Green Deal or No Deal: Can the Government’s Flagship Scheme Work?

York Way, Kings Cross - Prime candidates for the Green Deal?

I’ve talked much about the Green Deal in earlier postings and, indeed, it is widely recognised as the flagship environmental policy of this Government, which anticipates that some 14 million houses will have been improved through Green Deal finance by 2020, leveraging £7 billion investment annually and creating 250,000 jobs.

It is currently proposed that a loan of up to £10,000 will be available for each household, but with repayments attached to the energy meter not the householder. Applications will be assessed by competent Green Deal Advisors, based on their ability to meet the “Golden Rule”. This will require that the value of work be recoverable within 25 years or within the predicted lifespan of the products involved, whichever is the least. Finance will be organised through the Green Deal Provider, who would normally be responsible for the installation. Repayments on the other hand will be via the Energy Company and be transferred to a new owner on sale of the property. It is unclear what will happen if properties remain empty for many years after, for example, the death of the householder.

The Energy Company Obligation (ECO) will replace previous subsidies, such as the Carbon Emissions Reduction Target (CERT) and Warm Front, that focus on low-income and vulnerable households, but share a common front-end and process to the Green Deal. Importantly it will also provide funding for measures that do not meet the Golden Rule, but represent the only feasible energy saving measure, such as solid wall insulation.

In a recent briefing note from the UK Green Building Council (UKGBC) to its members a number of questions were raised:

Will the cost of finance be low enough? It is hoped that this will be addressed by the promised involvement of the Green Investment Bank in funding the scheme, at least in the early years.
Will the proposition for consumers be compelling enough? This is yet to be addressed, but seems likely to be left in the hands of the Providers.
Will consumers be properly safeguarded? In a briefing note published in May of this year DECC stated that “The overall requirements for Green Deal Providers and Installers will be brought together in a Green Deal Code of Practice which is being developed by DECC with the assistance of industry experts.” Green_Deal_briefing

A Publicly Available Standard (PAS 2030) is being developed titled ‘Improving the energy efficiency of existing buildings: Specification of installation procedures, process management and service provision’. As the title implies this will be crucial in providing a framework and standard for works commissioned under the Green Deal. PAS_2030

The UKGBC expresses concern that the Government has failed to commit to setting targets for the Green Deal within the 2011 Energy Bill:
“This has led a large coalition of NGOs and businesses, including the UK Green Building Council and many of our members, to ‘Demand a Better Bill’ – a campaign pushing for the Energy Bill to include a commitment to “deliver policies that cut carbon by at least 42% (by 2020) and eliminate fuel poverty (by 2016)” Energy_Bill. This would be achieved through a “Warm Homes Amendment” to the Bill, which would place obligations on the Secretary of State for Energy and Climate Change to publish a plan for achieving energy savings from the UK building stock and report progress in delivering against that plan. At the time of writing, Government amendments have been made to tackle these issues, but these are some way short of those proposed under the campaign.” This Amendment was debated on 7 July, leading to a delay in the implementation of the Bill, and potentially more time to make the necessary amendments.

The Committee on Climate Change 3rd Progress Report on Meeting Carbon Targets published at the end of June stated that “the Green Deal and the new Energy Company Obligation (ECO) should be aligned with the ambition to insulate all lofts and cavity walls by 2015, as well as 2.3 million solid walls by 2022.” It pointed out that the take-up of solid wall insulation (SWI) in particular has been very low, with only 13,000 walls treated in 2010 under CERT, whilst the take-up of Community Energy Saving Programme (CESP), which was intended to drive the installation of SWI, had only 7 schemes approved in 2010. CCC_Report_3

The CCC report considers that the way the Green Deal and ECO are currently configured encourages neither whole-house nor area-based approaches. The CCC’s analysis indicates that the £10,000 limit placed on the Green Deal will preclude a comprehensive approach to carbon reduction. For example the German CO2 Refurbishment Programme offers up to 50,000 euro per property. The area-based approach “...applies the whole-house approach on a street by street basis. It strengthens incentives for uptake of measures, based on evidence that suggests people are likely to be more willing to act when they can see others acting. It also offers scope for cost reduction through scale economies.” This is unlikely to fit with Green Deal Providers such as B&Q and M&S who will most likely deal with individual householders.

The CCC also warns that “ECO funding may be restricted under limits on DECC spending, given that this may be classed as tax and spend, limits for which were set to 2014 in the 2010 Spending Review.”

Clearly there are massive opportunities for those who position themselves correctly to service the Green Deal and ECO. However uncertainties over uptake mean that many companies will hesitate before investing in the staff, training, equipment and premises required. The willingness of Government to dilute Feed-in tariffs and zero carbon has eroded confidence that it will not in future meddle with poorly designed schemes that are found to have unintended consequences. As the Green Deal and ECO schemes evolve in coming months it is critical that industry uses the opportunity to consult on the legislation, codes of practice and standards to ensure that the risk of failure is minimised.

UK Low Carbon Construction Action Plan: The Government's Response to the IGT Report

The Innovation & Growth team (IGT) Final report (summarised in my posting dated 20 February 2011) was a clarion call to Government for urgent action to drive the construction sector towards a low carbon future. Paul Morrell, chair of the IGT Steering Group states in his introduction that “the scale of the challenge, and the degree of market failure, is such that only Government can set the framework for action.”

