan, 2013) and The Earthscan Expert Guide to Sustainable Home Refurbishment (Earthscan, 2010) . Follow him on Twitter (@davidkthorpe).