Sunday, 24 August 2014

Momentum in the Green Deal Supply Chain

Many of us were sadly disappointed by the sudden end of the Green Deal Home Improvement Fund a month ago. However, looking on the bright side it is still helping many households with home energy improvements. Also, and even more importantly, it is helping to maintain momentum in the supply chain for installers. The danger is that demand will fizzle out after the current backlog has been processed, though the Green Deal HIF is not the only game in town.


The big headache in our housing stock is the solid wall homes. Insulating my 1896 home (plus a few other measures) has reduced our bills by half showing that it can be very effective, though on average the savings aren't quite as good as this. The payback times are long and most people don't have the cash to do it without assistance from a grant. There are 8 million homes in Great Britain with solid walls and only about 0.26 million have been insulated so far [1]. If we were to insulate half the rest by 2050, that would be 107,000 per year.

In 18 months of funding from the Energy Companies Obligation (ECO) there were 58,000 installations of solid wall insulation [2]. At its peak there were about 10,000 installations per month (in February and March this year). However, in December 2013 the government slashed the ECO carbon saving target and this has lead to a collapse in activity. In the last three months there was only about £2 million traded each month in the grant auctions, compared to £50-60 million in October and November before the announcement. This is partly because of the reduced target but also because the funding pot that was aimed at hard to treat homes such as solid wall houses now includes loft insulation and cavity wall insulation [3]. Since these are much cheaper in terms of carbon savings per £ they will always win in the grant auctions.

Fortunately, DECC produced some new grants to fill the gap. The ECO is funded from our electricity bills whereas the new grants are funded from our taxes. The Green Deal Home Improvement Fund is one of them. In the six weeks when it was open - it closed abruptly on 24th July because the funding ran out - there were 21,500 applications, the majority for solid wall insulation. By the end of July there were 14,000 vouchers issued and these have to be reclaimed, after installation, within six months. Assuming the remaining applications will be processed soon this probably means 20,000 installations over 8 months or so, around 2,500 a month.

Local authorities that have won Green Deal
Communities funding
Additionally, the Green Deal Communities fund offers grants to local authorities to deliver the Green Deal 'on a street by street basis'. Cambridgeshire was one of 24 authorities to win this and they are using it to offer grants comparable to the Green Deal HIF - up to £6000 for solid wall insulation, although the householder has to pay an affordable contribution.  In total, DECC gave out Green Deal Communities grants worth £88 million which should help 32,000 households, though not all of these will get solid wall insulation. This money has to be spent within 12 months - by April 2015. That would be another 2,700 households a month.  This money is spread out  fairly evenly across England - the map shows the local authorities that have won funding.

Between the HIF and the Communities fund that should mean 4000-5000 solid wall installations a month over the next 8-12 months. This is much less than the 10,000 a month peak but probably enough to keep the supply chain going. However, DECC will need to find another way to sustain it next year.

[1] English Housing Survey Energy Efficiency of English Housing 2012 (www.gov.uk) July 2014
[2]Green Deal and Energy Company Obligation Statistics (www.gov.uk) July 2014
[3] The future of the Energy Company Obligation (www.gov.uk) July 2014

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