GRJ0019

About E.ON

E.ON’s strategy in the UK is to lead the energy transition.  We currently supply almost 20% of all homes and businesses in the UK and we offer our customers smart, sustainable and personalised solutions.  Since June 2019 we have supplied all of our residential customers, and since early 2020 all of our SME customers, with electricity from 100% renewable sources, as standard.

We are at the heart of tackling the big issues the UK faces in meeting its ambitious Net Zero by 2050 target.  Over the past decade, E.ON has invested more than £2.5 billion into large scale, renewable energy projects throughout the country, and the UK is now well on its way to decarbonising the power sector, burning 50% less fossil fuels in 2020 than it did in 2010.

Our focus now is on helping homes and businesses in their transition to Net Zero.  We have installed around 1.4 million energy efficiency measures in over 460,000 homes across the UK since 2008, helping reduce both our customer’s carbon emissions and energy bills.  We are proud to offer households and businesses whole house/site solutions, from insulation to boilers, Building Energy Management Systems (BEMS) to LED lighting and the 3.7 million Smart Meters we’ve installed help maximise these benefits.

The UK’s Net Zero ambition will only be met by ensuring that we have the right sized workforce with the right skill sets.  This includes creating jobs in the immediate aftermath of Covid-19, helping to drive the UK’s Green Recovery, but also that we have a long-term skills plan geared towards reaching Net Zero 2050.

Executive Summary

• The energy and utilities sector employs more than 500,000 people, almost 2% of all UK employees, and provides essential services to more than 66 million people across the UK.  However, the sector is due to undergo transformational change over the next decade.
• Over the next ten years, it is likely that 27% of the entire workforce will retire as the baby boomer generation reach 55 and over.  Coupled with the requirement of new jobs and skills and people leaving the industry, the sector will need to replace or retrain 48% of the current workforce over the next 10 years, equivalent to 277,000 vacancies[1].
• E.ON strongly supports early and sustained action to reach the UK’s target of net zero emissions by 2050. E.ON has the technology, expertise and scale to support the Government in delivering the low carbon investments across Britain needed to reach net zero emissions.
• We believe that a focus on policy to upgrade the UK’s residential and commercial buildings through energy efficiency and the decarbonisation of heating provides the most effective green economic stimulus. The Green Finance Institute calculate that meeting the UK Government target on energy efficiency could support more than 150,000 skilled and the Energy Efficiency Infrastructure Group (EEIG) estimate that 42,500 full time jobs could be created in the first two years of such a programme alone given the right levels of investment. Government targets to increase heat pump installation twentyfold, from c30,000 p.a. today to 600,000 p.a., by 2028 would require over 26,000 heat pump installers.
• To ensure these jobs are created, Government must deliver in three key areas:
1. Provide regulatory certainty to give industry confidence to invest in the long-term;
2. Maintain financial incentives, at least in the early phases, to encourage take-up of low carbon solutions.
3. Ensure apprenticeship and training programmes in the required skills are available on the timeline required for the UK to meet its carbon budgets
• E.ON has considerable experience in recruiting, training and deploying technicians to deliver significant infrastructure changes driven by Government policy, in areas such as smart meters, energy efficiency and renewable energy. For the smart meter implementation programme alone, we have recruited and trained over 1,500 new technicians. Besides apprenticeships and similar training paths, it is vital that training programmes are put in place that focus on upskilling and reskilling those already working in the sector.  The current route for such retraining is often costly, bureaucratic and outdated.
• A heat sector deal to foster partnerships between Government and industry should be considered.  The offshore wind sector deal, signed in 2019, had a particular jobs focus, to sustain 27,000 jobs by 2030, and pledged Government to work more closely with further education institutions to develop a sector-wide curriculum to develop the jobs and future workforce needed.  A similar approach to heat could mean we are simultaneously supporting affected industries and areas in the present, whilst developing a workforce with the right skills for the future.
• Finally, it’s important Government understands that investing in green jobs and the sectors the UK needs to grow to hit Net Zero and other environmental targets are not just good for reducing emissions but for boosting our economy as well.  Investing in areas to stimulate job creation will be key to lessening the impacts of Covid-19.

