Post date: Thursday, 24th November 2011

Huhne says Green Deal will cut consumer and business energy bills

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Externally insulating a block of flats

Insulating the nation's buildings will save energy and create thousands of jobs.

The Green Deal will "kickstart £14bn investment over the next decade, supporting at least 65,000 insulation and construction jobs by 2015", energy secretary Chris Huhne claimed yesterday as he launched consultations on key areas of climate and energy policy enshrined in the Energy Act 2011.

Speaking prior to the defeat by 71 votes of the Labour motion to block the government's proposed changes to the solar Feed-In Tariff last night, Huhne told Parliament that "rising world gas prices will push up bills for both gas and electricity, but our prices will be moderated by our policies".

The energy secretary was referring mostly to domestic energy prices, which he said would overall be 7% or £94 lower in 2020 than if these polices were not in place and we had to rely on fossil fuels.

However, the story is not the same for businesses.

While many businesses are able to access the advice of the Carbon Trust, who, for example, recently pointed out that simply by switching to more efficient variable motors and drives, a medium sized business with an electricity spend of £50,000 could save £5,000 per year, Huhne acknowledged that some firms are not able to make significant efficiency savings due to the nature of the industrial processes they employ.

Additionally, many businesses pay energy prices that are closer to the wholesale level, and therefore price rises seem to have a harsher impact: the government's own estimates are that by 2020, policies could add 19% to the average energy bill of medium-sized business energy consumers, whereas the figure for large energy intensive users could be anywhere between 2% and 20%.

It is partly so that government policies on climate change do not impair their international competitiveness, Huhne said, that "the government is committed, before the end of the year, to announcing a package of measures for those energy intensive industries".

He said this is also why he is working with Vince Cable's business department, and giving more powers to Ofgem, such as allowing it to extend the role of Elexon in regulating the wholesale market, in another consultation that has been announced this week.

Announcing the consultation on the Green Deal as well as making the Annual Energy Statement to Parliament, Huhne underscored that businesses as well as homes will be able to take advantage of the deal.

The scheme will let them install energy saving technologies such as insulation at no upfront cost, with repayments made over time out of the energy savings.

Huhne also claimed that there will be at least a 3% increase in green exports plus future growth from policies like the Renewable Heat Incentive.

Exactly how the financing of the Green Deal will work has yet to be explored, but he promised that up to £150 in cashback could be available for those taking out a Green Deal as part of efforts to make the scheme as attractive as possible.

Huhne even said that a net saving on domestic energy bills will be possible as early as 2013. "This assumes a central gas price estimate of nearly 70p/therm in 2020," he said. "If the gas price were to be higher, householders will be even better off."

Help for the fuel poor

Huhne confirmed that the Energy Company Obligation, which is also being consulted on, will force energy companies to provide £1.3 billion a year to target Green Deal measures at those in fuel poverty and solid walled properties.

But to ensure that not only the big energy companies benefit from the financial benefits of the work, the ECO consultation specifies that up to 50% of it should be executed by other providers, such as local authorities and other Green Deal providers.

Huhne said that this would "help make ECO more cost effective for consumers, and get more competition into the market" so that "smaller providers aren’t crowded out".

Some far-seeing companies that have already been installing solar PV systems under the FITs scheme, and who know that they are going to have to offer energy efficiency measures in future as part of the proposed changes to the way the scheme is offered to households, are already considering how they can take advantage of this opportunity.

The plight of those on low incomes was highlighted today by two new pieces of research from the Rowntree Trust which show that those in deprived neighbourhoods contribute the least to climate change but are likely to be the worst affected by it.

Understanding the social impacts of UK climate policies reveals that wealthier households have the highest energy use and people in the 45–55 age group emit 50% more carbon than the under-25s.

In terms of climate change impacts, Yorkshire and Humberside are the most disadvantaged regions due to the combination of high social vulnerabilities and high likelihoods of flooding, but nearly a quarter of all London neighbourhoods are most likely to suffer and least likely to be able to cope with the effects of heat waves.

The Trust is therefore calling not only for more support to address fuel poverty, but also protection for these regions from the dangers associated with climate chaos, and help for those who have difficulty in obtaining insurance against the damage caused by it.

The Energy Statement was welcomed by RenewableUK, especially the news that the current cost to the ordinary household of support for wind power is 18 pence per week, and that in 2020, the cost to consumers of support for large-scale renewables will be less than £2 per week, or 3.5% of an annual energy bill, "far less than opponents of renewables claim".

“The figures in the government’s Annual Energy Statement demonstrate this simple truth – that green measures, far from being expensive, can actually save us money," said RenewableUK chief executive Maria McCaffery, ″and we’ll have tens of thousands of new green-collar jobs, thanks to that investment”.

Garry Worthington, head of Green Deal for Climate Energy, commented that he was “pleased to see the proposal to appoint a Green Deal oversight body and an ECO administrator", and hoped they would "promote and facilitate regional and local Green Deal schemes".

Other features of the deal proposed by the consultation are:

  • an accreditation framework for installers
  • provision for collection of finance repayments through the electricity bill and remittance to Green Deal providers or nominated finance providers
  • partnerships and localised delivery of the Green Deal and ECO to ensure that Green Deal finance and ECO support are seamlessly combined behind the scene
  • a consumer protection regime.
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The key point in the article is "how the green deal will be financed has yet to be worked out". This is indicative of a department that is failing to manage the energy sector in a forward thinking manner. Yesterday I watch a debate on FITs where the current administration blamed the last one for the issues arrising from the higher than expected uptake of Solar PV. They need to stop blaming the other guy and start taking accountability for the department (DECC). This means, working things out ahead of time.... so not launching any new "green deal" before all the detail has been worked through. As the MD of a renewable business and also a director of a low carbon consultancy, we need a competent administration to enable Britain to deal with this long term challenge. The current irratic last minute managment is killing investment in the sector. Don't trust me on this ask the CBI.

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