Green recovery: why energy efficiency matters

15 Jul 2020

The Green Homes Grant

In his summer statement this week, the Chancellor, Rishi Sunak, launched several measures to help protect the economy from the fallout of the COVID-19 pandemic, including £3 billion earmarked for green investment. Two-thirds of this funding will go towards Green Home Grants to install energy efficiency measures in private homes, with another approximately £1bn allocated for energy efficiency in social housing and public buildings, including schools and hospitals. Most participating households will receive vouchers of up to £5,000 to spend on measures including wall insulation and double-glazing, though they will need to contribute at least one-third of the costs themselves. For low-income households, grants of up to £10,000 will be available to fully fund efficiency measures.

The Treasury has estimated that the Green Homes Grant, which is to be spent over one year, could support more than 100,000 jobs. Previous work carried out by researchers at the UK Energy Research Centre found that investing in greater energy efficiency or renewable energy can create more jobs than investing in the equivalent amount of fossil fuel electricity, such as from gas or coal power stations.

A strong case for investment

The UK has one of the oldest, most poorly insulated, and draughty housing stocks in Europe. Space and water heating in buildings contribute around 40% of UK energy consumption and 20% of UK greenhouse gas emissions. Several recent reports, for example by the Energy Efficiency Infrastructure Group and the Institute for Public Policy Research, have made a strong case for investing in home energy refurbishments. Properly insulating UK homes and replacing fossil fuel boilers with heat pumps can help to alleviate fuel poverty, meet the UK’s longer-term net-zero climate target, and support a just transition, creating jobs in a distributed way around the country, including ‘levelling up’ in regions most affected by unemployment and lack of investment.

Targeting the stimulus towards labour

In times of recession, it makes sense, at least from a short-term perspective, to target the economic stimulus at labour intensive sectors which can help to increase the number of people in work. Energy efficiency products and services, including lighting, currently support around 150,000 jobs in the UK. This equates to over two-thirds of UK employment in low carbon and renewable energy businesses, according to a survey carried out by the Office for National Statistics. It is hoped that the nature of this work will allow people made unemployed through the coronavirus lockdown, to quickly retrain and take up work.

High take-up from homeowners is needed

This stimulus, however, will only be effective with high take-up from homeowners. Previous Government schemes to improve household energy efficiency, such as the 2013 Green Deal, failed at stimulating high uptake, and this voucher scheme will need to be flexible as well as easy to access and utilise in order to be a success. There is also a question mark over the private rented accommodation sector, which features some of the country’s most inefficient and poorly insulated properties. Landlords can apply for the scheme, though it remains to be seen how many will, given that in the majority of cases tenants are responsible for energy bills.

Coordinated and consistent interventions

Low carbon and energy-efficient refurbishments of the UK’s 28 million homes is a huge task and will require coordinated and consistent interventions over a much longer period than one financial year. In their 2019 manifesto, the Conservative Party pledged £6.3 billion over the course of the parliament to improve household energy efficiency. The recently announced £3 billion fund has been referred to as a ‘down-payment’, and we would hope that this support will continue. The scale of the current scheme, though welcome from a UK point of view, contrasts unfavourably with European neighbours, with Germany announcing €40 billion in climate-related spending and France pledging €25 billion.

There are opportunities for the UK to go further. The Government has proposed that a Clean Heat Grant be introduced in April 2022 to provide capital grants for heat pumps, helping to make such alternative technologies more affordable to consumers. In 2019, it announced plans for a Future Homes Standard that would mandate the end of fossil-fuel heating in all new houses from 2025. Both measures could be introduced more quickly to support the creation of new jobs in low carbon heating and energy efficiency and help realise the associated health and societal benefits of levelling up between regions.

This blog was originally posted on the Energy Futures Lab website.

About the authors:

Dr Aidan Rhodes is a Research Fellow at Energy Futures Lab. Dr Richard Hanna is a Research Associate at the Centre for Environmental Policy. They are both co-authors of an upcoming Energy Futures Lab briefing paper on Smart and Flexible Heat, assess the UK Government’s announcement of new funding to help homeowners cover the cost of making energy-saving improvements to their properties.