A lesson in how not to run an energy efficiency programme

The National Audit Office’s damning report of the Green Homes Grant debacle should act as a guide for future Government assistance for domestic energy efficiency

 

The National Audit Office (NAO) has seldom issued a more excoriating report than their recent critique of the English Green Homes Grant GHG) debacle. It sets out the declared objectives, enunciated both by the Prime Minister and the Chancellor. And then compared them with the end result.

The scheme was originally supposed to make 600,000 homes more energy efficient. It may just have reached 47,500.

It was meant to create somewhere between 100,000 and 140,000 jobs, depending upon which Minister was speaking. The NAO reports that the Government think it may have sustained 5,600 people in employment.

It was supposed to last 18 months. It was ignominiously abandoned over a weekend, after just 6 months.

Its allocated budget was £1.5bn. In the end, it cost the taxpayer £314m, of which just £256m will go on actual energy improvements “should all current applications be processed.” Even five months after its plug was pulled,by August 2021 less than £83m had actually been paid out to contractors. With £50.5m of that going on “programme management and administrative expenses,” this amounted to expenses of more than £1,000 per home upgraded.

Effectively, the NAO reckon “the rushed delivery and implementation of the scheme has significantly reduced the benefits that might have been achieved, caused frustration for homeowners and installers, and had limited impact on job creation for the longer term.”

But as the NAO acidly points out, this particular report is being issued “against a backdrop of previous problematic attempts by Government to implement domestic energy efficiency schemes.” This is the fourth such NAO Report has published on this policy area in just over a decade. Eachhas dealt with programmes ostensibly intended to revolutionise aspects of parts, sometimes all, of the residential building stock’s energy performance.

So, this time round this latest report also concentrates upon “identifying lessons for future schemes.” Whatever replaces the GHG, Government must “engage with the installer market on the proposed design of any future scheme, and base its planning upon a realistic assessment of how long it will take the different segments of the market to mobilise the skills and capacity to meet demand across all parts of the country.” This did not happen with the GHG.

The NAO sets out how the Treasury’s priority (employment under Build Back Better) and the Business Department’s concentration upon achieving zero carbon society,clashed. The strong recommendation is henceforth to “ensure the different policy objectives of a scheme are reconciled and translated into clear targets as part of the scheme design, with an agreed understanding of which objectives should be prioritised should trade-offs need to be made.”

Instead, sectors with large established workforces and consumer assurance systems were either made “secondary” participants (like glazing). Or else excluded altogether (like lighting or high efficiency boilers). According to the NAO, the Business Department deliberately “deprioritised measures which have established, larger-scale supply chains, and often require less specialist skills, and hence are easier to scale up quickly in terms of jobs supported.”

The Business Department argued that focusing on less developed “primary” measures like heat-pumps and solid wall insulation would have “the biggest carbon impact and reduce the potential for paying for doors and windows that people would choose to install themselves”.

However, the NAO is clear that the “scheme’s primary aim was intended to be an economic stimulus to support jobs.” It acknowledged that the Business Department “recognised that for many of the primary measures, the capacity of the supply chain would need time to build up”, time that the GHG scheme was never allowed to have.

The NAO states that, to achieve its objectives, the Government must in future “ensure that installers had the capacity and skills to provide energy efficiency improvements. It also needs to ensure that the Scheme is attractive to homeowners.” To achieve this, it is vital to ensure that the Government “deploys, alongside policy makers, people with technical, delivery and commercial experience to provide input at the earliest stages in the conception of new schemes.”

It is now well over half a year since the plug was unceremoniously pulled on the Green Hones Grant scheme. There had been a five-year hiatus between the similar decapitation of its predecessor Green Deal scheme, and announcement of the ambitious GHG scheme.

The NAO Report ends with a set of instructions. “The Department should set out by the end of 2021 how its various home energy efficiency schemes fit with its overall plans for decarbonisation, setting out timescales in a more detailed and longer-term plan. This will help to promote interest in future schemes from consumers and installers.”

In designing any new schemes, the NAO advises the Government to take three overt policy steps: a) “test from the start what is being expected of householders and installers. The aim should be to simplify processes, enabling all parties to complete stages right first time as far as possible”;b) “consider what risk appetite is appropriate to balance making the scheme accessible and efficient, with managing the risk of poor-quality workmanship and fraud,” and c) “take a staged approach to launch, to ensure the processes and systems are working efficiently and effectively, and can scale up.”

Personally, I entirely endorse these recommendations. Which, as it happens, bear a remarkable similarity to the ones that members of the British Energy Efficiency Federation were making directly to Business Department staff when the GHG scheme was originally announced.

 

• Andrew Warren is chairman of the British Energy Efficiency Federation