EEH0063
Written evidence submitted by the Greater Manchester Combined Authority
Contacts: Mark Atherton, Director of Environment, GMCA (mark.atherton@greatermanchester-ca.gov.uk); Sean Owen, Energy Lead, GMCA (sean.owen@greatermanchester-ca.gov.uk);
Henry Parker, Policy & Strategy Officer, GMCA (henry.parker@greatermanchester-ca.gov.uk).
CONTENTS
(I) Introduction
(II) Government targets
(III) EPC ratings
(IV) Energy efficiency and COVID-19
(V) Green Home Finance Innovation Fund
(VI) Interventions for social housing
(VII) Home Upgrade Grant Scheme and fuel poverty
(I) INTRODUCTION: HOME ENERGY EFFICIENCY IN GREATER MANCHESTER
There are over one million homes in Greater Manchester and over 500,000 of these are still in need of basic forms of insulation. To reach Greater Manchester targets of carbon neutrality by 2038, we need to retrofit up to 60,000 residential and commercial properties each year. Buildings account for 50-75% of the city-region’s carbon footprint and whilst positive steps have been made towards building new homes to stringent environmental standards, the real challenge is to have similar ambitions for our existing homes.
The size of the Greater Manchester retrofit market is estimated to be – at a minimum - £10bnover the next 30 to 40 years, with potential to save an annual 100,000 tonnes of CO2 as well as £26 million from customers’ bills.
(II) GOVERNMENT TARGETS
Are the government’s targets on residential energy efficiency still appropriate to achieve its ambition to reach net zero emissions by 2050?
Government’s 2017 Clean Growth Strategy sets several targets to promote energy efficiency including the upgrade of all fuel poor homes in England to Energy Performance Certificate (EPC) band C by 2030 and, where “practical, cost effective and affordable” to update “as many homes as possible” to EPC band C by 2035. It also sets a target to improve business energy efficiency by 20% by 2030.
These targets are not ambitious enough to achieve net zero emissions by 2050 and to achieve Greater Manchester’s own ambitions for net zero emissions by 2038. There would be significant benefit in looking at a staged target-setting approach given the imperative to ‘act early’, given the cumulative nature of carbon emissions. Strong legislative stimulus will therefore be an essential component of delivering the scale of retrofit activity needed. It is not, however, just the timings or binding-power of targets, it is the methodologies of the standards that these targets commit us to that will drive real change (see the EPC methodologies answer below for proposals on reforming EPC methodologies).
The Clean Growth Strategy also sets ambitions to phase out the installation of high carbon forms of fossil fuel heating in new and existing businesses off the gas grid during the 2020s, starting with new builds. The success of this strategy will be dictated by the ability to harmonise the Renewable Heat Incentive (RHI) and Energy Company Obligation (ECO) schemes to ensure that they are treated as complimentary rather than ‘either or’. At present, RHI and ECO funding cannot be combined for any measures except for the installation of ground source heat pumps, meaning that all other renewable heating measures can only receive support under one of the schemes. The Treasury must recognise that each subsidy funds different costs (RHI funds surplus costs compared to the costs of a gas boiler whilst ECO subsidies help those who cannot afford boiler upgrades even if it were the cheapest form of boiler).
With significant reform to EPC ratings (see EPC methodologies below), Minimum levels of Energy Efficiency Standards (MEES) for EPCs would be a critical component of achieving targets. Government should consider raising these standards for rented properties as one of several mechanisms to hasten the achievement of net zero. The best policy, however, will only be of limited value if not back up by on-the-ground enforcement of MEES. Enforcement is carried out by Local Trading Standards officers, but their offices have seen budgets cut by over 50% since 2009. In addition, trading standards teams will almost always lack the knowledge and skills training to be able to enforce effectively. Housing and environmental health teams are more often in a better position to conduct accurate enforcement procedures, however, they also lack the resources to do so. The trend of declining resource must therefore be reversed to provide officers with the capacity to carry out enforcement duties.
