Should we agree with Nick?

It’s hard to disagree with the sentiment behind Nick Clegg’s speech on the green economy last week at KPMG’s London headquarters in Canary Wharf. His words were welcomed by groups as diverse as the World Wide Fund for Nature and the Confederation of British Industry. The Deputy PM’s core claim was that the economic downturn, far from necessitating a turn away from environmentally sustainable policies, presents a major opportunity to reshape our economy and encourage a transformation in energy efficiency: “in so many ways, for so many consumers, for so many firms, going green has never made so much sense.”

Although Clegg talked both about homes and industry, I want to focus on his theme of increasing household  energy efficiency. How far was the optimistic tone he struck backed up by the policy content of his speech?

He correctly highlighted two significant problems inhibiting the take-up of domestic energy efficiency measures – the “hassle factor” and the cost. On the former, there was a nod to small-scale schemes that make it easier to insulate, like Sutton’s pay as you save grants programme. One of the services it offered was to empty a client’s loft, insulate it, and take away any items that were no longer required for donation to charity or disposal . Available to just 100 households, this scheme is now closed due to demand – an encouraging response to when only a 40% grant was available, but pretty small beer and something few cash strapped local authorities will be queuing to replicate. And there was no word from Clegg of support to help them or targets to compel them to do so.

Much obliged

The government’s flagship energy efficiency policy is the Green Deal, which aims to help with the up front cost of energy saving improvements for homes and businesses, then to recoup the investment through the recipient’s energy bills. At a time when many people will struggle to find the capital to invest in energy efficiency, this sounds like a good idea.

Its resources include £540m Clegg announced would be available from the Energy Company Obligation, which will be focussed on those most at risk of fuel poverty and least likely to be able to afford improvements otherwise. Low-income and vulnerable households, older people and people with disabilities can all benefit.

Nick Clegg. Photo by Chris Ensell, via Wikimedia Commons

The aim is to help around 180,000 poorer households per year. Unlike predecessor schemes such as Warm Front, it is in theory available to fuel-poor tenants as well as homeowners, thanks to the way it is paid for through fuel bills. But how easy will it be in practice to get a private landlord’s consent to substantial work that will leave a lasting obligation on any future resident of their property?

Committee on Climate Change scepticism

How many people who make use of the Green Deal will ever experience a financial benefit? Some cheap measures, like loft or cavity wall insulation, may well show a saving on fuel bills that exceed the repayments – although the Green Deal loan is less attractive than the big subsidies some companies already offer. The government’s Committee on Climate Change has warned that – based on DECC’s own impact assessment – the Green Deal is likely to be less effective than the current obligations on energy companies under the Carbon Emissions Reduction Target (CERT) policy.

The measures needed in hard to heat homes, like double glazing or solid wall insulation, are far more expensive, and using Green Deal money to fit the will mean incurring a significant loan. The language assuring people about their financial risk has been loose:  Clegg said that clients “shouldn’t” be out of pocket and won’t be charged more in repayments than “we expect them” to save in cheaper bills. But that’s way short of a guarantee, especially given that some of the potential saving is likely to be lost through people keeping their newly insulated home a little warmer than before. Far from lifting people out of fuel poverty, the repayment mechanism may well leave those who most need support trapped in it.

The only new announcement to address fuel poverty was a headline grabbing obligation on the big six energy companies to give customers “a guaranteed offer of the best tariff for them”.  But each energy company is required to tell customers about the best price it offers – not those of other companies. Consumers will therefore remain oblivious though bigger savings may be available, especially in the pre-pay market which many of the fuel poor occupy.

And if the new obligation is successful in bringing about more tariff or provider switching, and starts to drive down energy prices, doesn’t that push in the opposite direction to the Green Deal? High fuel prices are unpopular, but are making people more conscious than ever of energy inefficiency. There may be reasons for trying to make the energy sector more competitive, but the environment wouldn’t be on the list: what was this announcement doing in the speech at all?

Clegg’s fine words don’t seem to be backed by any substantial policy on domestic fuel efficiency. News this week that David Cameron will block the only significant mandatory elements of the Green Deal, which would have required homeowners undertaking home improvements to also make their homes more energy efficient, only confirms that if anyone agrees with Nick these days, it certainly isn’t his cabinet colleagues.