Two documents of importance to Wales have just been published: the National Infrastructure Commission’s Congestion, Capacity, Carbon: Priorities for national infrastructure; and HM Government’s The Clean Growth Strategy.
The NIC report states that its first priority for achieving low-cost, low carbon is to improve the energy efficiency of buildings and it goes on to say that it will consider how an ambitious programme of energy efficiency improvements could deliver this.
The Clean Growth Strategy also recognises the importance of improving residential energy efficiency and wants all fuel poor homes to be upgraded to Energy Performance Certificate (EPC) Band C by 2030.
HM Government has said that it will “support around £3.6 billion of investment to upgrade around a million homes through the Energy Company Obligation (ECO)”. A fourth ECO scheme will run from October 2018 until 2022 at £640 million per year rising with inflation aimed at further improving the targeting of support towards fuel poor households in greatest need.
Cost of eliminating fuel poverty in Wales
The Centre for Sustainable Energy, on behalf of the Committee on Climate Change, has estimated the average cost of raising UK homes to EPC Band C as £4,500 per home. Analysis by Cambridge Econometrics and Verco came up with a cost of just under £4,400 per home to upgrade low income homes to EPC Band C.
Conservatively assuming an average upgrade cost of £6,000 per home in Wales, and 300,000 fuel poor homes, gives an overall cost of £1.8bn. Adding 10% for project management this comes to £2bn. A programme that runs from 2018 to 2030 gives an average annual cost of £167M. In comparison, the annual cost to the Welsh NHS for treating people who are made ill by living in cold damp homes is approximately £175M.
ECO funding can reduce the burden on Welsh Government, at least until 2022. To date Wales has secured only 5% of available ECO funding, which is below its fair share, measured by need.
How much funding ECO could provide in Wales
8% of £640M is £51.2M pa. There is no reason why Wales should not aim to secure more, say 10%, which equates to £64M pa. That reduces the money Welsh Government has to re- allocate or borrow in order to eliminate fuel poverty to about £115M pa (out of a budget of £15bn pa).
Halving the energy consumed in Welsh homes
Tackling fuel poverty at scale and with urgency, combined with measures designed to make improving residential energy efficiency as socially normal as having a new kitchen or bathroom, can be the catalyst for very large-scale residential energy efficiency improvements by owner-occupiers and private landlords. 84% of all Welsh homes are owner-occupied or rented from a private landlord8. Any programme aimed to reducing energy consumption must target these people.
Benefits to Wales
Large-scale residential retrofit can deliver a wide range of benefits that meet most of the goals of the Well-being of Future Generations (Wales) Act 2015.
Welsh Government should act as the initiators of a programme to deliver large-scale residential energy efficiency improvements, and ensure its proper governance. In particular, it should start with the following actions.
1. Work with local authorities to improve the targeting of ECO funding.
2. Reconfigure the Arbed and Nest programmes and substantially increase their funding so that fuel poverty in Wales is eliminated by 2030.
3. Organise workshops to determine how to make best use of SMEs, sole traders, micro- enterprises, existing networks and associations. These are often a household’s first port of call for advice on energy efficiency. The RMI market in Wales is worth about £1bn per annum, and if half of that were directed towards improving residential energy efficiency, something like 75,000 homes per year would be improved.
4. Create planning guidance on the acceptable appearance of measures that will change the appearance of homes and neighbourhoods. We need the right measures to be pre- approved by local authorities, as they are in the Netherlands, so that planning permission is not needed.
5. Organise workshops to identify and disseminate lessons learned and best practice from what has already been done. There is a huge amount of experience from retrofit schemes by registered social landlords and devolved administrations. We need to learn and share the lessons from those.
6. Organise meetings with the Energy Efficiency Financial Institutions Group, which represents about 60 major funding bodies from the UK and mainland Europe. This group has reported that it wants to invest in large-scale residential energy efficiency but that there are transactional barriers in the way. The goal of the meetings would be to understand how to configure large-scale area-based programmes to be attractive to investors and home-owners alike.
7. The very first step Welsh Government should take is to appoint a task and finish group drawn from people both within and outside the construction industry to create a framework that will deliver a step change in the rate at which homes are upgraded across Wales. There already exists a Ministerial Decarbonisation Task and Finish Group and this new group should feed into that.
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