Finally – energy efficiency regulations emerge un-pickled

Finally, stumbling over the line six weeks or so before pre-election purdah puts everything into mothballs, the regulations requiring landlords, by 2018,  to ensure their rented properties exceed a very basic test of energy-worthiness before they can be rented out have been laid before Parliament. Now lest that first sentence sound a bit churlish, let’s be clear: hooray. The regulations themselves are sound. OK it’s only energy efficiency band ‘E’  (the bands go from G – meaning your house, energy efficiency-wise, is more like a gazebo than a property, to A – which envisages homes that are so efficient they don’t use much energy at all to heat and power, and may anyway create their own energy to do so) so it’s not that far up the scale. But since private rented homes are among the least energy efficient properties as a group it represents a real step forward for tenants warmth and property efficiency across the country. And the penalties for non-compliance are proportionate to the cost of actually doing something – i.e. more than it is likely to cost landlords to do up their homes to conform (which as the Association for the Conservation of Energy and others have shown is, in most cases, a pretty modest sum – perhaps £1500 or so).

The regulations don’t of course cover a large part of the private rented scene, which is where parts of properties in which people are living jointly are let out on individual tenancies: Houses in Multiple Occupation or HMOs. This remains a real gap in provision, since it means that thousands of properties in most large towns and cities will simply be exempt. This raises the not entirely fanciful prospect of some landlords straying into letting properties out as HMOs and not single tenancies over the next few years so that they do not have to improve their properties to let them.  I shall certainly continue to pursue this gap in the regulations, which surely, a future government more interested in energy efficiency across the piece will have to fill…which brings me to the slightly more churlish bit of the piece.

The Energy Act 2011, from which these regulations derive, received its Royal Assent on 10th November 2011. That’s a piece of legislation passed by Parliament, supported generally all-round, although there were moves during its passage to move the qualifying date for landlords to comply forward to 2016. No, we were told, 2018 is a better forward date, because after the regulations are in, that gives five to six years to move towards compliance, instead of about three if the date is met at 2016.

So, a mere three years and three months later, regulations (which were probably written and ready to go by early 2012) finally emerge, giving landlords, yes, about three years to move to compliance.  So why the inordinate and otherwise inexplicable delay?

Introducing the measure yesterday, Ed Davey gave it away, although when he was in undifferentiated mode as Secretary of State, he played a straight bat when I enquired, repeatedly about the non-appearance of the regulations. ‘Well’ he said, ‘’I wish the regulations had been brought in earlier.’  Battles within the coalition had apparently delayed them. ‘Not everyone in this government wants more regulation. But in energy efficiency regulation plays a crucial role’. Quite so Ed.

So who might it be that the battles were with? Not the Ministry of Defence obviously – the finger very rapidly and accurately points at our not very green at all friend in DCLG, Mr Pickles. Quite scandalously, in fact, that a modest follow on measure from an Act agreed by Parliament which would make a big difference on housing fitness and tenant welfare at small cost, and even endorsed by the National Landlords Association, has been blocked. Blocked by the head of the department that is supposed to be all about housing and standards therein, and only eventually unstitched because, I understand No. 10 very belatedly told them to stop messing around.  In another system someone ought to be accountable for that kind of attempted extended sabotage on a measure agreed by Parliament. Not in this one though.

Why ECO should become ECO

By way of a cheery goodbye to 2013, Damian Carrington reported in the Guardian on December 30th  that (according to a compilation of Parliamentary answers and latest DECC official statistics) loft insulation retrofits plummeted by 93% between 2012 and 2013 (1.61 million to just 110,000) and cavity wall insulation measures dropped 76% over the same period (640,000 to 125,000 in 2013). What he could also have reported using the same statistics was that solid wall insulation – that category of ‘hard to treat’ properties regarded by the Climate Change Committee as essential to treat at a rate of over 3.5m solid walls by 2030 – also fell from 82,000 in 2012 to 16,461 in 2013. Which also means a drop of almost 80%.