Questions

1. What estimates are there for the jobs required to meet the pathway to net zero emissions, by sector, and other environmental and biodiversity commitments?

For the UK to meet its ambitious Net Zero and environmental targets, it is vital we have a ready and well-trained workforce to meet the future demand and to be able to provide sound and objective advice to households to help support them on their own personal transition.  That means scaling up and investing in the areas most important to our targets now, sending clear signals to the public and private sector on the direction of travel.  There are a number of estimates for how many jobs are required to meet the UK’s various targets, however it’s critical we focus on the areas which present the largest and most immediate challenges and opportunities.

Energy Efficiency

The UK’s homes and buildings account for more than 30% of our total greenhouse gas emissions[2], and homes alone count for more than all of the UK’s power stations put together.  Research has shown that poorly insulated homes and buildings can have a serious impact on occupants’ health, with demonstrable links to respiratory and mental health illnesses, and the Building Research Establishment (BRE) has demonstrated that cold homes cost the NHS more than £2.5 billion a year.  Poorly insulated homes also lead to higher bills for its occupants and research from the UK Energy Research Centre (UKERC) has found that improving all homes to EPC C will save households an average of £270 a year[3].

The carbon, health and bill saving benefits of energy efficiency are clear for all to see, however a national programme to improve the standard of the UK’s housing stock will also provide a significant increase in the number of jobs required.  The Green Finance Institute (GFI) have determined that meeting the UK Government target to get as many homes as possible to EPC C by 2035 could support more than 150,000 skilled and semi-skilled workers across the supply chain[4].

As we begin to recover economically following Covid-19, it will be crucial that any sectors warranting economic stimulus deliver quickly, and energy efficiency is well placed to do this.  Supply chains which are ready to grow already exist due to more than a decade of supplier led energy efficiency programmes (first through CERT/CESP and now ECO) and the Energy Efficiency Infrastructure Group (EEIG) estimate that 42,500 full time jobs could be created in the first two years alone given the right levels of investment[5].

It’s also important to consider the local aspect to job creation.  Whilst improving the energy efficiency of the UK’s housing stock is a national need, it can be tackled most effectively at the local level, driving job growth in our towns and cities.  The Green Homes Grant (GHG) Local Authority Delivery (LAD) scheme is a good demonstration of this and it is crucial Government maintains pots of funding for local authorities to bid into to improve the homes in areas that need it the most.  The EEIG have conducted analysis looking at how energy efficiency can help level up the regions of the UK, and figure 1 (below) demonstrates the number of jobs each region will require to improve homes in the area to EPC C by 2030[6].

Heating our Homes and Buildings

Improving the energy efficiency of our homes and buildings is crucial, however we will only meet our Net Zero by 2050 target if we also change the way they are heated. 

According to the Climate Change Committee (CCC), 19 million heat pumps will need to be installed in homes between now and 2050[7] if we are to meet Net Zero.  This means that over the next 29 years we will need to install on average more than 655,000 per year (more than 1,700 a day).  However, the UK is currently installing circa. 30,000 heat pumps in homes and buildings per year, meaning a significant scale up is required.  It explains why the CCC in their sixth carbon budget recommendations to the UK Government assume that over 1m heat pumps are installed annually from 2030, rising to around 1.5m heat pumps a year from the middle of the 2030s.

In 2019 the Heat Pump Association (HPA) published their Roadmap for the Role of Heat Pumps[8], which outlined the number of installers required if we are to install the number of heat pumps required.  Figure 2 illustrates the scale up that is required, from numbers in the low 1000’s today to more than 40,000 by 2032.  These estimates are broadly in line with accommodating the Government’s recently announced target of 600,000 heat pumps a year by 2028, with HPA estimates predicting 26,591 installers by 2028 will be capable of installing 714,000 heat pumps a year (Figure 3).

Electric Vehicles (EV)

Another important area we need to tackle if we are to meet Net Zero is transport and managing the transition from internal combustion engine (ICE) vehicles to electric.  Transport is responsible for 23% of the UK’s emissions[9],  and whilst it is encouraging that the Government has brought forward the phase out date for petrol/diesel vehicles to 2030, the majority of miles driven on UK roads still come from ICE vehicles.

