An end to cold homes: One Nation Labour’s plans For energy efficiency – Consultation Response from the Heating and Hotwater Industry Council (HHIC) December 2014 1. About HHIC The Heating and Hotwater Industry Council (HHIC) are the leading representative body for the UK domestic heating and hot water industry, worth £3-4 billion per year. HHIC’s membership base covers approximately 94 per cent of heating and hot water solutions available in the UK. HHIC are a division of Energy and Utilities Alliance (EUA). HHIC has been working extensively with DECC on ways to try and improve the energy performance of the UK’s housing stock. We welcome this consultation and hope we will be able to work with Labour in developing these proposals. 2. Response Summary 2.1. HHIC’s response focuses on the questions below. Any unanswered questions should be considered as acceptable to HHIC and so no further comment needed. 2.2. HHIC broadly agrees with all the policy recommendations. However we would urge a focus on registered heating engineers and recognising the role they could play in ensuring success. 2.3. HHIC also asks that Labour looks at all heating measures that could help improve energy efficiency and not just at condensing boilers. This should include measures such as heating controls, hot water cylinders, new radiators, renewables and allow for innovation.
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3. The Response Question 1: Do you think that other incentives, measures or publicity will be needed in order to raise awareness about potential savings from energy efficiency improvements? Organisations such as the Energy Saving Trust (EST) have been trying to raise awareness about the potential savings from energy efficiency improvements for a considerable amount of time. It is hard to judge how successful this has been. A recent report from DECC1, indicated that 39% of participants found information about the Renewable Heat Incentive (RHI) from the EST. Another report from DECC and Ipsos Mori2 showed that only 5% of people went to the EST for information on what heating system to install. This would indicate that their activities to raise awareness through publicity have not been successful. In both these reports the most trusted and used source of advice was a local installer (61% and 42% respectively). HHIC has been informing Government and Stakeholders that the key to increasing uptake and interest in energy saving schemes is to mobilise the around 135,000 registered heating engineers. 30,6683 boilers are installed each week into UK homes. That doesn’t include the number of homes visited for repairs, servicing and other plumbing services. Heating engineers are trusted by homeowners and could be a trigger for alerting homeowners to services that could be available. We would urge Labour to consider 1
Evaluation of the Domestic Renewable Heat Incentive: Interim Report from Waves 1 – 4 of the domestic RHI census of accredited applicants – November 2014 2 Research Report - Homeowners' Willingness To Take Up More Efficient Heating Systems – March 2013 3 5 year average based on HHIC boiler sales statistics
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how they could utilise this resource to help them to deliver the 500,000 annual energy reports. We would expect it to be a very hard ask to reach that number without engaging heating engineers in some form. In the January 2014 report ‘Learnings from the DECC Community Energy Efficiency Outreach Programme’ one finding was “the ‘neighbour-to-neighbour’ door stepping approach used by Milton Keynes resulted in a sign up rate four times higher than the professional door-stepping company working in the same streets”. This illustrates how important trust is to succeeding with large scale works. One model we proposed for the original Green Deal was that on installation of the boiler the house holder was issued with a voucher. They could then redeem this, giving money off the installation cost as long as they then undertook a post installation Green Deal assessment or another measure. This was because many boiler installations are distress purchases and so they can’t wait for a pre assessment. However if these installations were used as a trigger for further engagement it could help Labour reach their targets. This could be used in the same way for home energy reports. The current uptake in EPC’s and Green Deal Assessments is largely driven by demand for the Energy Company Obligation and incentives schemes such as the Green Deal Home Improvement Fund. So we would also acknowledge that some form of incentive would be needed to reach the 500,000. Interest in energy efficiency alone will not encourage enough uptake. Question 2: Do you think that any changes need to be made to the content, format or process by which Green Deal assessments are currently provided?
