Ed Davey launches Energy Company Obligation consultation at Ecobuild conference - speech in full
Published by Jon Land for 24dash.com in Central Government and also in Bill Payments, Environment, Housing
Ed Davey launches Energy Company Obligation consultation at Ecobuild conference - speech in full
Ed Davey, the Secretary of State for Energy & Climate Change, delivers key note speech on the government's future energy plans at the Ecobuild 2014 conference, the world’s biggest event for sustainable design, construction and the built environment.
It’s great to be back here at Ecobuild helping you celebrate your 10 year anniversary.
This exhibition is now the world’s largest sustainability show for the built environment.
As Paul King wrote in the Conference supplement:
“Ecobuild has become the Crystal Palace of its day, the Great Exhibition where new products can be found and sold, and fortunes can be made in the name of green building.”
One of my very first engagements when I became as Secretary of State two years ago was to launch DECC’s Energy Efficiency Deployment Office.
I said then that one of the purposes of EEDO was to “change the way we think about energy……to make energy efficiency real and relevant to people’s everyday lives”.
And that remains the challenge – a challenge for government, for industry and for all those who support what we are going for.
So today I want to talk about how Government proposes to improve two of our key policies to meet that challenge.
In particular the Energy Company Obligation – ECO – with the new consultation we are publishing today.
And I want to set out how we’re improving the Green Deal, in the light of what many of you have told us - what we’ve being doing already and a sneak preview of some announcements we’ll be making shortly.
But before I do, I want to emphasise just how important it is that we constantly strive to improve what we do, together.
For our shared ambition is to build one of the least wasteful, most energy efficient, most climate friendly societies in the developed world.
And to drive home that ambition we will all need to work together to help your customers - our citizens - the families and households of Britain – to bring about a radical change in the way they approach powering and heating their homes.
Taking control of their consumption.
Becoming smart savers.
Cutting out waste where they can, bringing down their bills so they can stay warm for less – and bringing down their polluting carbon emissions.
People have seen this winter the kind of wild weather the scientists warn us will become more frequent in a warming world.
So many recognise the need to be more energy efficient - to cut their bills, to act on climate change - or both.
But they are still not always convinced that there is anything they personally can do.
Together, that’s our challenge.
That is why initiatives such as Sir Ian Cheshire’s ‘Big Energy Idea’ which he’ll be talking about tomorrow are encouraging.
Because it will be through shared endeavours – government and industry - that we will drive the change we need.
So we need to remember what’s been achieved.
Together, over the last 10 years - government working with industry - we have grown a market for energy efficiency here in Britain with over £18bn of sales, supporting over 130,000 jobs.
With energy efficiency exports at almost £2bn, Britain is a recognised world leader in technology and expertise.
Because of the work you’ve done.
Around two thirds of lofts and cavity walls are now well insulated.
Over three quarters of homes have double glazing throughout.
And this energy efficiency has been driving a fall in household energy consumption.
Households are now using around a fifth less energy than they were in 2004 – saving the average consumer around £200 a year in today’s prices.
But of course more needs to be done.
Around half of all homes don’t have energy saving condensing boilers fitted.
Around seven and a half million homes could have more roof insulation.
Around five million homes are not fully double glazed and almost 1.5 million have no double glazing at all.
Over five million homes could benefit from cavity wall insulation.
And almost eight million solid wall homes remain untreated.
A lot of potential business.
Of course, in some areas, reaching that potential is getting harder.
A lot of the easy to treat, low-cost, low hanging fruit has been plucked.
The harder to reach consumers, living in the hardest to treat houses, are often the poorest and most vulnerable in our society who need support and help to access your services.
The private rented sector, which accounts for five million homes, has never been properly targeted or incentivised for energy efficiency.
And like any emerging market, there are bumps along the way, and it can take time to ensure we have the right regulatory balance that guarantees quality and access without inhibiting growth.
So let me turn to ECO and the Green Deal.
Last year, when I spoke here at Ecobuild, we had just launched the Green Deal and the Energy Company Obligation which replaced the CERT and CESP schemes.
And since the launch, just twelve months ago, over 450,000 households have benefited from the new regime - 450,000.
And our ambition for that new policy framework – our target – remains the same as at that launch.
To have at least one million homes upgraded under ECO and the Green Deal by the end of the next financial year.
That’s not to say, things have worked out quite as planned or gone smoothly.
And today I want to be frank about the lessons learnt.
But we should acknowledge what has been achieved – just as we acknowledge that the name of the game must be to improve.
I know the frustration is that we don’t always get it right first time.
And that the certainty and stability we all want isn’t helped when we have to make changes.
Yet the prize remains large.
The prize remains creating a stable long term market - for decades.
So changes at this stage perhaps shouldn’t be too surprising, given that ambition.
