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Tag Archives: Energy Efficiency
FAQs on ECO Brokerage
December 2012: Further to the ECO Brokerage consultation document issued earlier this week, DECC have now issued an ECO Brokerage FAQ briefing.
Survey of commercial property investors’ views on sustainability
December 2012: Interesting report from independent commercial property adviser GVA who have issued their latest annual survey of commercial property investors’ views on sustainability. Points to note from the report include:
- It is only five years to go before the EPC minimum energy performance standards kick-in (for both domestic and non-domestic properties). In accordance with The Energy Act 2011, by April 2018, it will become illegal to let residential or commercial properties that do not meet a minimum energy performance standard. The government have announced their intention to use an EPC rating of E as the minimum standard. This could have very significant implications for landlords and property investors alike with currently a fifth of commercial properties below this standard.
- This latest survey indicates an increased emphasis on the importance of sustainability in property, despite the significant economic challenges that remain. However it will still do little to convince industry critics that the current trajectory of improving property stock will meet Government deadlines.
- The survey shows a trend between 2007 and 2012 of investors placing increasing importance on sustainability factors within their acquisition and disposal decision making.
- The report also stated that only a third of survey respondents believe the current poor market conditions have caused a lessening of importance towards sustainability issues by investors.
Are EPCs a true indicator of energy efficiency?
December 2012: Jones Lang LaSalle with the Better Buildings Partnership have issued the output of some interesting work they have undertaken: “Using data gathered from over 200 buildings over the past four years, we’ve measured the actual energy performance of BBP members’ managed properties in London with surprising results…There is little or no correlation between EPC ratings and actual energy performance”. This is something often raised by EPC assessors, and so it is useful to get this comprehensive research confirming this view.
The report concludes that:
“If the commercial property industry is to succeed in achieving the Government’s ambition of cutting the associated CO2 emissions of the built environment, it is imperative for the industry, backed by Government direction, to focus on actual energy performance rather than just ‘design intent’. We have shown that there is little or no correlation between a building’s design (as measured by its Energy Performance Certificate) and its actual consumption.
The BBP members’ portfolios achieved a reduction in the associated CO2 emissions of 8% and made a saving of more than £4 million in energy bills, between 2009/2010 and 2011/2012. If the level of success achieved by BBP members were applied to the total existing office stock of Greater London, savings could be in the order of £70 million.”
Somewhat disappointingly, the publication of this research was very shortly followed by the following news report from the Government Minister overseeing this policy concerning extending the coverage of EPCs:
U-turn over compulsory energy assessments for commercial buildings
“Correspondence from building regulations minister Don Foster, confirms that plans for compulsory display energy certificates (DECs) for the private sector have been dropped. Instead, the commercial sector will be required to obtain less stringent energy performance certificates, which measure projected energy use. Display energy certificates, which measure a property’s actual energy performance, are already compulsory for public buildings.”
Mayor to encourage energy efficiency in the private rented sector
13 December 2012: The Mayor has today published a new ‘London Rental Standard’ where- the press release states – he “has called for the establishment of a new deal with landlords, letting agents and tenants based around a voluntary and transparent ‘London Rental Standard’ (LRS), which will be consulted on with the industry and launched next year by the GLA.”
Today’s publication, ‘The Mayor’s Housing Covenant: Making the private rented sector work for Londoners’, sets out the Mayor’s proposals for improving private renting for Londoners. Included in there are commitments that:
- The Mayor has three principal objectives for improving the private rented sector (PRS) in London which includes promoting standards through improving the energy efficiency of the stock.
- To do this the Mayor will work with government and energy providers to ensure that the Green Deal works for London’s PRS
- The Mayor has also committed (para 2.3) to address fuel poverty and encourage more landlords to take advantage of energy efficiency programmes.
The report goes on to say (page 33) that:
Improving energy efficiency
In terms of energy efficiency the PRS tends to perform well compared with other tenures but there is still significant room for improvement. In 2010/11, the average SAP rating for private rented homes in London was 57.3, worse than in social housing but better than in owner occupied properties and better than the national average for the PRS. The latter is probably explained by the larger share of flats in London’s PRS compared with elsewhere (flats are generally more efficient than houses).
From 2016, landlords will not be able to unreasonably refuse requests from their tenants for consent to undertake energy efficiency improvements where they can be funded by the Green Deal, and from 2018 all private rented properties must be brought up a minimum efficiency standard.” The latter requires all private rented properties (domestic and non-domestic) should be brought up to a minimum energy efficiency standard rating, likely to be set at EPC rating “E”. Further information on DECC’s website here.
