Written evidence submitted by Energy Efficiency Infrastructure Group (EEIG) (EBS0006)

Introduction

The Energy Efficiency Infrastructure Group (EEIG) welcomes the opportunity to submit a response to the Public Accounts Committee’s inquiry on Energy Bills Support. The UK can’t afford another energy crisis or to let families waste hard-earned income on high energy bills in cold, draughty homes. Our short submission focuses on the measures the government must take in order to shield consumers against future volatility in energy prices.

The EEIG is a broad-based coalition of businesses spanning the energy efficiency and clean heat supply chain calling for a 25-year national plan, supported by a 10-year package of policy commitments, to deliver warm and comfortable homes for all, to reduce energy bills and carbon emissions permanently and build householders’ confidence in the retrofit experience[1]. We support empowering the public and businesses to reduce their energy costs and secure a long-term legacy of low carbon and low energy bills without placing undue financial burdens on the UK public.

We are submitting a response to this inquiry as we believe energy efficiency is too often neglected as part of the solution to the UK’s persistent exposure to volatile energy prices. We are all aware that the cheapest energy is the energy you don’t use. Whilst government financial schemes helped domestic and business settings when energy prices spiked, they are not a solution to consistently high prices – which affect both the cost of living and business revenue. A long-term approach to protecting consumers to volatile energy prices, through investing in energy efficiency and bringing energy bills down permanently, would reduce government expenditure in the long term, prevent the need for knee-jerk responses that risk fraud, and provide economic, health and social benefits.

The following response is detailed across the following sections:

1. How energy efficiency can protect consumers
2. Challenges in achieving national energy efficiency
3. Energy efficiency as a growth sector

1. How Energy Efficiency Can Protect Consumers

The Energy Efficiency Infrastructure Group (EEIG) urges the UK government to adopt energy efficiency as a cornerstone policy for shielding consumers from the financial impact of volatile energy prices. Energy efficiency measures offer a practical and long-term solution by reducing energy demand, enhancing resilience, and stabilising household costs. The government must prioritise these measures to safeguard household finances and build a more resilient energy system for the UK.

Past government policies have driven significant progress on building energy performance.

For example, the proportion of English housing in the highest energy efficiency rating bands A to C, increased considerably between 2011 and 2021 from 16% to 47%. In Scotland in 2021, 52% of homes were rated as EPC band C or better compared to 39% in 2016.[2]

In addition, the Energy Company Obligation alone has saved low-income customers £17.5 billion in lifetime energy bills since 2013, and the average home improved under the scheme saved £290 per year[3].

Efforts to date saw domestic energy consumption in the UK fall by a huge 21% between 2002 and 2021[4], in part due to making homes more energy efficient.

But progress has stalled, and the UK now needs to repeat this scale of drop in energy consumption, but over ten years rather than nearly twenty, if we are to get on track with the Climate Change Committee’s Balanced Pathway Scenario[5] and for longer-term net zero goals.

a). Reducing Demand Mitigates Exposure to Price Volatility
Energy-efficient homes and buildings require significantly less energy to maintain comfortable temperatures, thereby insulating consumers from fluctuations in wholesale energy prices. For instance, homes upgraded to an Energy Performance Certificate (EPC) Band C or higher consume substantially less energy, with solid wall insulation alone saving households up to £380 annually on heating bills[6]. By lowering overall energy demand, energy efficiency reduces the impact of market volatility on household budgets, benefiting consumers in the long run.

Additionally, reducing heating demand through insulation and other energy efficiency measures contributes to grid resilience and helps control grid expansion costs. The National Grid Electricity System Operator’s (NESO) Future Energy Scenarios highlight that consumer engagement, insulation, and electrification efficiency could lead to a 30% reduction in residential heating demand. Without these measures, unanticipated grid pressure and higher costs are likely.

Consumers in more efficient homes experience lower and more predictable energy costs, particularly during price surges or supply shocks. Policies like the Warm Homes Stamp Duty initiative and income tax relief for landlords incentivise investments in and encourages the market to put value on energy efficiency, making these measures more accessible to homeowners and accelerating the transition to energy-secure housing stock. Retrofitting the UK’s housing stock could significantly reduce national energy demand, decreasing exposure to global market dynamics.

Government-backed research from 2017 suggests that houses rated EPC B/C typically sell for around 5% more than those assessed at EPC band D[7]. There is also evidence that energy efficiency upgrades which improve the comfort and affordability of properties improves their rentability. Reducing tenants’ energy bills also reduces the risk of rent arrears.

b). Protecting Vulnerable Households
Energy efficiency measures are particularly impactful for low-income households, who are disproportionately affected by energy price fluctuations. Improving the energy performance of the 7 million homes in fuel poverty reduces heating costs and minimises the need for government support during periods of high energy prices. Research suggests tripling investment in energy efficiency programs for low-income households could deliver life-changing savings, shielding millions from price volatility[8].