Ensuring we decarbonise transport to meet Net Zero means growing a supply chain for EV charge point installers and developing the workforce to meet the challenge.  According to a report by Capital Economics[10], more than 25 million EV charge points will be required across the UK by 2050, with around 21 million by 2035, at an estimated cost of £45.9 billion.  That requires 1.5 million installations per year to meet the 2035 target (more than 28,000 per week).  Whilst generating a new workforce through apprenticeships and T levels is a sensible path to take, there is also the opportunity to upskill existing electrical engineers, which we would urge is seriously considered in any future works programme.

2. Does the UK workforce have the skills and capacity needed to deliver the green jobs required to meet our net zero target and other environmental ambitions (including in the 25-year environment plan)?

The scale of the challenge facing the UK in meeting its Net Zero target is huge, and we currently do not have the workforce with the appropriate skills or capacity needed to meet it.  Despite this current situation, we believe that with the right action taken by Government, the country can rise to meet this challenge, thereby supporting a Green Economic Recovery.

The energy and utilities sector employs more than 500,000 people, almost 2% of all UK employees, and provides essential services to more than 66 million people across the UK.  However, the sector is due to undergo transformational change over the next decade.  The Energy and Utilities Skills Partnership (EUSP) last year published their Workforce Renewal & Skills Strategy 2020-2025 which specifically looked at some of these changes.

Their research found that over the next decade, it is likely that 27% of the entire workforce will retire as the baby boomer generation reach 55 and over[11].  Coupled with the requirement of new jobs and skills and people leaving the industry, the sector will need to replace or retrain 48% of the current workforce over the next 10 years, equivalent to 277,000 vacancies[12].

The UK’s future work and skills strategy needs to focus on these areas, ensuring that the conveyor belt of talent is starting as early as possible, and that re-training and upskilling is done in time, to meet these challenges head on.

3. What needs to be done to ensure that these skills and capacity are developed in time to meet our environmental targets?

Regulatory Certainty

The first thing industry needs to ensure the appropriate workforce is in place to meet future targets is long term regulatory certainty.  Industry has shown in the past that once Government makes the direction of travel clear and gives regulatory certainty, businesses will invest and work towards this.  The success of the renewable electricity sector is an exemplar on what can be achieved. 

In terms of Net Zero, 2021 is a key year for turning promises into action.  The Future Homes Standard, for example, will play a key role in supporting the exponential growth in heat pump installations throughout this decade, and with it, the training of new heat pump engineers, however this Standard must be legislated for as soon as possible to provide certainty to housebuilders and investors alike.  It will be similarly important for Government to legislate as quickly as possible on the phase out date for retrofitting fossil fuel heating systems, including oil and gas boilers.  This would give industry a clear indication of where we are going and send strong signals to invest in alternative low carbon heating technologies.

Financial Incentives

Besides regulatory certainty, it is also crucial Government offers financial incentives for business to invest in the skills and jobs needed.  The introduction of the Green Homes Grant scheme last summer is an important start, and as we look towards a green economic recovery, Government should consider extending the scheme beyond March 2022 as well as boosting the budget of existing schemes to drive new job growth and reskilling.

One consideration Government should make is doubling the Energy Company Obligation (ECO) to £1.4 billion, with the additional spend coming from general taxation.  Government should also introduce its manifesto promise of the Home Upgrade Grant (HUG) as quickly as possible to start improving homes which are off the gas grid.  This would instantly create a market for the installation of Net Zero critical technologies, such as heat pumps, driving job creation throughout all regions of the UK.

Apprenticeships and Training Programmes

Finally, it’s important Government and industry works closely together to ensure that the right apprenticeship and training programmes are in place to meet the workforce demands of the future.

E.ON are committed to developing our workforce and ensuring we are ready to meet the future Net Zero needs of the energy sector. Apprentices play a key part of that and since 2017 we have had a 95% utilisation of the apprenticeship levy.  However, there need to be appropriate training schemes in place to aid this transition.  E.ON used non-levy funds to transform our Kingswinford site into a training Centre of Excellence, and due to the lack of appropriate apprenticeship schemes, we have had to upskill 20 employees ourselves to become solar and storage installers and EV charging installers.  More levels 2-4 apprenticeships in these areas would help support a growth in the number of technicians.

