Making a meal of the Green Deal

Forthcoming research from the New Local Government Network reveals that the Government's Green Deal home energy-improvement programme could still leave much of the social housing sector unaffected. Luke Hildyard reports on the conclusions. The Government's flagship Green Deal programme has much to commend it. The scheme will eliminate a sizeable element of risk for anyone considering home energy-efficiency improvements in the knowledge that they might also move house in the medium to long term. However, the lack of a clearly-expressed role for local government and social landlords, or a recognition that action to address climate change and fuel poverty can be most effectively co-ordinated at a local level, is in danger of hindering its success. Outright opposition to the Green Deal is likely to be muted, although proposals will still be difficult to implement. The proposed mechanics of the scheme are that households will be able to install energy-efficiency improvements with a value of up to £6,500 to their homes at no upfront cost, with responsibility for repayments attached to the property, rather than the individual. It will be open to any household where the ultimate cost of the energy-efficiency measures – including interest payments – is less than the savings they generate from reduced fuel bills. This is the ‘golden rule' of the scheme. The golden rule presents the first difficulty. Forthcoming research from NLGN and British Gas has identified areas of the Green Deal which could leave parts of the social housing sector uncovered. There are a number of households where it will not apply, often those most in need of more energy-efficient homes. Indeed, 1.4 million homes in the social housing sector are classified as ‘hard to treat' – because they are older or more isolated, and the process of retrofitting wall insulation or more energy-efficient boilers is a lot more expensive. Therefore, energy-efficiency improvements are less likely to generate a long-term return on investment. Furthermore, growth of fuel poverty in social housing has outstripped that in the private sector. Social homes accounted for 27% of the increase in fuel poverty between 2007 and 2008 – the most recent years for which data is available – despite representing only 18% of the housing stock. Fuel-poor households cannot afford to heat their homes as it is, so their scope to save money on fuel bills as a result of energy-efficiency measures is limited. Thus, these households will also struggle to meet the golden rule. There is an obvious difficulty in persuading those social homes which do fulfil the criteria specified for the Green Deal to take on an ongoing charge for improvements to a property they do not own. The potential fixed cost will also be a serious deterrent across the sector – a disproportionate number of social housing tenants operate pre-payment meters for gas or electricity to ensure they can avoid running up energy costs that they are then unable to pay. These findings support two main conclusions. First, support for home energy-efficiency improvements will need to be maintained beyond the Green Deal. This is currently provided largely through the energy supplier obligations. However supplier obligation funding is poorly targeted at low-income households and areas, despite the fact that these do not necessarily correspond with those in fuel poverty. As such, we recommend reform of the supplier obligation, removing these requirements in terms of process, and focusing on the twin outcomes of mitigating climate change and fuel poverty. Suppliers should be given quantitative targets relating to a reduction in carbon emissions, and improvements to the homes of the fuel poor, measured using the Standard Assessment Procedure (SAP) rating for the energy efficiency of buildings. We also envisage suppliers working with local authorities and social landlords to identify relevant households, and deliver their savings via a series of area-wide projects similar to the current Community Energy Saving Programme (CESP), but with a much wider, less-prescriptive remit. Second, social landlords and local authorities will need to play a key role in implementing the Green Deal in the social housing sector. By taking an area-wide approach, they can reduce costs through economies of scale. As a trusted voice promoting the scheme, they can drive take-up from tenants. To facilitate this process, we recommend that responsibility for a portion of the national climate change targets be devolved to local government level. We also support the extension to the social housing sector of measures recently proposed by secretary of state for energy and climate change, Chris Huhne, which would give private tenants the right to demand Green Deal improvements to their homes. These recommendations set tough challenges for local authorities and the social housing sector. The Green Deal in its current format will not entail any of the changes to the regulatory or policy framework that we propose, making it an easy sell to the many Government backbenchers, wary of anything to do with climate change. But the Government may find that a lack of opposition to the scheme reflects not its perfection but its deficiency. The more extensive reforms of the supplier obligations and the wider policy framework – including a clearly-defined role for local government – will be the bigger test of their ambitions on energy efficiency. Luke Hildyard is a researcher at NLGN

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Making a meal of the Green Deal

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