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HHIC is concerned that the current format and content of EPC’s and Green Deal assessments are too rigid in their treatment of properties. Both use RdSAP as the mechanism to calculate suitable measures that could be available. This mechanism does not allow for advanced heating controls, hot water storage cylinders, flue gas heat recovery systems and other energy saving devices. If these reports are going to promote meaningful and practical changes then Labour will have to revisit their formulation and look at ways they can include all energy saving products and not just the ones that SAP have prescribed. Question 3: Do you think that personalised home energy reports would be better provided by local energy efficiency providers or directly from central Government to individual households? HHIC would recommend that Government provides a simple voucher scheme that allows a fully qualified and accredited energy assessor to claim back the cost of carrying out an energy assessment. The network has already be been built and has operated effectively for the ECO scheme. One of the mistakes the current government made when trying to implement the Green Deal was to try and create new supply chains. This did not work and led to the failure of a promising project. Therefore we would ask that the home energy reports are provided by existing assessors using the simplest model possible. Question 4: How can we best manage the transition from the existing energy efficiency framework to the policies proposed in this Green Paper, in order to minimise disruption to consumers and industry?
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The key is to be open with industry from the start, make clear your plans and consult thoroughly. That way it minimises disruption. The Green Deal Home Improvement Fund and the ECO scheme are examples of knee jerk policy making and reactions to unexpected results. Industry needs time to plan and also time to deliver. Constant government interference affects both of these and in time erodes confidence and willingness to engage. Question 5: How do we best ensure that all revenues raised from the Energy Company Obligation go to households in or at risk of fuel poverty? Stakeholders and HHIC members have indicated that one of the difficulties in reaching the fuel poor has been a lack of access to reliable data. The frustration has been that different government departments have data sets that could be used such as DWP and DCLG. Cross departmental data sharing could facilitate the targeting of resources to those who genuinely need it. We understand that data protection currently prevents a lot this happening. But consultation across departments on making this data available would be a good start. Currently the Off Gas Grid Industry Working Group have been working with DECC and network operators to map off grid properties to better target policy measures. Question 7: How do we most effectively deliver an area-based energy efficiency scheme? Local Authorities would need to work with local community agents and trades people. A number of models propose that the Local Authorities should roll out a street by street campaign to transform properties. This is often in conjunction with a large delivery company. Whilst these can be effective, there are plenty of examples where these failed to materialise or deliver.
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HHIC has long argued that boiler replacements are a key driver to change and should be used as such. If local heating engineers were incentivised to recommend homes to local schemes this could help encourage a wider and more effective uptake. The heating engineer would have to benefit as well from this arrangement. HHIC is also concerned that Local Authority procurement lists are often hard for smaller companies to join which could lead to them being excluded. Question 8: Which organisations do you believe are the best delivery agents for energy efficiency improvements? As stated in question 7, HHIC believes that Local Authorities or Community Groups working in conjunction with local tradespeople would be the best and most effective method to deliver the energy efficiency improvements required. Question 9: How should funding be allocated so as to ensure an equitable distribution between different communities? What criteria should be used when determining which projects should be prioritised? HHIC would obviously advocate that funding should be distributed targeting those at greatest need first. We would caution against looking at the most cost effective first, a fault of the current ECO scheme. Looking at cost effectiveness often results in the easiest properties to retrofit. This has the effect of only marginally reducing the number of those in fuel poverty. The current ECO scheme is set up in a way that does not reward energy companies to try and target those with more expensive to fix properties, often rural. Therefore
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we would ask that priority be given to schemes that try and target harder to reach properties and ones that result in a greater improvement, for example from a G to a C rather than D to C’s. This should ensure that the off grid properties are supported. Under the current ECO scheme they are not. This should also ensure that all options to improving the energy efficiency and running costs for off grid properties are explored. This could include renewable heating such as Heat Pumps. The high costs of installation for these measures often means they are not considered, but they can drastically reduce households energy costs. Question 10: How can we best use government energy efficiency schemes to bring in other investment and boost economic development and regeneration? HHIC would again ask that bids that will use local small businesses to deliver the improvements be prioritised. This would ensure that the money would benefit the local community and employ local people. We would also suggest that bids that pledged to create a percentage of long term apprenticeships for young people be encouraged and rewarded. Question 11: Do you support moving from a single-measures approach to whole house retrofits? HHIC supports moving to whole house retrofits. This method would ensure homes are best equipped to reduce fuel poverty. However we would ask that attention be paid to the measures that are included in a whole house retrofit.