Proposals set out in the Clean Growth Strategy to create a two-stage Future Homes Standard that delivers either a 20% or 31% reduction in carbon dioxide emissions by 2020 (baseline: 2013) and a 75%-80% reduction by 2025 are also too limiting. These targets limit the ambitions of local authorities such as those in Greater Manchester who wish to go further and faster than the national trajectory. Instead, new build regulations should include net zero targets or net negative targets to see a pay back of carbon used in building the house. Given that new build homes will last for over thirty years, these targets should be set for achievement by 2025 at the latest to avoid ‘lock in’ to an energy efficiency pathway that would guarantee an overshoot of 2050 net zero targets. Prompt revision of these targets is critical for Greater Manchester as we move forward with our Greater Manchester Spatial Framework plan to build at least 50,000 homes.
What are the potential risks and opportunities of bringing forward the government’s energy efficiency target?
There is a risk that bringing forward targets could render them unachievable without the necessary supporting supply chains and skills provision, however, there is an opportunity to realign the construction industry by mandating adherence to the PAS 2035 standard beyond just ECO-funded installs. This would help to create a level playing field and drive forward informed, quality-assured retrofit work, however, would require thought to be given to how consumers will accept additional costs and how currently non-accredited builders would be able to comply with the standard.
A part of the solution to these issues may be for finance and retrofit offers with lenders specifying quality standards and also through the use of local authority-approved schemes. The RetrofitWorks BEIS demonstrators provide good example of supplier on boarding, building customer trust and adding value through quality assurance.
Should Government targets for energy efficiency be legislated for, and if so, what difference would this make?
Yes. Legislated targets will allow Audit and Select Committees to hold Government to account if targets are not met. Care must be taken when setting targets, however, to ensure that targets are:
(i) Measurable: To ensure it is clear when targets have been met or when the rate of progress towards them is insufficient.
(ii) Clear on exceptions: To explicitly demonstrate areas where the targets do not apply.
(iii) Flexible if setting iterative targets: We support the introduction of interim targets, however, they pose a danger if set iteratively as this can encourage properties to be incrementally upgraded to the standard set at the next target deadline rather than encouraging a more efficient, one-time upgrade to the highest energy standard stipulated. This is particularly true for new builds, however, there will be cases where iterative processes may be more suitable depending on people’s available budget and preferences for when the best time is to carry out upgrades. To support a more flexible approach, we therefore need:
- Better data about buildings
- Tools to aid the development of decarbonisation pathways (e.g. building passports)
- Better specifications.
(III) HOW EFFECTIVE IS THE EPC RATING AT MEASURING ENERGY EFFICIENCY? ARE THERE ANY ALTERNATIVE METHODOLOGIES THAT COULD BE USED? WHAT ARE THE CHALLENGES FOR RURAL AREAS?
In their current form, EPCs measure running costs, rather than energy efficiency, and give a large part of their weighting towards the cost of heating fuel. Further to this, the EI rating in EPCs does not measure energy efficiency, however, it does have use in providing information for decarbonising homes. Consideration needs to be given as to the end goals of EPCs – energy efficiency or instead decarbonising the home and reducing fuel poverty. The objectives for achieving the latter two are not the same as for the former, and are also potentially not complementary to one another. For example, installing electric heating in a cold home would make it ready to be net zero by 2050, however, it would be costly to run and may exacerbate existing vulnerabilities of those most at risk of fuel poverty.
Part of the solution to this issue lies in the presentation of EPC information. For decarbonisation, the EI rating should be brought to the fore. For fuel poverty, the EPC band is more helpful – but could be further improved by further increasing the prominence of actual running costs. This information then requires support through either a building passport or retrofit pathway, showing what has been done to the home, and what the options are to get to zero carbon. The Parity Project and Sero Homes have done exemplifying work in this area. This should be coupled with a greater frequency of EPC renewal, carried out following larger scale projects including kitchen replacements, bathroom heating replacements and similar.
EPCs currently show that heat pumps have a negative impact on the EPC ‘score’ of a property and its environmental impact (EI) rating. This is due to the assumed efficiency of heat pumps (a particular issue for Air Source) and the assumed carbon intensity of the electricity grid – currently based on 2012 figures which are significantly higher than now and do not account for the more recent deployment of renewable energy generation. Today, it is not uncommon for the electricity grid to have a lower carbon intensity than gas. Given many landlords no have targets set for minimum EPC rating, the way heat pumps are reflected in the EPC process could dissuade many from installing them.