These figures, of course, mark the passing of the CERT, CEST and Warm Front programmes and their replacement by Green Deal and the three strands of ECO. And it is ECO which has, Carrington notes , done all the heavy lifting to arrive at the pitiful total that was reached, accounting for no less that 98% of all installed measures in 2013. This latter point, I think, puts the lid on the suggestion that the poor figures can be explained away by saying that this is just a hiatus whilst the new schemes unfold. The almost invisible performance of Green Deal and the pulling apart of ECO will most likely mean that ECO lifts some of the Green Deal dead-weight, but at the expense of other harder to achieve measures such as solid wall insulation. So we can therefore expect the modest solid wall insulation figures to be as bad next year or indeed even worse. In short, it is not a hiatus. It is a collapse, with no relief in sight.

And it is serious, very serious indeed, because we know that energy efficiency in homes is the only really effective way to combat fuel poverty in the long term. And we know that for any serious climate change emission targets to bite we need many more UK homes, commercial and industrial buildings being made more energy efficient (as the CCC provides for in its carbon budgets). Each of these goals will only be achieved by the methodical implementation of measures in a reliable, extensive, year in and year out fashion until we get there. The grandmother’s footsteps-style repositioning that DECC has undertaken in the wake of the ‘green levies’ fiasco of two months ago will perhaps turn a collapse into a mere rout, but that is all.

So I think it is time for a fundamental rethink of how we get ourselves anywhere near back on track, because we know we will have to do so sooner or later.

I don’t think we need to look very far to see what might be done, and it isn’t just all about money, although the presence of funds to make it happen is very important. Even if the plans of the admirable Energy Bill Revolution people were to be adopted, with their proposed root and branch energy efficiency programme which uses the proceeds of future green taxes to vault English and Welsh homes up through the energy rating bands, we would still need to look at how such a programme might be delivered. And here I think is where much of the effort, even when it was better and publicly funded, has come unstuck.

A common thread through CESP and ECO ( that is until the December ECO announcement stopped many fledgling collaborations in their tracks) has been that where programmes have worked or started to do so, they were through area partnerships between energy companies and local authorities. Along with social landlords it is because of these unsung heroes that much of the progress to date has been made. The final Ofgem CESP report records for example:

‘Almost all CESP measures were delivered through partnerships with social housing providers (SHPs) or by direct promotion to private households (e.g. privately owned homes within social housing developments). Activity carried out in partnership with SHPs was the most popular delivery route but many schemes covered both delivery routes, often including the private householders that were located within predominantly social housing areas.’

And what would have happened, in all probability, if the ECO target had remained fixed to 2015, was that obligated energy companies would have sought to offset known and reliable chunks of their obligations onto local authority partnerships as a priority. For instance, like the one that was about to be signed between three partners MITIE, SSE and Southampton City Council for the cladding and uprating of thousands of homes across the city until clumsy Dave tore the rules up.

And we know, looking back somewhat, that local authorities were highly successful in delivering uprating programmes including insulation in the General Improvement Areas and Housing Action areas of the 70s and 80s.

It always has looked a little strange, in the light of all this evidence, that a complex layer of measures has been in place, obligating energy companies to seek partners. Or in the case of CERT and now for ECO actually to seek out ‘vulnerable’ households and get their properties treated, when it would all have been far simpler, more straightforward and effective to do it at local authority level.

I appreciate that placing obligations into the hands of those that had them was a way of avoiding the cost of all of it falling upon the public accounts (although quite why we can’t just follow the rules adopted by pretty much the rest of Europe for public expenditure purposes is a mystery). I also understand that Green Deal, in particular, has been informed by an imaginative but ultimately far too byzantine experiment in capturing the forward value of energy savings into a market led programme. But let’s face it: both approaches look like they’ve failed.

