Friday, 15 April 2016

Why are the ECO and Green Deal so expensive?

The National Audit Office has produced a report damning both the Green Deal finance program and the Energy Company Obligations (ECO) scheme as being very expensive. I agree in part, but there are reasons for this.

As the NAO says 'The schemes have saved substantially less CO2 than previous schemes, mainly because of the Department’s initial focus on harder-to-treat homes.' These homes have to be tackled at some point. If not now when?

The government's stop-start policy has been a disaster for green jobs and industry. Energy efficiency installations were growing nicely until April 2014 when the ECO targets were reduced. There is still a small backlog of measures to be installed but the auctions where the installers bid for grants have ebbed almost to nothing - see chart.

Number of measures installed by month (light blue, left hand axis) and the value of the ECO auction trades (dark blue, right axis). Data from [1]

The result? Many lost jobs [2][3].

Secondly, the Green Deal loan scheme got off to a very slow start due to all sorts of problems. Interest rates were higher than mortgages because the loans were long term and unsecured and they were aimed at people who did not have the best credit ratings. (If you qualified for a mortgage you didn't need one.) This was never going to be an easy sell and the Green Deal Bank had to train up the Green Deal Providers in how to manage it. They were just about getting going when the government pulled the plug in July 2015 [4] - see chart.

There were lots of things wrong with the Green Deal but that doesn't make it reasonable to close it down and offer nothing to replace it. We still have a large stock of homes that need upgrades and we won't meet our carbon saving commitments unless we do. This is just one of a number of areas where the Committee on Climate Change has been severely critical of current policy. They say 'Our assessment of existing policies is that some of these are at risk of failing to deliver, either due to design and delivery problems, or because they are currently unfunded. Even if these policies delivered in full, there would be a policy gap to achievement of the fourth carbon budget (2023-27) and the cost-effective path to the 2050 target.'[5]

So - what next Amber Rudd? Can we please have some support for green industry that doesn't get the rug pulled out from under its feet as soon as it starts to make a difference?

[1] Green Deal and Energy Company Obligation statistics (Nov 2015)
[2] Deal to cut energy bills 'will cause 20,000 job losses and 50,000 homes to go uninsulated' (Mar 2014)
[3] Energy Efficiency firm Mark Group to axe 670 jobs (Sep 2014)
[4] Government kills off flagship green deal for home insulation (July 2015)
[5] 2015 Progress report to parliament (June 2015)

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