DECC Heat and Energy Saving Strategy

Not a huge amount of interesting news this week, so I've decided to share with you some selected highlights of the DECC Heat and Energy Saving Strategy that is now open for consultation. Or to put it another way, I've had to read the whole thing and therefore I'm going to inflict it upon you.

My first impressions are that it is really quite ambitious. Its overarching aim is for emissions from all buildings to be approaching zero by 2050 (I had an immediate mental image of a motorist claiming to be approaching zero speed after removing their foot from the accelerator at 100mph – I'm too cynical!). In practice the aim is that overall emissions from buildings will be reduced by more than 80% in 2050. Greater emission cuts [than the UK 80% target] from buildings are required in order to take up the slack from other sectors that will find it tougher going (for example transport). The top level policy measures proposed are as follows:

• All lofts and cavities will be insulated where practical by 2015. This represents a significant acceleration of the current strategy. The current CERT scheme may be superseded by a new Community Energy Savings Programme (dependent on how a trial scheme performs).
• Numerous accredited home energy advisors and plentiful information on energy saving and low carbon technologies will be available to homeowners and landlords to help them save energy and money.
• Innovative financial support packages will be developed in order to encourage people to install more expensive energy saving (for example solid wall insulation) and low carbon energy generation technologies (for example heat pumps or solar thermal). This is an area that fascinates me and I'll come back to it below.
• An examination of Building Regulations to see whether energy saving measures can be installed alongside other necessary building work. A new voluntary code of practice relating to energy efficiency and energy saving will be discussed with the building trade.
• District heating and combined heat and power (CHP) will be re-examined and mechanisms to encourage uptake will be scrutinised.

My interest was piqued by the discussion of financial mechanisms to encourage the installation of low carbon technologies in buildings. The premise that installing such technologies will save energy and make homes more attractive for sale seems sound to me. The fact that the up-front costs puts people off is also true. So what is the Government proposing here?

One option is for Government to provide a bigger subsidy for the technologies – perhaps 50% or more (or less) of installation costs.

Option B, crudely put, is that you will take out a loan to pay the up-front costs of technology installation (for example solar thermal can cost £2-3K to install) and you will then pay back the loan plus interest, over an extended period of time (think mortgage lengths), out of the money you save. The key thing is that the loan repayments are less than the total money that you save, so, in other words, you will be paying less on energy monthly after you install the technology. So what happens if you chose to move house? On average we move house about every 9 years in the UK (I am way above average!) – what happens to the shiny new technology and of course your loan? So far it's not quite clear, and in fact the Government is looking for innovative ideas (ask the banks how they are feeling about innovative financial ideas right now). One possibility is the loan will be passed onto the new owners through an as yet undefined mechanism. Who will be giving the loan? Energy companies and mortgage companies are possibilities as both are used to long term customer relationships. What happens if you want to switch to a better deal for energy or mortgage? This is yet to be worked through, hence why they are consulting.

Option C is to apply an Energy Services Company (ESCo) model. Here companies would install the low carbon energy generation equipment, at no up-front cost, and charge consumers for the use of the services over a contract period. The ESCo would also maintain the equipment. How does the customer save money and the ESCo make a profit? The ESCo would receive any subsidies such as the feed-in tariff (or ROCs) and Renewable Heat Incentive and use these to offset the charge paid by the householder. If the householder moves then in theory the contract could be passed to the new home inhabitant. What if they don't want the service? I guess some technologies (but all) could simply be removed and installed elsewhere.

I've just used the EST tool to self-assess my house (a 1985 mid-terraced house) for its energy efficiency and achieved a B rating. I've pretty much exhausted the energy efficiency measures that I can easily install (double glazing, cavity wall insulation, condensing boiler, thermostatic control and low energy bulbs) and my energy usage has been significantly reduced. I'm now seriously considering adding a low carbon heat technology (probably solar thermal or air source heat pump) to my house; this is why, in addition to the day job, that I'm interested in the incentives and mechanisms proposed. Of the three options I'm probably more attracted by A and C. Option C is would potentially be the least effort on my behalf but I have sneaking suspicion that I'd be able to save more money with A (and I'm a very stingy Northerner). I'd love to hear your thoughts on the mechanisms (especially if I've totally misinterpreted them) and also the technology choices. I know the NERN newsletter isn't supposed to be a "help Jeff make decisions" forum but if I don't get to abuse my position now and again then I feel I would be missing out.

I promise to write about energy news next week.