Even so, we could adapt elements of the logic of both approaches into something that may work over the next period.  I think that the relationship between partners should simply be turned around: Energy Company Obligation should become Every Community Obligation.  Local authorities should have the obligation for reaching targets for treated properties in their areas, and once programmes have been put into place, energy companies should be obliged to compete to secure the right to fund an agreed part of them. Rewards similar to some of the principles of the New Homes Bonus should come the way of local authorities reaching their targets. This could be done through area schemes such as ‘Efficiency Improvement Areas’ similar to GIAs. Energy companies would have to chase the musical chairs of schemes to fund in order to be signed off for their allocated funding obligation and to ‘buy out’ a higher fine if they fail.

Probably, most of the funds local authorities would need to carry out their obligation could be obtained in this way and fines for energy companies could be recycled. It would be far simpler and I think far more efficient that the present system. And you never know we might just cladding by cladding, cavity wall by cavity wall, get back onto the road we know we will have to travel down.

A word on behalf of ECO – we may be sorry when it’s gone

I should think that, by the time you read this, we will be about to hear or will have heard the Chancellor’s Autumn Statement (now effectively a second budget). I have no idea what will be in it, except that it will almost certainly contain the outcome of one of the fastest “reviews” in history: the recent “green levies” review suddenly announced by the Prime Minister literally half way through Prime Ministers question time a few weeks ago. The problem with this review (which is explicitly linked to the presumption that the green levies contribute £112 to an average energy bill) is that the various amounts that appear on our bills as levies perform a variety of different tasks. Only some of them would truly fit this “green levy” description. The charges that can properly be called “green levies” are basically those that go to underwriting wind farms and solar energy and most of them are pretty fully committed to already. They were ruled out of the “review” pretty soon after it had been announced.

Ironically this leaves the Carbon Floor Price (a levy that doesn’t actually save any carbon emissions and goes straight to the Treasury) and those levies that help the elderly and fuel poor to manage their energy bills better, or those that contribute towards making our homes more energy efficient and so far less expensive to power in the long term. These are the elements of our energy bills that the Chancellor will almost certainly pronounce upon in in his statement. The question is, will he absorb them into general taxation (and give himself a fundraising headache in the process) or will they be modified or even abandoned entirely?

The word in advance of the statement was that the likely recipient of the review would be the Energy Company Obligation (ECO). This £1.3 billion-a-year obligation was placed on the energy companies to force them to tackle some of our most energy incompetent homes – such as solid wall houses – and in part to do so in favour of people who are in fuel poverty and live in such properties. It may be that ECO as a whole will be funded from general taxation but I think it is more probable that it will be cut or extended over a longer period (but with the same amount of obligation level). The present cut off point is 2015.

It is perhaps a bit of a metaphor for the whole febrile debate on energy that we should have come to this. Because without a doubt, if you want to save the most, permanently, on energy bills, ECO (or something like it) is the programme you should be investing in. The comparative figures across Europe should not surprise anyone but they still come as a bit of a shock. In the UK we have some of the continent’s cheapest energy prices but we also have significantly larger energy bills than most. And this is quite simply because, as a rule, we live in more poorly insulated, leakier homes than in the rest of Europe. These energy inefficient houses are twice as high an incidence as in Scandinavia, for example. And therefore we sit at the bottom of the European league for homes spending considerable amounts of household income on energy – we spend almost three times the level of homes in Belgium or Holland.

The effects of ECO-type schemes on bills can be startling. Many solid wall homes across the country can halve their bills through effective insulation measures. This would be a far higher and more permanent saving than other measures being canvassed. For example, reforming tariffs probably saves a few pounds and an energy price freeze would save perhaps £72 – definitely worth having but paling in weight beside the long-term effects of wholesale energy efficiency action.

Now of course energy efficiency measures affect the country asymmetrically whereas less dramatic measures spread the gain. But overall we all lose in the long term if we do not take the energy efficiency of our homes seriously and invest in their improvement. And this is why I for one will grieve if the apparently little loved and under-defended ECO scheme is sacrificed at the altar of short term energy bill expediency.

This article was first published in The Environmentalist.