Why Is Spending Money on Energy Efficiency So Hard? Lessons From the Green Homes Grant

UK Policy Net Zero

Why Is Spending Money on Energy Efficiency So Hard? Lessons From the Green Homes Grant

Commentary
Posted on: 17th February 2021
Tim Lord
Senior Fellow | Net Zero

Cutting emissions from our buildings is crucial to delivering net zero. The government’s flagship policy to accelerate that process – the Green Homes Grant – was announced with much fanfare, and has the fundamentals of good scheme. It improves the consumer offer by reducing the cost of energy efficiency and low carbon heating for householders, cuts emissions in a difficult sector, can deliver jobs across the country, and stimulates a vitally important supply chain.

But it’s struggling to get money out of the door, facing criticism from suppliers and customers, and looks likely to have its budget cut significantly. This follows a series of policies focused on buildings which haven’t achieved their objectives – most notably the Green Deal, which aimed to decarbonise 14 million homes but only managed 14,000.

But the challenges faced by the Green Homes Grant are not a reason to shy away from ambitious policy to cut emissions from our homes – they show the importance of stable, long-term commitment. 

Before learning lessons, it’s worth thinking about how Whitehall puts in place schemes like this.  Before a scheme is announced, a department will usually produce a business case – why do they want the money, how does the proposal deliver value, how will it be implemented etc.  But (crucially) at that point there is generally minimal delivery capability for a scheme either inside Whitehall or outside – departments are stretched and don’t have resource to get delivery ready if they don’t know whether they’re going to get the money. 

And there can be an optimism bias too – an assumption that offering money will mean the supply chain comes to the party, and consumers will see their own self-interest and go for it.

Many proposals fall by the wayside at this point, but sometimes (as here) the decision is taken to go ahead.  Money is announced, and the scheme is rapidly opened.  There is then real urgency - ministers understandably want money spent quickly so it’s delivering jobs; and the Treasury will often front-load the spend in the hope of delivering rapid results, and be reluctant to commit funding for future years.

But it’s hard to do it fast.  It means the scheme is being built when it’s already open – in this case, in the middle of a global pandemic.  That inevitably creates teething problems. And if the scheme is perceived as going badly, there’s a lot of firefighting to do.

So how can we do it better?

Think about the consumer: we need to start from the consumer perspective by communicating the benefits and offering a positive experience – not just assume that if the government provides money, the demand will be there.  If you’re buying a kitchen, there’s a horde of companies who will offer a vision of what you can get and how it will benefit you, and will manage the process from beginning to end.  If you want to transform your energy efficiency and get a heat pump, that level of service is much harder to access.  We expect consumers to do huge amounts of the legwork, and many have neither time nor inclination and have given up – for now at least.

Patience is a virtue: putting in place schemes with no standing delivery capability and an under-developed supply chain is hard, and will take time.  We need companies to invest in the skills and consumer offer – but a stop-start approach to funding doesn’t provide incentives to do that.  Why retrain my workforce, or do all the hard yards in developing new business propositions, if the money could vanish in a matter of weeks?

Data, data, data: our data on energy use in buildings is poor.  Anyone who’s got an EPC will know that the process is cursory at best, and we have limited understanding of local and regional energy systems.  Improving that data, and making it widely available, will provide huge opportunities for companies to exploit as they can target their services and deliver economies of scale, and make the consumer process much easier.

Engage the supply chain: developing schemes behind closed doors, and announcing with large amounts of funding to be spent quickly, is a recipe for a difficult start.  In the case of the Green Homes Grant, that meant a backlash from the supply chain – with accreditation requirements putting companies off, and consumers delaying orders in anticipation of being able to get a voucher for the work.  These problems can be both anticipated and better managed if schemes are designed in partnership with the companies who will deliver them.

Rapid feedback loops: any large scheme will face delivery challenges, particularly at an early stage.  We need to ensure we are putting in place rapid feedback loops so those problems can be identified, understood, and remedied as they emerge – and the lessons applied to future schemes.

Strengthen delivery capability: The next phase of net zero isn’t about targets – it’s about delivery on the ground. That means a different skill set, in Whitehall and beyond – and in particular a strengthened delivery capability. 

Finally: it’s worth emphasising that this stuff is hard, and is going to face challenges in getting off the ground.  The key lesson to learn is how to do it better – not  to shy away from the challenge.  The government’s forthcoming heat and buildings strategy will hopefully help to set the long-term direction we need.

 

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