By Kathryn Porter, Watt-Logic

With the growing energy crisis across Europe there are calls for more action on demand reduction, and in particular to reduce energy wasted through heat losses. Research by the Energy and Climate Intelligence Unit (“ECIU”) suggests that poorly insulated homes will see energy costs around £1,000 higher than well insulated homes this winter. It found that homes rated band F on the energy performance certificate (“EPC”) system are likely to pay £968 more for gas than a C-rated home. Band D homes would pay £420 more. A comprehensive plan to address this issue is not something that can deliver short-term results, and should not be the priority for this winter, but it is time to stop tinkering round the edges and put in place a proper long-term plan of action.

Germany, with its greater gas uncertainty, has recently unveiled a plan to reduce heat losses from houses in part because it threatens the country’s emissions targets – buildings emitted 115 million tonnes of CO2 equivalents last year, higher than the 112 million tonne target. The plan will cost the equivalent of £47 billion over three years and will help to improve the thermal efficiency of the bottom 25% of households through a subsidy scheme with €12-13 billion/year allocated to improve the thermal efficiency of windows, doors, and heaters. Almost a third of the country’s energy is spent on space and water heating with German officials arguing that every euro spent on renovation is ten times more economically efficient spending on new homes. There are calls for a similar scheme in the UK.

“The UK has the oldest, coldest, and leakiest housing stock in Europe and, thanks to rocketing energy bills, struggling families face paying a bitter price for that in terms their health and quality of life. Matching or going beyond what the German government has just announced would help us tackle a number of major challenges at once, including the cost-of-living crisis, health outcomes and energy security as well as helping us meet Britain’s world-leading net zero climate target…In addition, such a programme would help create thousands of skilled and semi-skilled jobs in the green economy and boost consumer spending by delivering household savings via energy bills,”
– Duncan Baker, Member of Parliament

The only long-term scheme to tackle the issue in the UK is the Energy Company Obligation (“ECO”) which requires gas and electricity suppliers with more than 150,000 domestic customers to provide funding for measures that reduce heat losses from homes. The fourth iteration of the scheme, ECO4 is focused on providing support to low income households – local authorities inform suppliers which households in their area are eligible for support under the scheme. One of the main targets is to improve all F and G rated properties to at least band D; and to improve all D and E rated properties to at least C. The difference between the UK’s plan and Germany’s plan, is that the energy suppliers provide the funds for the retrofitting in the UK, whereas, in Germany, the government will provide the funds.

“The Energy Company Obligation insulation scheme has worked well and is knocking at least £600 a year off the bills of fuel poor households, but government is non-committal on doing more. We have to consider security of supply too, but more UK gas won’t come online anytime soon, so insulation is our best bet to shield us from the whims of [Vladimir] Putin and lower bills during this cost of living crisis and each year after,”
– Jess Ralston, senior analyst at ECIU

The ECO is a step in the right direction, but it has various limitations. First of all, suppliers are really not the right organisations to have this responsibility – there is no reason that a company which sells gas and electricity should have any expertise in construction and building retro-fitting. Suppliers simply intermediate between local authorities, building contractors and householders.

The other major limitation is that it relies on the flawed EPC metric, which has a number of drawbacks as detailed in this previous post. Briefly, the EPC ignores the condition of buildings and quality of materials, is based on potentially unfounded assumptions about construction methods and materials, is prone to errors and has been found to decline with the age of properties without justification (since the calculation ignores the condition of buildings so there should be no deterioration over time under the methodology). Also, while it is reasonable to prioritise homes owned by the fuel poor, all leaky homes need to be improved if energy waste is to be properly tackled.

The Royal Institute of British Architects (“RIBA”) has called for a National Retrofit Strategy. In its 2020 report, Greener Homes – decarbonising the housing stock, RIBA recommends the introduction of a sliding scale of stamp duty, capped at £25,000, with the most thermally efficient homes accruing significantly less tax than the least efficient. It also suggests a tax rebate for a period after purchase, to encourage homeowners to undertake improvements such as insulating lofts and walls, draught proofing doors, windows and floors, fitting double or triple glazing, and choosing smarter heating systems and appliances. Other proposed measures included:

• better targeting of existing income support payments including the Warm Homes Discount and the Winter Fuel Payment, towards the most fuel poor
• a clear long-term timeline for increasing the Minimum Energy Efficiency Standards for both the private and social rented sectors
• stronger standards for new homes
• more information and regulation of the quality of building work carried out by tradespeople making thermal efficiency improvements

The Architects’ Journal is championing a RetroFirst approach with three primary targets:

1. Reduction of VAT on refurbishment, repair, and maintenance from 20% to 5% or below
2. Amending policy to promote the reuse of existing buildings and reclaimed construction material
3. All publicly funded projects look to retrofit solutions first

This plan not only addresses energy waste in use, but also wider waste in the construction industry where a “wasteful economic model which often involves tearing down existing structures and buildings, disposing of the resulting material in a haphazard fashion, and rebuilding from scratch” prevails.

Many of these ideas have merit – reducing waste is genuinely sustainable, and there are some perverse aspects to the tax system that could be adjusted to incentivise improvements to existing buildings rather than building new ones. Standards for new buildings should also be improved. But as noted above, these schemes will not deliver results this winter. The near term focus should be on carrying out basic repairs and helping householders to reduce their energy use through changes in their habits. If the energy crisis teaches us anything, it must be that we can no longer afford to be complacent. Not about security of supply, or energy affordability. Reducing energy waste will be an important measure in addressing both of these challenges.

This post was co-written by James Porter.

Original article   l   KeyFacts Energy Industry Directory: Watt-Logic