I’m just determined to make sure that you, the green building industry, have a say in how we move forward.
So let me start with improving ECO.
ECO’s effectiveness for driving home energy efficiency is not in question.
It is our foremost tool for helping the poorest and most vulnerable in society to get those benefits.
As with previous schemes, it incentivises carbon reductions and remains an obligation on the large energy suppliers.
And even following the boom year of 2012 – when Cert and CESP came to an end with a scramble to meet targets by the deadline - 2013 with ECO has been a great success.
Hundreds of thousands of the poorest and more vulnerable have been warmer this winter – in the main part, at no cost to them.
But of course ECO does have a cost.
And it’s because the impact of this government policy falls on consumers through their energy bills, that it is entirely reasonable that we reviewed it to ensure that it delivers in the most cost effective manner possible.
So today I am publishing our consultation on the future of the Energy Company Obligation.
We are proposing a series of changes designed to reduce costs for suppliers and thereby reduce the impact on bills for millions of consumers.
This consultation is a key opportunity to make sure we take into account your needs and the experience of ECO this last year.
It is a real chance to shape its course in the future.
But before, during and after this review of ECO, I’ve been clear: the obligations under ECO that meet the needs of the fuel poor cannot be compromised.
And they have not been cut back.
We continue to cleave to the basic idea that the nature of our housing stock means that expensive but necessary work can require subsidies.
These principles will continue to underpin ECO.
But we recognise that near term targets create long-term uncertainty and can result in surges of activity followed by lulls as the market adjusts.
So it is our intention through this consultation to deliver longer-term certainty that is required for proper business planning.
As we announced in December, we are extending the reach of the current ECO through to 2017, with new targets from 2015-17.
The two fuel poverty elements of ECO have been fully protected before the old 2015 cut off, and we propose to fully extend them, for an additional two years.
And to avoid any repeat of boom and bust, we propose that suppliers will be able to carry forward a proportion of their delivery against 2015 targets to count towards 2017 obligations.
Lofts and cavities will now be eligible as so many in the industry pressed for and, for the first time, we will put a target in place for Solid Wall Insulation – a minimum target, not a maximum.
Of course the danger of consultations is that they themselves can create a hiatus.
So as we carry forward this ECO consultation I am keen to ensure that work now does not suffer, while the new legislation is put in place later in the year.
So Ofgem will continue to administer ECO - and measures installed after 1st April will be included as allowable primary measures under the new regime.
So I urge you to get stuck into the detail of the consultation and work with DECC and OFGEM to ensure that we are providing the stability and certainty required.
Driving the energy efficiency market
Of course our vision of an energy efficiency market is much wider than the obligations under ECO.
While ECO focusses in the main on the poorest, the great innovation this government is bringing about is to develop a whole new energy efficiency business model.
A model where the basic proposition to is to help all households buy less energy rather than selling energy to them.
That is the underlying proposition of the Green Deal.
It’s different from anything that has gone before; a world first.
And of course central to the Green Deal design is the Green Deal assessment.
More than 145,000 Green Deal assessments have been undertaken in little over a year.
And our surveys show that of those who’ve had a green deal assessment, not only are the vast majority satisfied with that assessment, but over 80% have already acted on it, or are seriously considering having the work done to improve their home’s energy efficiency.
So I am encouraged that so many people are using the Green Deal assessment to seek information and to take action to invest in making their homes warmer.
We are looking at ways to improve the Green Deal assessment, of course, and we want your thoughts, but the good news is that we have a lot of assessments to go on.
But when it comes to converting Green Deal assessments into finance plans, the story so far has been, let’s face it, disappointing.
And we need to tackle that.
But the fact that most people currently having a Green Deal assessment are not then going on to choose Green Deal finance plans shouldn’t actually worry us.
How people pay for energy efficiency improvements is not after all the main issue.
The aim of the Green Deal isn’t to sell credit plans, but to make our homes warmer, cheaper and greener.
First and foremost, the Green Deal is a way of helping people understand how they can save energy and reduce their bills.
It is about the availability of good information on home improvements and access to trusted companies to do the work.
And that is what we need to focus on because the outcome is far more important that the input.
Nonetheless, we need more outcomes.
We need the Green Deal to help deliver more activity.
More energy efficiency.
So we are determined to take the necessary steps to overcome the barriers that people are saying they face when it comes to accessing Green Deal measures and savings.
It’s clear from the feedback that the information, administration and finance has been too difficult, lengthy and complicated for people to access easily.
The assessment process needs to be improved.
And the old incentives weren’t taken up.
So what do we need?
First, a single route through for consumers - to get the energy efficiency advice and upgrades they want, whether it is ends up being through ECO, Green Deal or self-financed – easy, simple, hassle free.
Second, a healthy market place of companies that can make the improvements, sell the benefits to customers and be trusted to work to the required standard.
