UK energy efficiency industry 'in state of chaos'

More than 1,000 jobs have been cut in the North East energy efficiency industry and last month’s reduction in energy bills will make the dire situation worse. Peter McCusker reports

Funding available to support domestic energy efficiency has more than halved
Funding available to support domestic energy efficiency has more than halved

The nation's drive to cut carbon emissions will not be met solely by the supply-side changes outlined in the Energy Bill such as shutting coal-fired power plants in favour of renewables.

The Government wants to see a 50% cut in domestic energy consumption but recent changes to energy efficiency delivery are hampering that drive.

With the take-up of domestic energy efficiency measures at historically low levels, last month’s decision to bow to political pressure and cut energy bills by £50 has landed a further blow on a struggling industry.

As a result scores of North East business who had geared up to work in the sector are struggling. Industry body the National Insulation Association says 1,000 workers – out of the 5,000 strong regional workforce – were laid off in 2013.

Ross Armstrong is managing director of Newcastle-based energy efficiency and renewable firm KNW (Keep Newcastle Warm).

He said: “The energy efficiency market is in a state of chaos. Effectively the Government has privatised energy efficiency delivery and passed the cost on to households through energy bills.

“The market has fallen away rapidly since the demise of the previous Warm Front Scheme, and last month’s decision by the Government to change targets and extend the period for the implementation of the ECO (Energy Companies Obligation) scheme by a further two years has led to another hiatus in activity, which is a further blow for the industry.

“This is another massive setback and several of the schemes which had been coming forward have now been put on hold as the energy companies pause to assess the full extent of the proposed changes from the Government.”

Armstrong, who runs a company with an annual turnover of £10m, employing 115 staff, has been able to transfer employees to other parts of the business such as social housing contracts and renewable energy installations.

When the Coalition came to power it scrapped the Warm Front scheme which was being delivered by Newcastle company Carillion (formerly Eaga) and successfully providing energy efficiency measures to 10,000 homes a year.

This was replaced by two new measures the Energy Companies Obligation (ECO) scheme and the Green Deal which came into effect in April 2013, at the time Warm Front was wound down.

Consequently the funding available to support domestic energy efficiency has more than halved and the take-up of Green Deal has been paltry. Latest Government figures show that for the seven months between April and October only 757 homes had participated in the scheme nationwide.

Jenny Saunders, OBE, is chief executive of the UK-wide fuel charity National Energy Action (NEA), which is based in Newcastle.

She said: “There has been a 90% reduction in the delivery of domestic energy efficiency measures under Government-mandated schemes over the last year. The uncertainty surrounding the future targets for ECO will delay delivery and damage the installation industry further.

“Some of the small SMEs are on their knees. Scores of companies were gearing up for the programmes.

“They had invested time and money in securing equipment and training staff. The Government could have gone for other levies which will push up energy prices such as the Carbon Floor Price.

“Once this was announced, and there was further uncertainty around ECO until a formal consultation process takes place, it was inevitable that the big six energy companies would halt progress and reconsider contracts that were under development. 

“This has caused a real hiatus for the energy efficiency industry and will mean there is more limited assistance for heating and insulation measures for the poorest households. 

“There is no customer pull for what the Government is offering under the Green Deal and the scheme must be reviewed. We have a big job on our hands to get Government-funded energy efficiency programmes back in place.”

Following Labour leader Ed Miliband’s price freeze promise the Coalition was forced to come up with an eye-catching measure to regain the political initiative.

This saw it extend the delivery of ECO for a further two years to 2017. This helped save almost £35, further cash was saved by a £12 Government rebate and a further £5 from savings by the power distribution companies, such as Northern Powergrid, bringing the total to £50.

The Government’s proposals have been put out to consultation, but David Connor, regional director of not-for-profit national charity Warm Zones, which is based in Newcastle, said: “It makes no sense for the Government to say it wants to see domestic demand cut by 50% at the same time as it is cutting investment in energy efficiency.”

He has criticised the Government measures to achieve this; namely ECO and the Green Deal.

“The Green Deal is too expensive and there has been very little take up. Around 99% of the people who have made enquiries about the scheme have not taken it forward. It is not attractive enough.

“Effectively what the Government has done is make less funding available for low income homes and energy efficiency activity is at historically low levels.

“It makes no sense to cut energy efficiency support. This is an industry which supports hundreds of local jobs, it saves the Government money in the long term and helps keep fuel bills down, it helps tackle fuel poverty and makes a positive contribution to the environment.

“In the long run it will cost the country more through increased use of the NHS and through benefit payments to the workers who have been made redundant.”

There are still measures in place to help families on low incomes access energy efficiency measures.

But there is growing concern that the current situation, which has essentially reduced the size of the financial pot available to support domestic energy efficiency measures, could have damaging long-term consequences at a time of rising fuel bills.

Late last year new figures from the figures from the Office for National Statistics showed the number of winter deaths had risen by 29%.

It said 31,000 people died between December 2012 and March 2013, with over 9,000 of these believed to have died because they were living in freezing homes.

Most of those who died were aged over 65, with the over 75-year-olds the most vulnerable group. Cold-related illnesses such as heart attack and strokes were a factor in many of the deaths.

A spokesman for the Department of Energy and Climate Change said: “The announcements made on December 2 about ECO and the Green Deal should give certainty to the insulation industry – ECO has been extended to 2017 and we’re making it simpler for households to get a Green Deal.

“Policies are in place to overcome the four main barriers to energy efficiency take-up.

“This includes action to connect energy efficiency measures with finance. Energy consumption in the UK has fallen in seven of the past eight years.”

Saunders said: “People on low incomes tend to be low users of electricity and heating. If the temperature falls below a certain level then there is a rise in cold-weather related illnesses affecting people with pulmonary and respiratory conditions and the hospitals see a rise in admissions.

“The Government says it wants to achieve a 50% reduction in the amount of electricity used by households and we are involved in a number of schemes which can help achieve that. But the recent direction of the Government in the energy efficiency sector will make that very hard to achieve.”

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