Envirotec

A clearer outlook? Autumn statement brings energy efficiency ambition (but bad news on bills)


The Chancellor’s Autumn statement seemed to bring focus and clarity to efforts to advance the UK’s energy efficiency – a policy area whose vagueness to date has puzzled many sustainability observers.

Standout announcements included a national pledge to reduce the energy consumption from buildings and industry by 15% by 2030. Jeremy Hunt also unveiled a £6 billion extra package of support for initiatives like retrofitting to insulate homes and upgrade heating systems, from 2025 – although it wasn’t clear if this was new money or not. Commitments to infrastructure included confirmation that the building of a new nuclear plant at Sizewell C will go ahead.

These measures were announced alongside “a major acceleration of home-grown technologies like offshore wind, carbon capture and storage, and, above all, nuclear.” And there seemed to be a commitment to enabling innovation in sectors like digital, life sciences and green industries.

The details around all of this seemed vague and included a nod to the 1980s Big Bang, and the professed wish “to combine our technology and science brilliance with our formidable financial services to turn Britain into the world’s next Silicon Valley.”

About time?
Until now, those looking for a lead from government on energy efficiency have seemed to be grasping the air uselessly in search of so much as a policy, and as UK100 noted, “now we at least know what it is.”

“Before today, most Brits didn’t have a clue what the Government’s plan for energy efficiency was.”

The statement outlined an extra £6 billion of funding for energy efficiency measures to be available from 2025, which is estimated to amount to a saving of £450 per household on their bills. This is supposedly on top of £6.6 billion that Parliament has already committed to spending on energy efficiency.

UK100 noted that the £6 billion appears not to be new money, and many thought the timeline didn’t reflect the urgency of the matter. “Jeremy Hunt is taking a small step in the right direction — but he needs to run, not walk. We can’t wait until 2025,” said the local authority network.

Consulting firm Kearney welcomed the package but said “more will be required to get building fabric to where it needs to be to deliver on the UK’s Net Zero commitments.”

However, the Association of Directors of Environment, Economy, Planning & Transport (ADEPT) felt that, “to be truly effective, it has to be locally led,” adding that “it is a real missed opportunity not to start this work now, particularly with the ongoing energy crisis experienced by our communities.” Countryside charity CPRE called on the Treasury “to make this money available now rather than in 2025, which is far too late.”

The last decade has seen “good progress” in improving buildings’ energy efficiency, especially homes, according to Kearney, “but the median energy efficiency of a home in England and Wales is still EPC Band D, according to the latest release from the ONS.”

The UK’s buildings are still regarded as among the most wasteful in Europe, with some worst-case scenarios estimating as much as 36% of a bill is wasted energy. An energy-efficient office, on the other hand, can save up to 65% on energy bills, as well as contributing to other targets such as net zero.

By announcing the new target, of reducing energy consumption from buildings and industry by 15% by 2030, the Government was “showing its commitment to the Glasgow Climate Pact,” in the view of consultancy firm PwC. But the Wildlife Trusts pointed out that the UK’s net zero targets require it to reduce greenhouse gas emissions by 68% by 2030, and “it is still not on track to meet this target and its actions in other areas undermine their promise.”

To be on a balanced pathway to Net Zero will require £55bn of investment in home energy efficiency alone between now and 2050, according to the Committee on Climate Change (CCC).

Net zero skills gap
PwC noted that its Green Jobs Barometer research has shown we can only meet this target by investing in retrofitting – “which could not only help the UK hit Net Zero, but can sustain upward of 500,000 jobs.”

Skills went unmentioned in the Chancellor’s statement, a crucial omission for some. “The fact is, local authorities do not have the resources or knowledge to be able to adequately tackle the climate issues they are facing,” said Ramboll’s Philippa Spence, who added that they “urgently need more targeted funding from the national government to plug the skills gap.”

“The devil will be in the detail for the Government’s climate commitments and investment in infrastructure.”

Climate solutions charity Ashden highlighted the need “to urgently train thousands of UK retrofitters to deliver low cost, low carbon solutions, including insulation and heat pump installation.”

“The government now needs to set out and finance a clear, long-term, retrofit policy which addresses the massive skills shortage and empowers local authorities to take action.”

Designing the solution
A new Energy Efficiency Taskforce will seemingly tackle the “how” aspects of meeting this challenge, although there were few details – more will be published by BEIS shortly.

Kearney said it was important the group is drawn from “a broad base of stakeholders”, including local and national government, charities, energy suppliers and banks, and that “all need to work together to generate bottom-up demand for energy efficiency measures.”

“They must build the skills and supply chains to deliver improvements at a greater level of pace and scale, and innovate the business model and financing to deliver measures at lower cost and multiply the impact of public funds with private capital.”

By way of explanation, the group added: “Energy efficiency measures are often fragmented or localized in delivery, require longer lead-times to deliver and require significant bottom-up engagement to identify.”

Help with energy bills
As for households and businesses struggling to pay their energy bills, the statement seemed to presage greater problems and uncertainty in the future. The Energy Price Guarantee (EPG) announced in September would have capped household energy bills to an upper limit of £2,500 per year (for a period of two years from October 2022). This price cap has now been increased to £3000 per year.

Mike Foster, CEO Energy and Utilities Alliance queried the morality and good sense of the government’s priorities in continuing to press ahead with its Boiler Upgrade Scheme – which provides £5,000 subsidies to more well-off households to change their heating systems – when the same cash might be more usefully siphoned into providing better insulation and energy efficiency, and bills support for the worst-off.