Appendix 1 of the document contains the draft London Rental Standard and the energy commitment goes no further than the rather disappointing standards set by Government in the Energy Act 2011 stating that “landlords must work towards compliance with duties imposed upon them by the Energy Act 2011, especially related to requests for energy efficiency improvements by tenants and in relation to low ratings in energy performance.” The Mayor should instead look to bringing in the recommendations on PRS energy efficiency made by a coalition of organisations during the passage of the 2011 Energy Bill.
Any feedback on the contents of the Housing Covenant paper need to be sent to the GLA by 15 February 2013.
Local Authorities and RSLs will not be able to trade in new ECO brokerage
13 December 2012: DECC yesterday released their consultation on the ECO brokerage. Previous posts (here and here) have highlighted the potential of the brokerage to local authorities and community groups to further access the £1.3 billion annual funding directed through the Energy Company Obligation (ECO) to support the take up of energy efficiency measures. However, Government have taken the view that local authorities and RSLs will not be able to trade on the brokerage.
The ‘Guide to the ECO brokerage‘ sets out the Government’s case:
“Why can’t a Local Authority or Registered Social Landlord trade on brokerage?
The primary objective of brokerage has always been to stimulate the Green Deal market. Therefore in the very first instance we will look to restrict trading to domestic Green Deal Providers. However, over time we will look to open the platform to other sellers. We are committed to working with social landlords and local authorities to see how this can best be done.
Will energy companies be able to pick and choose which companies they buy from on brokerage? Could this disadvantage smaller Green Deal Providers?
ECO brokerage is a blind trading mechanism. Energy companies will not be able to see who they are buying from. Therefore, if a smaller Green Deal Provider can offer ECO at a competitive price they will be able to compete on the brokerage platform.
DECC will be monitoring ECO Brokerage trading activity for any evidence of uncompetitive behaviours from buyers and sellers.”
The ECO brokerage consultation adds that:
“53. …It should be noted that all Green Deal Providers, non-Green Deal Provider delivery agents, and Local Authorities and Housing Associations/Registered Providers of Social Housing can all still access ECO directly via a direct bilateral partnership with ECO obligated energy companies, although we recognise the challenges involved in this for some providers.”
The consultation makes sets out that there was a clear majority in favour for establishing a brokerage, and hence the Government will put a brokerage mechanism in place on “a voluntary basis while it carries out this consultation asking for views, and any supporting evidence, on the need to regulate energy companies to use the brokerage service.”
The Brokerage will operate as fortnightly anonymous auction where ECO providers will be able to sell “lots” of ECO Carbon Saving Obligation, ECO Carbon Saving Communities and ECO Affordable Warmth, to energy companies in return for ECO subsidy. The auction process will be delivered by the Government Procurement Service through an e-auction online platform that allows energy companies to bid in real-time between 9am and 5pm on each auction day. Dates of first auctions are as follows:
18 December – first full test auction
15 January – first full live auction
Auctions will then take place fortnightly after that
An ECO brokerage Impact Assessment is also available to download.
‘ New Energy Efficiency Scheme could add over £94 to energy bills’
27 November 2012: Energy sector trade body Energy UK has published research undertaken by NERA on what they believe are errors in the Government’s assumptions of the cost per household of the new Energy Company Obligation (ECO). The report’s findings suggest that:
- DECC estimated that the ECO would cost energy suppliers £1,300 million per year (about £53 per customer per annum). ..Our analysis suggests that correcting unreliable assumptions in DECC’s modelling would raise the estimated cost of the programme to around £1,700 million per annum (ca. £69 per customer per annum).
- In addition, there may be a problem with DECC’s reliance on a “stated preference” study, a form of customer research which is known to suffer from a bias in the case of environmental programmes (i.e. the “warm glow” of appearing to favour good works leads people to state that they will pay more for environmental programmes than they will pay in reality). DECC has not published the study, so it is difficult to quantify precisely the impact of any bias inherent in the answers. A simple and transparent sensitivity is to assume that respondents might have ignored the “hassle costs” that an ECO project would impose on them. Adjusting DECC’s model of customer preferences by a comparable amount raises the cost of the programme further still, to around £2,350 million per annum (ca. £94 per customer perannum), but the final cost could be much higher.
Download the report here – The Costs of the Energy Company Obligation.