Published about the same time the Public Accounts Committee issued a report on funding the development of renewable energy technologies that, with equal vehemence, concluded that “the Department (DECC) needs a greater sense of urgency and purpose to drive the dramatic increase in renewable energy supplies needed to meet the 2020 target (15% of energy from renewables by 2020) and secure the new technology innovation to help meet the 2050 target” (80% reduction of carbon emissions compared to 1990 levels). PAC_renewables_report

Since the publication of these reports the Government has, amongst other things, published its Carbon Plan, the 2011 Budget and associated ‘Plan for Growth’, ditched their commitment to truly zero carbon buildings, excluded large PV installations from the Feed-in Tariff (FIT), legislated for the Renewable Heat Incentive (RHI) RHI, updated its 2050 Pathways Analysis and responded to the IGT report. It is also in the process of drafting a new Energy Bill and developing its landmark Green Deal and Energy Company Obligation mechanisms.

There have also been calls for action from other Government Committees. For example in May the Committee on Climate Change (CCC) published its Renewable Energy Report in which it stated that “...new policies are required to support technology innovation and to address barriers to uptake in order to suitably develop renewables as an option for future decarbonisation.” Whilst the Environmental Audit Committee report on the Budget 2011 and Environmental Taxes expresses disappointment in the fact “that there was very little in the Budget and Plan for Growth to help drive the low-carbon economy. The Government must focus on delivering growth that is genuinely sustainable, and that does not degrade the environment or entail increased consumption of resources.”

In this posting I would like to look at the gaps; i.e. what the Government is not doing (and is undoing) and the implications of this for the UK’s long term climate change commitments.
In its response to the IGT Final report the Government has produced an Action Plan, which although extensively referencing the IGT’s recommendations, only occasionally adopts them wholeheartedly. Mostly the Action Plan avoids committing to action from Government which wasn’t already in its Carbon Plan and was not undone in the 2011 Budget (see posting of 25 March 2011).

I think it is quite illuminating to examine the differences between the IGT report and the Government’s response. The headline component of the Action Plan is the establishment of the joint industry and Government Green Construction Board (GCB), which will be formed in consultation with the Strategic Construction Forum – a collaborative forum with representation from professionals, clients, contractors, product suppliers, site workers and Government. Although not a specific recommendation of the IGT this complies broadly with a 2050 Group recommendation (8.1) and it seems likely that the GCB will take on board some of the more difficult recommendations from the IGT Report that need a cross-industry effort.

The Government’s response gives no reasons for including some recommendations rather than others, which is a pity because we need to know, although it seems likely that in most cases either cost or impact on growth will be at the heart of the omission.

Incorporation of whole life carbon (embodied and operational) appraisals into the Treasury Green Book is neatly side-stepped by referring to providing continued support for the development of an embodied carbon measurement tool under the CEN TC350 Sustainability of construction works group of standards that are under development. There is no commitment to incorporating whole life carbon assessment into the decision making processes for public sector construction contracts, which is what the IGT were looking for.

There are a number of recommendations in the IGT report (3.13, 6.3, 6.4) that deal with the measurement of the energy performance of existing buildings and comparison with that predicted through the models used to assess compliance with Part L of the Building Regulations and the EPBD. Although referred to in the text of Chapter 3 the Action Plan does not deal with this directly other than mentioning the Technology Strategy Board’s ongoing £8m Building Performance Evaluation programme, which requires successful applicants to monitor performance of building fabric, energy and services; evaluate designs and the perception and satisfaction of building occupants, with no reference to predicted carbon performance.

This is an important omission since there is a widely recognised disparity between predicted and actual carbon emissions has already eroded confidence in building performance guarantees made by designers and that will significantly undermine commitments to zero carbon.

The Treasury has already withdrawn Enhanced Capital Allowance (ECA) from renewable technologies that benefit from FIT and RHI subsidy, so it is perhaps not surprising that the Action Plan ignores the IGT recommendation (6.16) that ECA’s be extended to cover low carbon whole building structures. This again is a pity because there is no doubt that for the foreseeable future low carbon buildings will cost more than those that achieve minimal compliance with Part L. A tax break that encourages developers to go beyond minimum compliance would encourage innovation and provide a basis for a gradual reduction in carbon emission targets.

Another overlooked recommendation by the IGT (4.2) required carbon reduction to be given greater prominence in Environmental Impact Assessments, with targets set by the proposed Major Project Review Group. Following the model established in the London Plan this could be used to encourage major projects to perform better than minimum Part L requirements.
The current draft of the Energy Bill requires that, where applicable, privately rented homes be enhanced to an EPC rating of E from 2018. This is an imported move, but only covers around 680,000 homes. The Action Plan states that the Part L 2013 review will have “to require additional energy efficiency improvements to existing buildings where work is already planned”. This does not go as far as the IGT recommendation (6.5) that all existing non-domestic buildings should have an EPC rating of F or better by 2020.

The above is not a comprehensive review of IGT recommendations that have been ignored or ‘interpreted’ by the Action Plan, but it is to be hoped that the Green Construction Board will revisit these when they come up with their “core work programme...based on key shared priorities from the IGT report, the Government’s response and the existing Sustainable Construction Strategy”. It is interesting that the Action Plan refers to this latter document which was published in 2008 by the previous administration, and which includes commitments that have already been reversed or forgotten by this Government. This includes the omission of non-regulated emissions from the definition of zero carbon buildings and the commitment for all Central Government Offices to be carbon neutral by 2012, for example.

The Government is committed to revising its National Infrastructure Plan in the autumn of this year. This will provide a “long term forward view of projects and programmes” in order to achieve the 2020 and 2050 targets, as well as the 5-yearly carbon budgets. It seems likely that much of the £3b initial capitalisation of the Green Investment Bank (GIB) will be used to fund major infrastructure projects. From the evidence so far however it seems likely that reaching carbon targets will be like one of those dreams where you are running as fast as you can to save a loved one from danger, but they just keep getting further and further away!