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The current SAP regime will only recommend a fixed number of measures. This is likely to be a new boiler, insulation and windows. It may also recommend more unrealistic measures like Solar PV. This ignores heating controls, hot water cylinders, renewables and other innovative products. By ignoring these other measures, homes may be fit with just the essentials to reach the required band whilst ignoring the fact that a well-insulated home without controls will not help to reduce bills. Therefore the programme should consult on how a package is selected and by what method homes are evaluated. HHIC would state that the current EPC SAP methodology is not fit for purpose. Question 12: Do you think EPC C is an appropriate target for whole house retrofits? HHIC agrees that EPC band C is a useful target and clearly one that will significantly reduce fuel bills. However the consequence of this could be that projects target band D properties and push these up to a C. This would be relatively cheap and there is an abundance of Band D properties. According to the English Housing Survey there were 11.6 million4 band D properties. HHIC would propose that the target be based on the rate of improvement rather than reaching a specific band. For example bringing the 1.2 million5 band F and G
4 5
English Housing Survey Headline Report 2012 to 2013 English Housing Survey Headline Report 2012 to 2013
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properties up to a D would have a far greater effect in reducing fuel poverty. These households are not likely to be targeted under current plans because they will be relatively more expensive and harder to find. This is the same problem that has reduced the effectiveness of the current ECO scheme. Question 13: Do you think that offering interest free loans for energy efficiency improvements will be sufficient to increase demand among able-to-pay households? HHIC agrees that offering interest free loans would be a step to stimulate demand for able to pay households. However the pay as you save pilot schemes run in 2009 which offered amongst other benefits interest free loans resulted in 1.1% in marketed to householders installing measures6. This would quite clearly illustrate that just offering zero interest loans will not work in isolation. One concern householders have expressed is that the loan is attached to the property. Given the UK householders sensitivity to house prices and saleability, this can be enough to discourage householder uptake. Another problem can be the rigid terms that accompany the scheme. Too often households have to use the installation companies provided by the scheme owner and abide by their terms. This lack of flexibility goes against the current trend in the UK of households choosing the builders, plumber and fitters they want, often previously used, and trusted companies. Any scheme introduced would have to take this into account.
6
Home Energy Pay as You Save Pilot Review – Department of Energy and Climate Change and the Energy Saving Trust – September 2011
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The referenced IPPR report7, to which HHIC contributed, proposed that the first 200,000 households receive an interest free loan, the subsequent 400,000 2% and so on. This would act as an incentive to homeowners and may be more appropriate. The desire to not miss out on the cheapest loan encourages customers to sign up early, which would encourage more people to take out these loans as they become “normalised within society through widespread uptake”. The problem with one million flat rate loans is that it encourages free riding. There’s an implicit cost to being one of the first to take part in any new scheme in risk, ambiguity or aversion. So people will wait for others to take on that cost unless somehow incentivised to do otherwise. Another suggestion would be to not attach the loan to the house and have flexible repayment terms, including no early repayment charge. Essentially acting like a private loan, but only for energy efficiency improvements. The households would be free to employ who they wished to carry out the work and agree terms suitable to them. Another way to encourage uptake would be to have an early incentive like the recently closed Green Deal Home Improvement Fund or the 2010 boiler scrappage scheme that linked discounted measures to the loan. An area Labour should look at is how they could use this loan system to incentive renewable heating. Currently the domestic RHI is struggling because of the high upfront cost of renewable heating. Allowing a portion of the loan to be used as an upfront payment would be a strong incentive. Also allowing the tariff earned from
7
IPPR – Help to Heat - 2013
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schemes like the RHI to be used in loan calculations could greatly improve the rate of return for renewables. Question 14: How can we best offer greater flexibility for the length of an energy efficiency loan, or to the repayment structure, so as to make households more likely to take out a loan? As detailed in the above question it will be key to offer flexibility, no early repayment charge, full transparency and ideally no link to the house. Early repayment of loans will also benefit government in the form of lower interest repayments. Question 15: Do you think that any additional energy efficiency improvements to those already approved should qualify for finance under an energy efficiency loan? As detailed throughout this response, HHIC believes that the current structure is too rigid and ignores some basic solutions like heating controls and hot water cylinders. It also ignores innovation such as high efficiency temperature control (e.g. load compensation or TPI), time and temperature zone control (e.g. programmable or connected TRVs), and ‘smart’ programmers (e.g. remote control or self-learning). It does not allow for solutions that have not yet come to market which dampens innovation and means homes do not always get the most suitable measures for their properties. This can also have the consequence of not allowing some hard to treat properties that may need more extensive improvements including structural measures like new radiators or the removal of a back boiler to take part.
