Ahead of the Government’s Energy Security Strategy published this month, there were hopes within the housing sector and beyond that BEIS and Treasury would use this opportunity to strengthen their approach to reduce the amount of energy we use by improving the energy efficiency of homes. Unfortunately, these expectations were not met and no new support has been announced.
The NHC’s Chief Executive Tracy Harrison commented:
“The Government have missed the opportunity to use the Energy Security Strategy to double down on efforts to make homes more energy efficient and reduce household bills. The Strategy’s focus on long-term energy supply has overlooked the required additional support to reduce energy demand now by improving the energy performance of homes. We hope to see further plans to accelerate home upgrades and transition to affordable, clean heat as part of the package to address rising energy bills and reduce the UK’s reliance on gas.”
The Government has had a tricky task for some time to respond to continuing rising prices in global gas markets which have been pushing household bills through the roof. This of course has been made even more complex by Russia’s invasion of Ukraine and the pressure to rebalance global energy markets away from reliance on gas from Russia. While the UK only relies on Russian gas for a small percentage of its energy (4% of total gas supply and 8% of oil demand), prices are still set in these markets so UK households are exposed to the volatility of overall gas prices.
Boris Johnson and his government have been reportedly conflicted on the most appropriate way to address these issues, with the Energy Security Strategy subsequently delayed many times in recent months. There have been varied demands from within the Conservative Party including calls to exploit fossil fuels further such as through fracking and increased drilling in the North Sea, and even to abandon net zero targets altogether. But there were also voices from within the governing party advocating for increased energy efficiency measures to be a key part of the energy strategy. Reports also emerged prior to the Strategy’s publication of Chancellor Rishi Sunak and his Treasury team outlining their reluctance to provide further support to upgrade the energy efficiency of homes.
The outcome of this debate was revealed this month when the Energy Security Strategy was finally published.
What was announced?
The Strategy focussed mainly on energy supply to help the UK reach its target of net zero by 2050 and includes ambitious new targets on offshore wind and nuclear energy. It was reported that plans to expand new onshore wind turbines were dropped from the Strategy due to existing conflict about wind farms within Johnson’s Cabinet. Reaction to this from the energy sector has been widely criticised as onshore wind is an effective short-term supply option and generally cheaper and more quickly deployed than other options, especially compared to nuclear power which is costly and slow to implement.
The overall ambition to align the energy system with net zero in the long-term is welcome. The North is already leading the way on renewable energy, with half of England’s renewable energy being generated in the region.
On low carbon heating, the Strategy announced a Heat Pump Investment Accelerator Competition in 2022 worth up to £30m. This is in addition to the Government’s Boiler Upgrade Scheme, opened this month, which will provide grants of up to £5,000 to help with the upfront cost of installing low carbon technologies, such as heat pumps. Further commitment to heat pump technology is welcome but the Accelerator is a modest sum in relation to the Government’s target for 600,000 heat pump installations per year by 2028.
The Strategy also references expanding investment to support the creation of green finance products to “introduce a scheme under which lenders will work to improve the energy performance of the properties against which they lend”.
The Heat and Buildings Strategy committed Government to incentivising electrification through the rebalancing of levies on household bills that currently favour the use of gas. The Energy Security Strategy commits to publishing proposals on how to make this happen by the end of 2022. This is a hugely important step in the decarbonisation process to ensure that technologies such as heat pumps, which are powered by electricity, are cheaper to run in the long-term.
The Fairness and Affordability Review promised in the Heat and Buildings Strategy aims to address this affordability point. We urge Government to bring this review forward as soon as possible to ensure the transition to clean heat does not raise costs for low-income households.
What was missing?
In the introductory section, the Strategy outlines that the “first step [to reducing household bills] is to improve energy efficiency, reducing the amount of energy that households and businesses need”. The document later states that the “majority of our homes are energy inefficient” and “improving the efficiency of our homes could reduce our heating bills by around 20% and reduce our dependency on foreign gas.” The NHC strongly agrees with this assessment that we need to reduce the amount of energy we use in the first place, but the Strategy fails to back up these premises with further support to deliver on them.
The Strategy goes on to outline previous announcements by Government on energy efficiency, including the support announced in the Heat and Buildings Strategy, the work carried out so far through the Social Housing Decarbonisation Fund, the expansion of the Energy Company Obligation (ECO) to £1bn per year, and other existing measures.
We know that levels of fuel poverty have been rising and are expected to continue to rise this year with a further price cap increase to come in October. Communities in the North are particularly vulnerable to these continually rising costs as the North started with higher-than-average levels of fuel poverty. The Energy Security Strategy was the next opportunity after the Chancellor’s Spring Statement for Government to minimise the impact of rising bills and prevent households having to make difficult financial choices between heating their homes and other essentials.
The Northern Housing Monitor showed that 270,000 homes per year in the North will need to be retrofitted until 2035 just to reach the Government’s own EPC C target (the energy efficiency benchmark). There is still a lot of work to do across tenures to achieve this.
The Climate Change Committee (CCC) is Government’s independent advisor on tackling climate change. The CCC’s response to the Energy Security Strategy is also one of disappointment in relation to the lack of ambition to reduce energy demand. The CCC have praised the ambition to accelerate plans to secure clean, green, homegrown energy, especially on offshore wind. But they commented the Government will need to do more in the coming months on energy efficiency to cut energy bills for households.
In a response to an urgent question from Baroness Hayman on the Strategy not going far enough on insulation schemes, BEIS Minister Lord Callanan told the House of Lords: “It would have been good to have gone further, but the Treasury would not support it.” It is disappointing that the efforts of BEIS on this agenda have been largely disregarded by Treasury at this stage.
The North is already leading the way on renewable energy, the region now has the potential to lead the way on energy efficiency improvements and heat pump installations. An inclusive approach to housing decarbonisation would reduce household bills, cut carbon emissions, create new green jobs in the region, and lead to better health outcomes.
We will continue to work on behalf of our members to accelerate the harnessing of these benefits in the North, especially ahead of this winter, to support the creation of sustainable homes and communities across the region.
Read the full Energy Security Strategy here.
Please do not hesitate to follow up on this with the NHC by contacting Anna Seddon (Policy and Public Affairs Manager) at firstname.lastname@example.org.