Analysis: Will Labour’s energy efficiency overhaul work?
Is energy efficiency about to become an electoral issue?
The Labour party last week put a plan to help UK households cut energy use, save money, and reduce their carbon footprint at the core of its election agenda.
Speaking at Labour’s annual conference last week, the shadow energy and climate secretary Caroline Flint declared a “war on cold homes”. UK household’s are horribly inefficient, she argued, calling the government’s current policies “useless”.
Labour’s plan would make five million homes more energy efficient within 10 years, all “without spending any more money or adding to anyone’s energy bill”, Flint claims.
So what are the new policies, and how do they differ from the government’s current schemes? Most importantly, would it work?
Policy plan
Labour’s plan has five parts.
If elected, Labour says it will make the homes of 200,000 low income households more energy efficient each year, for ten years, by paying for them to install insulation and more efficient boilers, among other measures. That would be two million homes in total by 2025.
Labour’s plan differs from the government’s current scheme for targeting low income households, the energy companies obligation (ECO), in a number of ways.
Firstly, it targets all low income households, not just those in fuel poverty. The UK currently has around three million households in fuel poverty and six million classified as low income. So changing the scheme’s focus “basically doubles the number of people [the government] can provide help to”, Ed Matthew from campaign group Energy Bill Revolution argues.
Labour also promises to bring the homes up to energy efficiency grade C in one go rather than in stages, as the government currently plans to do. It also says the improvements will be made street-by-street, rather than one property at a time. It also hands control of the scheme to councils, taking it out the hands of energy firms.
The energy efficiency industry has long argued that area-based plans that make all the improvements at the same time are more efficient than the government’s current property-by-property scheme, Matthews says.
For those not in fuel poverty, Labour plans to offer free energy assessments and interest free loans to make improvements – the second and third parts of its plan. That should help overcome two of the main obstacles to people participating in the government’s current scheme, the Green Deal, it says.
Households can currently get a loan for home improvements through the Green Deal. But these come with a seven to 10 per cent interest rate, which many households aren’t willing to pay. Households also have to pay £120 for a Green Deal assessment, putting them off the scheme.
Labour would also require landlords to upgrade the standard of rented properties to a band C by 2027, its fourth new policy. The government is currently passing legislation to get the standard up to grade E. The current average for rented homes is already at band D.
Finally, Labour promises to make energy efficiency a “national infrastructure priority”.
That’s mainly a symbolic move, and probably wouldn’t have much of an immediate impact. But it would allow policymakers to “make the case that energy efficiency is more cost-effective than new generation” in the long run, Richard Twinn, policy and public affairs officer for the UK Green Building Council argues.
That could ultimately persuade the Treasury to spend more government money on energy efficiency schemes he says.
Making it work
So Labour plans to do a lot. But how will it pay for it all? And will it work?
Labour has earmarked the £940 million energy companies are already expecting to put into ECO to pay for the energy assessments and low income households’ improvements. Campaign group energy bill revolution says that could be enough to hit Labour’s target of improving 200,000 homes a year, or two million households by 2025.
But there’s around six million low income households in the UK. If all those homes were to be made more energy efficient, Carbon Brief understands it could need to find in the region of £3 billion a year to fund the scheme.
Labour has also set aside £300 million to subsidise its zero-interest energy efficiency loans between 2015 and 2017. That comes from the a pot of money the government has already set aside for Green Deal loans, it says.
Carbon Brief understands that could be enough to provide interest free loans to around 200,000 homes a year, depending on the size of the loan they take out. If the funding was continued at the same rate after 2017 – and that’s a big if – it could mean improving the energy efficiency of a further two million households by 2025.
But that’s less than ten per cent of the UK’s total households, most of which need to some sort of energy efficiency upgrade.
So it’s likely Labour would ” have to find money from elsewhere” if it wants the schemes to have a wide-reaching impact, Twinn says.
Labour MP and energy and climate change committee member Alan Whitehead identifies a few potential sources for such funds. Labour could raise money through new green taxes, or a carbon tax, he suggests in a blog for the Fabian society.
Alternatively, the government could use the money raised from selling credits to companies participating in the EU emissions trading scheme or sell green bonds to fund its energy efficiency schemes, he says. But the Treasury wants to keep this money for itself, so the Department of Energy and Climate Change could have a turf war on its hands.
But paying for people to make improvements isn’t the only obstacle Labour has to overcome, Twinn says. It also has to get people to buy into the idea that energy efficiency is worthwhile.
That could mean offering reduced stamp duty or council tax rates alongside the interest free loans, Matthews suggests. Germany provides hundreds of thousands of loans each year through a similar scheme, he points out.
Labour’s plan has widely been welcomed by the industry and NGOs, many of which are vocal critics of the government’s current schemes. Whether the plan will be a vote-winner, and whether political parties are ready to battle over energy efficiency, will become clear as the May’s election nears.