EPCs would benefit from an update to bring them into alignment with Display Energy Certificates (DECs) to allow their comparison and use with wider technologies including Smart Tech (such as smart meters and smart appliances). However, this is of greater use for non-public audience given that EDCs could be very misleading as heating preferences vary significantly so actual energy use will not always correlate well with the asset rating and moreover there are data protection implications around making this data publically available. Where this information, detailing actual energy use, may be most useful is in enabling home Energy Service Companies to put together offers to customers, or in the evaluation of asset performance after works are completed.
(IV) HOW CAN THE GOVERNMENT FRAME A COVID-19 STIMULUS STRATEGY AROUND IMPROVED ENERGY EFFICIENCY OF HOMES?
Government should view the pandemic and necessary stimulus strategy as a once-in-a-generation opportunity to drive forward the net zero-carbon agenda more broadly, but specifically should frame investment in retrofitting around its benefits of being a quick, “shovel-ready” and labour-intensive programme. Much of the groundwork has been laid to scale up the retrofit market, offering a quick, low-risk route to supporting existing workforces and creating new jobs.
Cold homes as a result of fuel poverty and inefficient heat retention also place further burden on our health services at a time when we most need to maintain their capacity. Investment in energy efficiency of homes, particularly social housing, can help to solve this.
The Covid-19 response requires delivery of retrofitting activity at scale and in good time and, with the right planning, the social housing sector is in the best position to mobilise quickly using existing maintenance budgets that could be deployed to match any additional funding that is secured. There is also an opportunity to develop tools, skills and processes needed to support retrofit in other sectors and to help scale-up the supply chain.
(V) IS THE £5 MILLION GREEN HOME FINANCE INNOVATION FUND ENOUGH TO STIMULATE THE MARKET FOR AND DRIVE ACTION FROM THE BANKS TO ENCOURAGE OWNER OCCUPIERS TO IMPROVE THE ENERGY EFFICIENCY OF THEIR HOMES?
The £5 million fund is vastly insufficient to drive forward the market. A significantly larger fund should be considered (to including ECO) and be devolved to the regions, to allow for more effective targeting and leveraging of wider finance. Greater Manchester is well underway with the development of a GM Retrofit Accelerator which will transform the way we retrofit our existing homes. It will allow us to pursue a whole-house retrofit approach and will also help to build up the supply chain by creating a reliable and predictable pipeline of retrofit activities to attract greater private investment. The whole-house approach could equally be an ‘incremental improvements’ type approach that supports immediate job creation and diversification across the current repairs and maintenance industry. Locally devolved funding will allow us to rapidly expand this programme to offer efficiency levels not possible if retrofitting funding were administered nationally. To accompany regional funding, we would also welcome conditionality that the learning developed through regional programmes is shared with other regions to help accelerate understanding and progress.
(VI) WHAT ADDITIONAL POLICY INTERVENTIONS ARE NEEDED FOR SOCIAL HOUSING, LEASEHOLDERS, LANDLORDS AND TENANTS?
Government should consider raising the social housing rent cap to permit Social Landlords to move to a “rent plus bills” model. This would create positive incentives for Social Landlords to invest in retrofitting of their properties as they would be able to recoup some of their costs from the tenants over time.
Government should also consider reforming the Renewable Heat Incentive to provide upfront funding for the electrification of heat through a change to assignment of rights.
(VII) HOW SHOULD THE PROPOSED HOME UPGRADE GRANT SCHEME BE DELIVERED TO HELP THE FUEL POOR? SHOULD THE NEW GRANT SCHEME SUPPLEMENT ECO IN ITS CURRENT FORM, OR SHOULD ECO BE REDESIGNED?
ECO funding needs to be focussed on fully funding measures. There are currently homes that meet ECO eligibility criteria, however, unless match-funding can be found, work cannot be carried out. The Home Upgrade Grant could therefore be used to supply this subsidy. The complexity of ECO administration is a leading factor in why we have not seen an acceleration of energy efficiency improvements and the proposed changes would help to simplify the process. ECO funding should also be repurposed away from supporting supplier targets, and should instead be realigned with more local or regional carbon targets. It would also benefit from being able to fund outcomes, rather than individual measures, which would require a different process of whole house assessment, but would place the needs of the occupants first. This has already been done in Scotland, and London to an extent.