Rented homes and energy efficiency: a sad tale of intention and action

Lost in the mists of time (or 2011, to be precise) yet another Energy Bill found its way onto the statute books.  Most of us have probably forgotten what was in that bill, since several, rather more meaty examples of the species have come along since.  I haven’t, since I had the pleasure of sitting through an interminable series of committee meetings debating the finer points of the Bill. One such example was legislation requiring landlords to uprate the energy efficiency of their properties to a specified level by 2018 or face being unable to let them out, providing that the cost of the improvements would not be disproportionately burdensome. Some of us at the time thought that the 2018 date was a bit far in the future, but generally, the proposal had strong all party support and passed into law.

But, and there always are buts, the proposals required some secondary legislation to come to pass. Not least a specification of what energy band those landlords would need to attain, and what limitations on landlords’ expenditure would be regarded as ‘reasonable’. Furthermore, there was a question, which the committee at the time seemed to think would not be a problem, but the wording of the legislation later demonstrated otherwise, of what properties exactly would be covered by the new requirement? Would it just be where landlords were renting out an entire property to a tenant and would therefore obtain one energy performance certificate for the whole property? Or would it include the probably more numerous instances where properties were being let to more than one tenant – divided properties or multiply occupied homes?

Well, here we are three years later, and wooo, the first of the ‘buts’ has eventually been made into an ‘and’. At the end of July, the Department has finally got round to producing a consultation paper on how the proposals in the Bill will actually be implemented. You might have missed it by going on holiday, but it does mean that secondary legislation will now be prepared before 2018 is actually upon, us, but only just. And the good news is that the Department has set out the level of attainment that will be expected.  Landlords will have to improve their properties up to band E – not great, but since private rented properties are disproportionately to be found at the very lowest of the energy efficiency bands, in itself a real advance.

The second of the ‘buts’, however, remains firmly in that box. The Department has essentially bottled it as far as making the proposal into anything like a comprehensive measure covering all rented properties, and is proposing that the legislation only covers whole house lets. This means, not to put too fine a point on it, that the majority of properties will probably now entirely escape the requirements of the legislation. And if you are a prospective tenant looking to rent just part of house, you can be assured that your dwelling will remain just as draughty and fuel inefficient as, statistically at least, it will always have been. This wasn’t the intention of the legislation and I can only think that someone, somewhere has succumbed to a lot of pressure from some significant interests to drop the idea that the new laws might actually work properly.

I’ve been trying to get this omission plugged for some time now and I recently put a mini bill into the system with the specific aim of placing words onto primary legislation that ensures that all lets have to be included in any minimum standards programme. Unfortunately it is very unlikely to make any progress, so it is really down to the Secretary of State to change his mind about the omissions in the proposals for implementation. If you see him over the next couple of weeks, perhaps you can mention it to him…

This article first appeared in Business Green

RIP ECO

Obscure reference: this one’s still there…

Obscure reference: this one’s still there…

There’s a major catastrophe under way and, as far as I can see, with a very few honourable exceptions, no-one’s reporting on it, but it’s a catastrophe nevertheless. The hon. exceptions are the estimable Inside Housing and the Guardian (only they seem to have moved on).

The catastrophe I’m talking about is that the whole programme of solid wall insulation as we know it, which is supposed to be advancing via the Energy Companies Obligation, has almost completely disappeared before our eyes.  And it’s a catastrophe for the simple reason that Britain has some of the least energy efficient housing in Europe. So much so that if we do not seriously get to grips with our collective home energy efficiency now, then we severely lessen any chance we might have to reduce overall carbon emissions to anything like acceptable target levels by the 2030s. And of course it isn’t just me saying that;  the Committee on Climate Change is clear that to meet the terms of the third carbon budget (early 2020s) we need to have externally clad (or otherwise insulated) something like 2.2 million homes. By the fourth budget (assuming the government doesn’t abrogate its commitment to it) some 3.5 million homes will need to have been treated.  Last year, as DECC records, about 16000 such homes were clad, making it only a matter of …ooh…230 years or so before the 2020s target is reached.

And over the past few weeks it’s become apparent that any hopes that we might have had of some progress, any progress, being made in that fundamental task are being dashed. This is because energy companies are pulling out of what could have been the white hope of ECO; the local area-based schemes that had been developed in good faith by local housing associations and local authorities across the Country.

Because ECO placed an obligation with a challenging level of carbon reduction on energy companies up to 2015, some solid –looking partnerships had developed between social landlords, local authorities, energy companies and others. The aim of such partnerships was to discharge parts of those obligations through the treatment of thousands of solid wall and hard to treat properties using an area based approach.  In Southampton a deal to begin such a programme was at an advanced stage; deals had been struck, partners agreed, programmes designed at no little cost to the local authority, and residents had been informed that cladding and a potential considerable reduction in their bills was soon to arrive.

But now as a result of the lengthening of the ECO’s ‘commitment’ and the emptying of the CERO part of the scheme to fund easier to achieve treatments, e.g. loft and cavity foam measures (which should have been the province of the Green Deal), virtually no area based schemes, as far as I can see, are now standing. The energy companies, being no longer obliged to work at the speed or to the extent that they previously were, are simply pulling the plug on their contributions.  Technically, the ECO extension until 2017 means that companies will now be obliged to only insulate around 100,000 homes by 2017, instead of the target of about 180,000 by 2015. Because of the way the ECO obligation is calculated, energy companies can now plump for cheaper measures in order to discharge their obligation.  Bearing this in mind, I would be most surprised now if anything like that number of properties are actually insulated.

It might be worth reminding ourselves of what was put forward as a real prospectus for ECO less than two years ago. Then the government said:

One of the major challenges for the ECO and Green Deal is the changing nature of the types of measures that need to be delivered. CERT, by focusing on delivering low-cost measures, has been very successful at installing simple loft and cavity wall insulation. From 2012 Green Deal finance will offer a route to deliver the remaining low cost loft and cavity wall opportunities at no upfront cost and without need for subsidy. However to meet our carbon budgets cost effectively, we will need to go far beyond just lofts and cavity walls, and move towards the next most cost effective measures.

However, some 7 million of the most difficult to treat homes require some form of solid wall insulation. The Committee on Climate Change recommended in their 2009 Report, ‘Meeting Carbon Budgets – the need for a step change’1that 2.3million solid wall homes will need to have taken up solid wall insulation by 2022 in order for the UK to be on track to achieve carbon budgets. ECO support for these properties will help drive this market, and the supply chain to fulfil it, enabling us to unlock the resulting carbon savings more cost effectively.

Now the Green Deal is on life support and ECO is in ruins. Quite a catastrophe really.

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.