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Labour would need to consult on industry solutions to improving the SAP software to remedy this. Question 16: How do we ensure that the widest possible cross-section of households can access interest free loans for energy efficiency improvements? A balance would have to be reached with the Green Investment Bank to ensure households with a lower credit rating could take part, but also that the loan is not attached to the home. Question 17: How do we maximise public awareness about interest free loans and energy efficiency? Engaging and empowering local heating engineers is the key way to raise awareness of the scheme. As they visit homes every day and impart heating advice they are ideally placed to recommend schemes. However they have to benefit from the recommendation. The simplest way is to allow them to carry out work that is paid for by the interest free loan. The 2010 boiler scrappage scheme was so successful because all heating engineers could take part and so recommended it to all their customers. That scheme did not require expensive marketing and PR budgets. It was delivered entirely by word of mouth, which then led to extensive, and positive, media attention. The current energy efficiency schemes have not benefited from this. Question 18: What lessons can be learnt from the failure of the Green Deal scheme?
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Our key recommendation would be to ignore overly complex red tape. The scheme was too complicated for most customers, and to a degree industry, to understand. This led to widespread dissatisfaction with the scheme. The scheme had to be delivered by Green Deal providers, and then through Green Deal installers. This required companies to retrain staff, spend money on new systems and accreditations. The PAS2030 requirement for all installers was a gross imposition on the heating engineer, who was already heavily accredited to carry out their work. This alienated large portions of the workforce. Other more suitable schemes, like the manufacturer led Benchmark Installer accreditation or a Government recognised Competent Persons Scheme (e.g. FENSA , OFTEC) would have more suitable. Therefore when customers asked about the Green Deal it is no surprise that some installers would encourage customers not to take part. Poor PR and marketing was also a failure. DECC failed, despite many meetings with industry, to listen or engage. HHIC held over 4 meetings with the DECC PR and Communication’s team, and on no occasion did they listen to the advice given. As a consequence some of the biggest heating providers in the UK stopped engaging with DECC and lost confidence in the system. The Green Deal failed because the government did not listen to industry. Question 19: Do you support a new target on landlords to improve all properties in the private rented sector up to EPC C by 2027? HHIC fully supports this aim. However we would prefer there to be an interim target to ensure private rented sector landlords do not wait until 2027 to make improvements.
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HHIC would propose strengthening the recently introduced target of band E by 2018 to Band D by 2020. This would be a big step change in reducing fuel poverty amongst this vulnerable sector. This would help 1.4 million households rather than the current government’s proposals that would only help up to 400,000 households8. Question 20: How can we best support landlords to enable them to upgrade their properties? This consultation outlines a number of schemes that will be available for improving homes energy efficiency. These should be sufficient for landlords as well. Landlords earn an income from letting properties, if the regulations require that these be to a specific standard then landlords should comply in order to carry on earning from their portfolio. All other products that have regulations on performance do not receive benefits to achieve this; landlords should not be an exception. Question 21: In what ways could energy efficiency benefit from being designated as a national infrastructure priority? It would act as a clear signal that the government is going to prioritise energy efficiency, give the industry the confidence to invest in production and staff to meet demand and offer the potential of access to the capital markets at more competitive interest rates.
8
English Housing Survey Headline Report 2012 to 2013
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4. Conclusions 4.1. HHIC are pleased that Labour are taking energy efficiency seriously and this consultation is a very positive step in improving the poor level of energy performance of the UK housing stock. 4.2. In principal HHIC agrees with all the major policy proposals in this consultation. However as with any scheme the detail will be important in ensuring success. In conclusion we ask the Labour ensure full industry consultation if they are in a position to enact these proposals from 2015.
5. Contact Details
5.1. HHIC would be very pleased to discuss any of the issues raised in this submission with Labour, please contact Isaac Occhipinti, External Affairs Manager on Isaac@hhic.org.uk 01926 513742. HHIC Camden House Warwick Rd Kenilworth CV8 1TH
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