Concerningly, a high proportion of private renters in England still live in fuel poverty - at least a quarter. Tightening minimum regulations on energy efficiency to a C rating could save renters £570 per year on their energy bills - an aggregate saving of £1.75 billion[9]. The EEIG urges the government to reinstate evidence-based plans to raise standards in this sector early in the new Parliament, alongside providing appropriate support for landlords, including income tax relief discussed in Section 1.

The EEIG believes it continues to be important to use regulation, where necessary, to secure energy efficiency upgrades and the associated energy and emissions savings.

c). Supporting Market Transformation
Energy efficiency drives market transformation by increasing the value and desirability of energy-efficient homes. To accelerate this transition, the government should:

• Announce a Warm Homes energy saving stamp duty incentive for homeowners.
• Allow income tax relief for landlords investing in energy efficiency upgrades.
• Support the growth of green financial products to enable affordable retrofit solutions.
• Move to a new national framework in which Retrofit Providers are supported in routinely checking and verifying how homes perform in practice once upgraded.

Examples of effective initiatives that guarantee good outcomes for consumers include:

• Heat Geek guarantees the “overall efficiency” of the heat pump systems fitted by their installers[10].
• Knauf Energy Solutions recently guaranteed an agreed level of energy demand saving in kWh for a social housing retrofit project of 166 homes in Belgium[11].
• Octopus Energy offers the “Octopus Zero Bills” guarantee for new build homes, and which may, down the line extend to any home which meets their specification[12].

By routinely verifying and guaranteeing building performance, the energy efficiency sector can build consumer confidence, ensuring positive outcomes and achieving real energy bill reductions and emissions reduction targets but importantly remove the risk or perceived risk from the consumer.

d). Giving Consumers Confidence
In combination with the above, fully delivering on EPC reforms and supporting the adoption of innovative technologies for measuring real energy performance can ensure energy efficiency projects achieve intended outcomes for the householder. Planned reforms to Energy Performance Certificates (EPC) will make them more accurate, trusted, and reliable; a ‘true measure’ of the performance of buildings. By supporting building owners in adopting innovative methods and technologies which measure the actual efficiency of their buildings will give people confidence they will receive the best possible retrofit experience, removing a barrier to action. To protect consumers from high prices they must have confidence that retrofitting their property will be valuable in the long term and energy bills will be lower permanently.

e). Leveraging Local Delivery

Local authorities should be empowered with increased financial and practical support to lead energy efficiency initiatives. Sharing up to £4.5 billion annually for energy efficiency programs can enable councils to tailor solutions to local needs as each street will have differing requirements. Local delivery means successful delivery, essential if consumers are to get the protection from high prices that they need.

2. Challenges in achieving national energy efficiency

The EEIG identifies the shortage of skilled professionals in the energy efficiency and retrofitting sectors as a main challenge to implementing nationwide energy efficiency policies.

Skills shortages in the energy sector are not a problem unique to the UK but have disproportionately impacted the country due to historical underinvestment in skills development for energy efficiency and low-carbon construction[13]. Without addressing this gap, the UK risks failing to meet its energy efficiency targets and missing the opportunity for economic growth in the green sector.

EEIG has highlighted that the lack of skilled installers, retrofitting professionals, and energy efficiency specialists is a key bottleneck to scaling up programmes that can modernise homes, reduce energy demand, and ultimately protect consumers from prices shocks. A workforce shortage has already constrained the delivery of large-scale energy efficiency programmes as outlined in the EEIG’s paper on “Learning the lessons from the Green Homes Grant”[14].

The issue is exacerbated by limited training pathways for workers to upskill in energy efficiency practices, insulation installation, and low-carbon heating systems. For instance, current vocational and educational frameworks have failed to integrate modern retrofit techniques, leaving a significant skills gap in areas like air source heat pump installations and whole-home energy assessments.

It is in the government’s interest to prioritise investment in skills development and public-private collaboration to close this gap. This would ensure the UK can deliver its energy efficiency objectives and leverage its building stock to actively protect consumers from high prices. Significant investment in skills development and training programmes is crucial to enabling the energy efficiency supply chain to carry out work essential for protecting consumers.

The EEIG highlights the importance of industry-led initiatives to fill these skills gaps and scale up training for the workforce. EEIG members, including leading businesses in construction, energy, and insulation, have developed training partnerships and innovative programmes to upskill workers. For example, some members have established retrofit academies and training partnerships with local authorities to equip workers with the skills needed for modern energy efficiency improvements e.g. the IAA’s National Energy Efficiency Centre[15].

