Regulatory policy

Energy efficiency overlooked in Truss’ uncosted crisis bailout, IfG warns

Britain must learn from its neighbors to tackle soaring energy bills, including by fixing its long-neglected insulation for homes and factories, a think tank has warned.

The Institute for Government says in a new paper that while Prime Minister Truss’ uncosted plan to set the domestic price cap at £2,500 for two years is simple to understand and matches the scale of the crisis UK’s energy sector, it misses the key issue of limiting consumption.

And the Prime Minister’s focus on energy supply rather than demand does little to tackle the longer-term crisis, leaving homes facing sky-high bills until 2024 and beyond.

Analysts Rosa Hodgkin and Tom Sasse calculate that a major program to reduce energy consumption, including improving insulation, could reduce total household energy costs by £27billion as early as 2023.

In terms of immediate action to reduce energy waste, the Truss government should at a minimum launch a mass campaign on changing boiler flow temperatures, the two men urge. They say it is “a simple, free measure that can reduce gas consumption by up to 10%, but which ministers have so far been unwilling to publicly support, apparently for fear of appearing like nanny”.

“The UK’s current approach lacks ambition and funding – and it has ignored demand during the current crisis,” the IfG assessors say.

More strategically, the 2021 Heat and Buildings Strategy failed to… present a compelling home improvement plan. … It was too short-term and had significant shortcomings including on owned accommodation,” according to the IfG.

“There is a strong case for new investment, with over £3billion pledged in the 2019 Tory manifesto yet to be spent,” analysts say.

“Upgrades could now pay for themselves up to four times faster than last year, given the level of gas prices.”

Decade of failure

“The UK is paying the price for a decade of failure,” claim the IfG pair.

“(Our) older housing stock meant it faced a tougher challenge than other countries, but it cut subsidies in the 2010s and the last two major policy interventions – the 2012 Green Deal and the subsidy Green Homes 2020 – were poorly designed, failed to drive adoption and hurt consumer and installer confidence”.

Britain also dropped plans to tighten regulations on new homes in 2015. Energy performance certificates introduced after 2005 improved the insulation of British homes, but not enough, according to IfG researchers.

In England alone, the latest UK Housing Review revealed that nine million of the poorest people live in energy inefficient homes. They are inhabited mostly by low-income people, with private rented or owner-occupied houses being proportionately the worst.

Insulation measures can make a big difference on bills. Homes with an EPC rating of F are likely to have nearly £1,000 more gas bills than a C-rated home this winter, say Hodgkin and Sass, citing the Energy and Climate Intelligence Unit.

BEIS estimated in 2021 that the reduction in gas consumption due to energy efficiency measures ranged from 4% for loft insulation to 18% for solid wall insulation.

But installations have plummeted, with 2 million insulation projects launched in 2010 dwindling in 2021 to less than 30,000.

Reversing the dire state of home energy efficiency in Britain will require a combination of grants, loans, tax breaks, new taxes on energy retailers and increased enforcement of tougher building standards, says The report.

Germany, France and Italy provide powerful models for improvement, according to analysts’ assessment.

German subsidies of up to half the cost of cavity wall insulation, backed by low-interest loans for the rest, have doubled in a year to 2020, to 600,000 homes.

France aims to better isolate its poorest citizens, thanks to targeted subsidies. It prevents developers from selling their least insulated homes after 2025 and provides for further increases in building regulations.

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