Besides apprentices, it is also vital we put in place the training programmes to both upskill those already working in the sector and reskill those who transfer to it.  It is clear that at the moment there is a lack of real incentive for the current workforce to upskill or retrain to Net Zero critical areas and the current route is often too costly, bureaucratic and outdated.

The Heat Pump Association have proposed a £1.5 million fund to go towards a voucher scheme for the first 5,000 installers to go through a new qualification course to become a heat pump technician.  This would fast track the number of available installers to meet the initial ramp-up for heat pump installations and start to develop an expertise in the area.  This is a mechanism that could be boosted and replicated across the sector, being used to incentivise the next generation of EV, Solar and Battery Storage technicians for example.

Ensuring technicians are qualified to high standards is important for the consumer and will have an impact on the take-up of technologies such as heat pumps.  Research from Delta EE, demonstrated below in figure 4[13], shows that over 30% of those surveyed had strong concerns about finding an appropriate installer for a high efficiency heating appliance.  Developing a strong workforce of skilled and accredited technicians, across all of the technologies required, will be an important step towards driving consumer take-up and building trust as we move towards bet zero.

4. What measures should the Government take to ensure that its proposals to meet environmental targets do not by default lead to jobs in affected industries being exported?

In order to meet the challenges of Net Zero, it is crucial we maximise UK content as much as possible, meaning we manufacture, install and service as much as we can through homegrown supply chains.

To do this, Government should firstly consider attractive financial incentives to encourage manufacturing companies to set up production bases in the UK.  The challenge of decarbonising how we heat our homes and buildings is a good example of this.  The CCC have stated that around 19 million heat pumps will need to be installed in homes and buildings by 2050, and there is a prime opportunity for the UK to be a world leader in the manufacturing and installation of low carbon heating technologies. 

A heat sector deal to foster partnerships between Government and industry as we tackle this crucial challenge should also be considered.  The offshore wind sector deal, signed in 2019, had a particular jobs focus (to sustain 27,000 jobs by 2030, currently 7,200) and pledged Government to work more closely with further education institutions to develop a sector-wide curriculum to develop the jobs and future workforce needed.  A similar approach to heat could mean we are simultaneously supporting affected industries and areas in the present, whilst developing a workforce with the right skills for the future.

5. What risks are there to meeting the Government’s ambitions for green job creation in both the public and private sectors? What should the Government do to create the conditions to ensure its commitments are met by both sectors?

The biggest risk to meeting the Government’s Green Jobs targets is the lack of cohesive policy.  As outlined in our response to Question 1, a lack of long-term regulatory and financial certainty to back up the ambitious targets announced by Government, which we support, will make the private sector hesitant to invest in creating jobs and retraining existing workers.  Industry will look to match its own job growth with that of Government plans, and in the current economic climate it is important these match up, otherwise there is a risk of ‘deskilling’ workers.

It is also critical, in the energy industry at least, that we end the boom and bust cycle of recent policy events which have eroded investor confidence.  The past decade has seen the introduction and eventual scrappage of schemes such as Zero Carbon Homes, Green Deal and Solar subsidies amongst others, and as a result both the public and private sector will be sceptical of any short-term programmes introduced.

6. Are the Government’s ambitions for green job creation in the public and private sectors sufficient for the scale of the challenges? What changes should be made?

We welcome the Government’s announcement last year of an ambition to support 2 million green jobs by 2030 and await the detail expected when the Green Jobs Taskforce issues its final report.

7. How can the UK ensure jobs are created in areas most impacted by the transition to a low-carbon economy?

Meeting Net Zero requires action throughout the UK, however this can best be tackled through working closely with local authorities and the regions of the UK, levelling up homes and businesses as we go.  This is consistent with delivering a fair and just transition.

The LAD scheme announced as part of the Green Homes Grant (GHG) scheme last summer is an important example of this.  As part of the scheme, £500 million was made available, with the initial £200 million pot for local authorities to bid into.  This scheme is a great way for local authorities to secure money to improve homes with the worst EPC ratings in the area who may be living in fuel poverty, whilst also driving local job creation (particularly local SME installers) and supporting the upskilling of local people.