And third, attractive incentives and access to a finance package that makes sense for the individual.
Where are we on delivering these?
From quite early on, we’ve been looking for ways to streamline the Green Deal.
It started off too clunky and too complex.
So, for example, the simple on-line Home Energy Tool is now available – to help people check quickly what types of improvements would benefit them and what support they can get.
And where to go for more advice.
The Energy Saving Advice Service can match consumers together with local Green Deal providers and help them through the journey from assessment to finance to installation.
We are stripping down the red tape required to get a Green Deal finance plan, knocking 10 days of the process, so people can now – as of last month - sign up to a plan on the same day they get a quote for the work.
Amendments to the Consumer Credit Act have now come into effect which will allow the same Green Deal finance plan to be offered to all customers irrespective of what tenure they have.
Vital for the privately rented sector.
Let me be completely candid on this.
The day I found out that the 2011 Energy Act had not made it crystal clear where the liability for the green deal loan was, in the case of a landlord and tenant, was my most frustrating Green Deal day last year.
I’ve always regarded the Green Deal – with the Green Deal finance plan - as tailor-made for the private rented sector. But a mistake was made.
And we’ve corrected it.
Now, as of last month, Green Deal Providers can access the as yet untapped demand in the private rented sector.
Giving landlords the opportunity to improve their properties for the mutual benefit of themselves and their tenants.
And there is more work in train.
You have told us that many customers wanting to use Green Deal finance to fund improvements can’t borrow enough to cover the full cost of the measures they want to install - and meet the ‘Golden Rule’.
So we are considering whether changes may be possible so the Golden Rule may cover more costs while maintaining important consumer protections.
But making sure the Green Deal journey is smoother will only take us part of the way.
We have to make sure that we get the message out in the first place and encourage people to start the process to begin with.
In December, we announced that we have increased fourfold the capital funding available under the Green Deal Communities scheme.
And we received 64 Green Deal Communities bids from Local Authorities hoping to accesses the extended fund of £80m.
As Greg Barker announced yesterday, the first six projects have been approved.
These projects are in Cambridgeshire, Ashfield, Suffolk, Peterborough, Haringey & Bracknell Forest, and together represent a total £19.5m to deliver over 5,500 Green Deal Plans to over 7,000 households.
Further projects are being assessed and we will announce the next tranche of successful projects shortly.
We also set out in December a £450 million package over three years to provide new energy efficiency incentives, including for home-buyers and landlords.
The new schemes are being designed to be simple to access, and work flexibly with or without Green Deal finance.
Again, we’re learning from the shortcomings of the original cashback scheme.
Again we’re taking advice from the industry.
We are considering whether to open the new scheme to installers and if we do would give you notice before the scheme goes live, to give you time to prepare.
We are working to ensure the new scheme is up and running before the current one closes to allow a smooth transition and avoid a hiatus in the market.
In the meantime, applications for the current cash back incentives have been extended to the end of June and we have uplifted the value of several measures, with solid wall insulations increased to £4,000 as a clear signal of our intent.
Today I have focussed on the Green Deal and ECO, as I know that these are of direct interest to many of you.
But they are by no means the be all and end all.
The domestic Renewable Heat Initiative has received state aid clearance and is now subject to the approval of Parliament.
So, we are on is on track to launch in the Spring.
And I’m delighted to announce that ministerial responsibility for energy efficiency and products has been transferred from DEFRA to my department.
DECC’s Energy Efficiency Deployment Office is now taking this work forward - driving innovation and helping to bring new, energy efficient appliances to the market.
Working with manufacturers and retailers will be part of this.
I was pleased to be able to launch with John Lewis, an innovative retail trial to see whether giving people lifetime electricity running costs on white goods results in higher sales for energy efficient models.
This full trial is running now and will complete in June.
This is all part of helping people to be smart savers.
Just like the roll out of smart meters.
By 2020, we want every home and small business in Britain to be in control of their energy use through smart electricity and gas meters, focussing minds on what is being used and how to save energy and money.
We are also pressing ahead with help for businesses and organisations to cut their energy use and save money.
The £20 million Electricity Demand Reduction pilot is now open for registration of interest through my Department.
Final pilot rules will be published in June 2014, with applications to be submitted by October 2014.
Contracts to support EDR installations will be issued to successful bidders by January 2015.
So there is action being taken across the piece
But the vision for energy efficiency is clear.
For Britain’s householders - a single, simple way through to a warm home and a lower bill.
For Britain’s businesses – cutting energy costs to increase productivity and competitiveness.
For Britain’s green energy efficiency industry - a partnership with government that grows the markets and sells the benefits.
And for the country as a whole, playing our part in the global drive to limit climate change by cutting our emissions.
Thank you for your help and your leadership in those vital green ambitions.
The Future of Energy Company Obligation consultation