However, more must be done. EEIG encourages the government to support initiatives that expand existing training programmes, such as those focused on energy efficiency and low-carbon construction skills. This includes enhancing schemes like the Green Jobs Taskforce to work collaboratively across industry and with educational institutions to build a consistent pipeline of skilled workers. Additionally, expanding the availability and accessibility of retrofit training courses, particularly in areas of high demand like heat pump installations and whole-home energy assessments, will ensure a stronger, better-prepared workforce.

The government has the opportunity to harness crucial industry end to end supply chain experience and expertise to achieve public policy goals. By leveraging partnerships with private sector leaders, it can help fund and promote industry-led skills initiatives, ensuring that training programmes are aligned with market demands. This will be essential if we are to deliver the energy efficiency programs needed to protect consumers from energy threats – like the one brought by the war in Ukraine.

There are numerous other challenges facing the adoption of energy efficiency infrastructure across the UK, however in this response we have decided to focus on our main concern - skills. It is essential that the government work with industry to resolve barriers to investing and implementing energy efficiency infrastructure so that consumers across the UK can utilise this technology to reduce their bills, permanently.

3. Energy efficiency as a growth sector

Introduction

Investment in energy efficiency could unlock a significant amount of growth in the UK economy. This is essential in the context of this inquiry as protecting consumers from rises in energy prices is a significant cost to the government. By taking a long-term view, the government can reap the rewards from investing in energy infrastructure as the measures will pay for themselves due to the knock-on economic benefits.              

With around 1.2 million house sales in the UK each year, there is great potential to reduce energy costs and emissions, as well as to create a sustainable and thriving low energy retrofit market worth £8 billion per year in energy efficiency and low carbon installations alone[16].

a). A Strategic Imperative for Growth

The UK faces uniquely high and continually rising energy bills – which at times are exposed to shocks and skyrocketing prices. As such, particularly amidst the current cost-of-living crisis, addressing the energy efficiency of homes and businesses is an urgent priority.

Investing in the energy efficiency of UK homes offers an immediate solution to the crisis of high energy prices and insecurity regarding shocks, providing long-term relief for households while simultaneously driving economic growth by creating jobs and stimulating investment in green technologies.

b). Energy Efficiency as a growth promoting sector

Energy efficiency represents a significant opportunity for economic growth. The EEIG supports the government’s Warm Homes Plan, which aims to upgrade millions of homes with energy-saving measures such as loft and cavity wall insulation, potentially reducing household bills by up to £500 annually[17] an aggregate saving of £8bn per year. This is just one example of how energy efficiency can have tangible financial benefits for households, while also offering broader economic returns through increased household discretionary spending power and employment in the energy efficiency sector.

To ensure the successful delivery of the Warm Homes Plan, the EEIG recommend the government convene a Warm Homes coalition to draw together the vast expertise within the end-to-end supply chain. The EEIG has put together a package of proposals to form this partnership with Ministers and the civil service with a clear purpose develop recommendations for a comprehensive 10-year package of powerful policy commitments and incentives to ensure swift delivery of the Warm Homes Plan and concurrently, prepare the industry for delivery. Paramount to its success is the building of both consumer trust and confidence.

The energy efficiency sector is already poised for growth. As energy costs remain volatile, the need for energy-efficient homes, buildings, and infrastructure will only increase, creating an expanding market for energy-saving technologies and services. In fact, the sector can act as a multiplier, creating jobs across industries including construction, manufacturing, engineering, and technology.

By prioritising energy efficiency, the UK can also take a leading role in green finance, positioning itself as a global leader in financing the transition to a low-carbon economy. Market incentives, such as green bonds or low-interest loans for energy-efficient green upgrades, would stimulate further private investment into the sector, generating additional capital for further growth. This aligns with the government’s ambition to make the UK the green finance capital of the world, while enabling businesses and consumers to modernise and upgrade their properties in an affordable and sustainable way. These measures create an ecosystem in which consumers are prioritised and their bills lowered, creating a more sustainable energy market. It is through developing resilience, over the long term, that price shocks have increasingly reduced affects.

Conclusion

Energy efficiency infrastructure is a cornerstone of shielding consumers from volatile energy prices. By reducing overall energy demand, improving cost stability, and enhancing energy security, it serves as a long-term solution to the financial strain caused by market fluctuations. Upgrading homes and businesses to higher energy performance standards, such as EPC B and C or above, lowers exposure to price volatility while simultaneously reducing national energy dependence.

The government must prioritise energy efficiency policies as part of a strategic response to energy price volatility. This will not only safeguard households from future price shocks but also reduce public expenditure on reactive measures, delivering enduring benefits for the economy, the energy system, and society as a whole.