As Dan Atzori, Research Partner at energy consultancy Cornwall Insight pointed out: “Despite the support, an average household bill in April 2023 will still be over £1,000 more than just 12 months ago.”

Cornwall Insight forecast that the full cost of the EPG scheme will now be approximately £39bn.

Support for businesses via the Energy Bills Relief Scheme will also be reduced, and will come to an end in April 2023, and as Atzori highlighted, “the statement will have done little to alleviate the concerns of the thousands of businesses currently waiting to hear what support if any will be forthcoming after the EBRS scheme ends in April.”

Taxing renewables
Covering the costs of all this was a matter taken up in other parts of the statement, including the introduction of road tax on electric vehicles from 2025, which Ramboll’s Philippa Spence thought was “the right thing to do as vehicles of any kind carry costs – such as direct costs for roads – which should not be borne by only a percentage of road users.”

The government will also introduce a windfall tax of 45% on renewable electricity generators from January. Cornwall Insight suggested such a measure “may appear to be fair and proportionate,” but warned that “a degree of caution is needed.”

As the group explained in a statement, “the share prices across various renewables-heavy firms indicate they are not achieving the same level of windfall profits as oil and gas. There remains a danger that this measure will cost more than it raises and deter the volume of investment required to meet net zero, leaving consumer the net losers of this policy.”

Industry group Scottish Renewables was more strident. “Today’s announcement by the Chancellor damages this country’s reputation as a leader in renewable energy, chiefly by continuing to offer investment allowances to oil and gas extraction while failing to do the same for this industry.

The 45% tax obviously aims to harvest funds from those who have benefitted from the recent rise in prices of global energy, but targeting renewables in this way was a blunt instrument, suggested the group, since “many renewable energy generators on older contracts have sold their power far in advance, so are not benefitting from excess profits from wholesale price rises caused by the cost of gas.”

“We would therefore urge the government to ensure that the 45% windfall tax announced today does not unfairly impact these generators which have not been earning increased profits.”

“It is now vital that the UK Government moves swiftly to implement new power contracts, suggested by industry, which will cut costs for consumers and provide long-term certainty so that the unpredictable nature of the UK electricity market is addressed as soon as possible.”

Time to liberate renewables’ potential?
Perhaps it’s hopeless to look to the government for solutions to some of the challenges around energy, and a better bet is new technology.

Somayeh Taheri, CEO of UrbanChain noted that the statement aimed to address the UK’s requirement to ‘not be at the mercy of international gas prices’. But maybe the real monopoly – from which we should be striving for independence – is that of the wholesale electricity market. Consumers haven’t benefitted from the rise of renewable energy in recent years, because it’s all being sold to the wholesale market, which buys it cheap and sells it high. Peer-to-peer energy, on the other hand, offers a way “to link renewables directly to end users, creating an environment where energy is being bought and sold at a fair price while achieving true net zero through true green energy.” The approach has been attempted by various groups over the years. UrbanChain is a start-up utilising AI and Blockchain to overcome some traditional obstacles.

Infrastructure seemed to be one of few “winners” from the announcement, and Hunt said there would be no cuts to capital budgets over the next two years, and they would be maintained at the same level for the following three. Aside from Sizewell C and HS2 (to Manchester), he committed to delivering the core Northern Powerhouse Rail, East West Rail, a new hospitals programme, and gigabit broadband rollout.

Balancing winners and losers
Conservation group the Wildlife Trusts observed the “absence of nature’s recovery in today’s Autumn statement”, and was critical of plans to proceed with Sizewell C and the “extremely damaging” HS2 project, as well as the intention to rely more on offshore wind than other renewables “at the expense of the marine environment”.

Countryside charity CPRE felt the Chancellor had “missed an open goal when it comes to unleashing the potential of rooftop solar,” adding that “Changes to planning policy could turbocharge the rollout of solar energy and help reduce reliance on gas at little or no cost to the public purse.”

The Chancellor’s vision for UK technology and the outline of policy measures for energy efficiency seemed to be the more positive notes amidst a statement that perhaps presaged a dismal outlook for most. The Guardian noted the “biggest hit to living standards on record”, presenting evidence that it said showed that higher energy bills and the worst inflation since the 1970s would cause a 500k jump in unemployment. Local authority network UK100 saw the statement as confirmation that “Britain is returning to austerity”, with there being plenty of cause for alarm for local authorities who “are still grappling with the effects of the first round of spending cuts almost a decade ago.”

“Our members have told us they will be forced to strip back services to the barest essentials, threatening climate action and disproportionately affecting the most vulnerable.”

One upbeat appraisal came from Philippa Spence, MD of Ramboll UK. “Instead of the austerity we feared we potentially have a strong platform for growth.” But it was an opinion that didn’t seem to be widely shared.

“Local authorities have already started planning real-term cuts for 2022/23,” said local authority group ADEPT, “to combat the impact of inflation on existing budgets.”

“There will be some relief that we have a certain amount of funding security now to deliver policies which have been put on hold such as recycling and waste collection, local nature recovery strategies, and more resources for county devolution deals over the next five years, but no escaping the fact that with the impact to capital budgets and  inflation, we will have to continue to make tough decisions with a direct impact for local services.”

The group also lamented the “waste of time, resource and money” that has been expended on submitting bids for Investment Zones – a standout policy of Truss’s premiership that Hunt’s statement appeared to park.

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