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Two weeks ago, the Government reported progress on a part of its flagship Green Deal scheme - the catchily entitled Green Deal Home Improvement Fund (or GDHIF for short). The Government reported that of the total £120m budget, £43m had been spent in the first six weeks and over £50m worth of vouchers had been applied for[i]. The government said it would pay attention to budget uptake and continue to report. Just one week later, the Government announced that the GDHIF was closed with immediate effect. The reason - the entire remainder of the budget, some £60 million, had been spent in just two days[ii]. That is an astonishing 29 fold increase in uptake.
So what happened? It seems that a large number of applications for funds were made speculatively by companies on behalf of unknowing householders. All a Green Deal installer needs is their reference number and an Energy Performance Certificate number which can be obtained from the Landmark register. There is no need for the homeowner's approval.
It looks like companies have speculative applications so that they can approach a homeowner and say that they already have a grant of £6,000 to help them improve their home. Of course, the homeowner can refuse and so there is a real likelihood that all the money that has been claimed will not get spent.
The criticism that has been levelled at the government for creating a stopstart policy preventing the establishment of a stable, sustainable industry may be vey misplaced. The trigger of the stop-start seems to be that some companies figured out a clever way to block book the budget for themselves. Whilst they may feel very pleased with their ingenuity these companies are fuelling a growing problem: The erosion of trust between government and industry.
When the intent of a policy gets abused as seems to be the case with the GDHIF, the inevitable result is that Government will become more wary of industry and seek to design policy with ever increasing safeguards. Those safeguards translate into administrative bureaucracy and cost for industry, Government and taxpayers, with more checks and more evidence. The result? Less investment is made for greater cost.
Of course, those that took advantage of the loophole may say 'we have done nothing wrong, we have acted within the law'. But, it feels rather similar to the companies who say they pay the legally required amount of tax. Those who seek to squeeze the most out of policy risk are doing their own industry a disservice. It is all too easy to point the finger of blame at government but as we increasingly rely on policy solutions to correct market failures, especially for energy efficiency investments, perhaps on this occasion the industry needs to look at itself.
The EU calls on member countries to conduct stress tests before winter to work out how vulnerable they would be in the event the crisis over Ukraine leads to a major disruption of natural gas supplies from Russia. Russia is threatening to turn off Ukraine’s gas supply if they do not pay existing debts and pay in advance.
Ukraine acts as a key transit point for about half of European gas supplies from Russia and any restriction on supply will have a dramatic impact on prices. In the UK we rely on gas to meet about 70% of our heat and about 28% of our electricity, with over 45% of this gas imported, leaving us vulnerable to external forces if there was a sudden disruption to the European gas market.
EU member countries will meet in June to discuss what options are available to improve security of supply. The problem with the debate about how to improve the ‘security of our gas supply’ is in the word 'supply'. A new CHPA infographic shows that when these European leaders meet in a few weeks, if they want to address our security of supply, they need to equally think about the security of our demand.
In the UK, we are looking at squeezing more supply from its North Sea gas deposits, building liquefied natural gas terminals to import LNG tankers, and planning to drill hundreds of shale gas wells.
But each of these supply side measures has risks too. The North Sea deposits are in decline, LNG terminals often compete with high-priced Asian markets for LNG tanker deliveries, and shale gas drilling remains highly controversial.
The new CHPA infographic looks at how energy efficiency investments such as combined heat and power (CHP) vastly reduce gas import requirements equal to the production of many supply-side options.
Currently, our UK CHP capacity reduces our imports equal to eight LNG tankers or the annual production of 166 shale gas wells, while improving our balance of trade by more than £165m every year through reduced imports.
It is right to worry about how we will meet our gas demand at a time of increasing concern over gas security, and this infographic reminds us that by continuing to support energy efficiency investments like CHP, we strengthen the UK's energy security and stability.