The recent announcement of the introduction of a UK National Infrastructure Bank is also welcome, and this should have a key role in financing projects to level up the regions of the UK and those most impacted by the transition to a low-carbon economy.  Whilst we wait to see further details later this year, it’s important that the Bank has a role in co-investing in projects which help level up the regions of the UK and helps to de-risk projects which enables households and businesses to apply for low cost loans to help finance investments to upgrade their buildings.

8. What additional interventions should be undertaken to aid in a ‘just transition’?

9. What impact can green jobs have on the wider UK economy?

Investing in green jobs and the areas we need to hit Net Zero and other environmental targets is not just good for reducing emissions but for boosting our economy as well.  Covid-19 will clearly have a huge impact on UK GDP (Bank of England forecast it to be 11% down in 2020 and 7.75% down in 2021[14]) and employment levels (2020 saw an increase of 1.4 million people claiming unemployment related benefits[15]).  Investing in areas to stimulate job creation will be key to lessening the impacts of both of these.

As outlined in our response to Question 2, investment in the right areas of the energy sector can yield both jobs and economic growth quickly, with energy efficiency being a good example of this.  Improving homes has a number of benefits; creating jobs for the installer base, improving home insulation and thus reducing NHS and social care costs and generating bill savings which can be spent instead on local goods and services.  The EEIG have estimated that getting all homes up to EPC C by 2030 could generate up to £7.5 billion per year at today’s prices and figure 5 highlights the savings breakdown per region[16].

In addition to this, further investment for the able to pay will generate further consumer spending on energy efficiency improvements.  Germany’s national infrastructure bank, KfW, is a good example of this.  For every €1 invested by KfW, building owners borrowed and spent €6 on home renovations.  Overall, KfW’s programme cost the federal government €1.7 billion in 2016, unlocking €8.4 billion from building owners and nearly covering its own cost through the resultant VAT revenue alone (€1.6 billion)[17].

The Centre for Energy Policy (CEP) at the University of Strathclyde have also published some research into the economic benefits of a sustained energy efficiency programme.  In their analysis of four different scenarios of funding, the best case scenario (which was a scheme funded from general taxation) determined that UK GDP could be boosted by 0.25% and that for every £1 million spent, GDP would increase by £6.7 million[18].

10. What contribution can green jobs make to the UK’s economic recovery from Covid-19?

                                                                                                                                                                                 See response in Question 9.

11. How can the UK ensure high emissions are not locked-in when tackling unemployment?

Ensuring that we do not lock-in emissions when financing recovery measures and tackling unemployment should be a key consideration for Government.

One way to deal with this could be to attach green conditions to any bail-out funds given to high emission sectors.  Last year, the French Government sanctioned a €7 billion bailout alongside a Dutch Government bailout agreement of €3.4 billion for national airliners Air France-KLM[19].  In the wake of Covid-19 however, these came with strict green conditions.

The agreement means Air France and KLM have to halve their CO2 emissions per passenger kilometre by 2030 compared to 2005 levels and will need to cut some short haul flights where more environmentally friendly rail connections exist[20].  In the wake of the UK Government outlining the importance of ensuring the UK’s economy is green, this could be an effective way of ensuring sectors with high numbers of employees can continue operating whilst moving towards our environmental objectives.

Another way Government can act to ensure emissions are not locked in is to move quickly in supporting growth areas of the economy, such as those already mentioned in this response.  Schemes such as the GHG for example that provide jobs and services throughout the UK should be expanded and lengthened.  It is important Government also starts to legislate for the changes which have been promised, such as the Future Homes Standard.  This will provide long term certainty to those who may wish to retrain in growth areas. 

Similarly, there is a role for financial incentives (such as tax relief and transformation funds) and longer term regulation to help sectors reduce their emissions and transition to net zero.  In the case of Energy Intensive Industries, where global competition is intense, other levers should also be considered to help them decarbonise, including the role of Border Carbon Tax adjustments, so that they are not disadvantaged compared to imports which are produced from higher carbon energy systems.

January 2021