The Green Deal cost UK taxpayer’s £240 million, including grants to try and stimulate demand, but did not succeed in generating any additional energy savings. The NAO has concluded that this was because the Department of Energy and Climate Change (DECC) did not design and implement the scheme in a manner that managed to persuade householders that energy efficiency measures are worth paying for.
The NAO also found that DECC’s design of its Energy Company Obligation (ECO) scheme to support the Green Deal added to energy suppliers costs. This reduced the value for money of ECO, although information available from DECC is not sufficient to state by how much.
Another finding of the report is that while the Department achieved its target to improve 1 million homes with these schemes, this is not a direct indicator of progress against the objective of reducing carbon dioxide (CO2) emissions. This is because different types of energy efficiency measures save different amounts of CO2. Thus the schemes have saved substantially less CO2 than previous supplier obligations, mainly because of the Department’s initial focus on ‘harder-to-treat’ homes.
“Improving household energy efficiency is central to government achieving its aims of providing taxpayers with secure, affordable and sustainable energy” said Amyas Morse, Head of the National Audit Office (NAO). “The Department of Energy and Climate Change’s ambitious aim to encourage households to pay for measures looked good on paper, as it would have reduced the financial burden of improvements on all energy consumers. But in practice, its Green Deal design not only failed to deliver any meaningful benefit, it increased suppliers’ costs – and therefore energy bills – in meeting their obligations through the ECO scheme. The Department now needs to be more realistic about consumers’ and suppliers’ motivations when designing schemes in future to ensure it achieves its aims.”
Demand for Green Deal finance has fallen well below the government’s expectations, with households only funding 1 percent of the measures installed through the schemes with a Green Deal loan. The schemes have not improved as many solid-walled homes, a key type of ‘harder-to-treat’ homes, as the Department initially planned. As part of changes to ECO in 2014, the Department enabled suppliers to achieve their obligations with cheaper measures, moving away from its focus on harder-to-treat properties. ECO has generated £6.2 billion of notional lifetime bill savings to 31 December 2015 in homes most likely to be occupied by fuel poor people. Beyond this, the Department cannot measure the impact of the schemes on fuel poverty.
Significant gaps in DECC’s information on costs mean it is unable to measure progress towards two of its objectives: to increase the efficiency with which suppliers improve the energy efficiency of ‘harder-to-treat’ houses, and to stimulate investment. The lack of consistency in the government’s approach during the schmes could increase the long-term costs of improving household energy efficiency.
The NAO investigation has also discovered that DECC doesn’t expect to recover the £25 million stakeholder loan to the Green Deal Finance Company, plus £6 million of interest accrued on it. The loan was based on forecasts of significant consumer demand for Green Deal loans, but such demand was lower than Department forecasts from the outset, preventing the finance company from covering its operating costs. However, the Department does expect to recover a second loan of up to £34 million agreed in October 2014.
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