Has the Mayor ‘shown enough political leadership to tackle fuel poverty in London’?
November 2012: This was the question asked of the Mayor at last week’s Question Time session with the London Assembly in City Hall. The transcript of the discussion has just been posted on the GLA’s website – the fuel poverty section runs from pages 43-46. The Mayor responded with the following points:
- On recent increases in energy prices the Mayor stated that “We have repeatedly had the energy companies in . What they are getting away with at the moment is the claim that they are obliged to spend so much on renewables and energy efficiency of one kind or another and their claim is that that is pushing up the cost of providing energy. Whether or not that is true is very, very hard for me to evaluate.”
- The Mayor has brought up London’s specific energy issues directly with DECC – “I have been in touch with Greg Barker who is responsible for this and my Office has been in touch with the Department repeatedly for a long time.”
- That “we are committed to expanding our policy of retrofitting. I do not pledge that we can do that in all homes and in many cases the housing stock in London does not make it easy for us to do this but we are going ahead, as I say, with a programme that I think not only offers the opportunity for home owners to cut their bills but also offers massive scope for employment. I think it is a shame that successive Governments have not taken this up more vigorously.”
Posted in Energy Efficiency, News
Tagged Energy Efficiency, Fuel Poverty, Mayor, RE:NEW
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DECC to support Mayor’s RE:FIT programme
November 2012: Amongst the various proposals set out in the Government recently published energy efficiency strategy is one relating to the Mayor’s energy efficiency retrofit programme targeted at public sector buildings, RE:FIT, with DECC announcing that the Department will be:
34. …funding the initial rollout of the RE:FIT programme nation-wide to public sector organisations and will work with Local Partnerships and the Government Procurement Service to establish this support. The Greater London Authority has pioneered the Mayor of London’s award winning programme to deliver the energy efficiency improvement of the public sector estate. This is achieved through a simplified ESCO procurement framework and the provision of a RE:FIT Programme Delivery Unit team to provide technical support to projects.
35. The RE:FIT concept was initially piloted in 42 public sector buildings across London.These projects retrofitted energy savings measures to approximately 146,000m2 of building space, delivering over 7,000 tonnes reduction in carbon emissions and an average 28% reduction in energy consumption identified.The total spend was £7 million with a simple payback period of 7 years. Since the success of this pilot over 100 buildings have now successfully undergone retrofits and over 50 organisations, including Local Authorities, NHS Trusts, and Universities, have committed to using RE:FIT and the project pipeline contains in excess of 300 further properties. A new RE:FIT Framework has recently been tendered which further develops the approach and enables a wide range of financing options to be used.
Further information on the Mayor’s RE:FIT programme can be found here. No further information on the national rollout of RE:FIT appears to be available as yet.
DECC Community Energy Strategy Update
November 2012: DECC’s recently released Energy Efficiency Strategy includes the following update on its work to develop the first ever Community Energy Strategy for the UK:
“DECC is working with stakeholder groups to develop a Community Energy Strategy that will support activity with communities across the Department. This strategy will inform how the Department works with community groups and local organisations across all aspects of buying, saving and generating energy, and make sure our community schemes are fit for purpose. The DECC Community Energy Strategy is to be developed over the coming months, and will be available for use from Summer 2013.“
DECC established a Community Energy Contact Group (CECG) earlier this year to help develop the Community Energy Strategy. Minutes of the Group’s October meeting have just been posted online by DECC – and provide some interesting detail on current discussions between the Group and DECC including – under item 5 – the CECG’s views on what are – from ‘Energy for London’s perspective – some sensible ‘must haves’ for the forthcoming strategy. The minutes can be accessed here.
London and the Carbon Saving Community Obligation
November 2012: Government introduced a new affordable warmth element share to the £1.3bn a year Energy Company Obligation (ECO) earlier this year. The Carbon Saving Company Obligation (CSCo) is designed to target insulation measures in low-income communities defined using the bottom 15% of Lower Super Output Areas (LSOA) from the Index of Multiple Deprivation. A wider range of energy saving measures will be eligible for funding under the CSCo, including cavity wall, loft and solid wall insulation. Additionally, in contrast to the bulk of the ECO funds, the CSCo will be open to applications from social housing providers.
Government have set the level of the CSCo at 20% of the overall Carbon Saving Obligation element of the ECO, representing around £190m per year. DECC have stated that London has proportionally a higher number of these low income areas and hence should – in theory – fare better under the CSCo element of ECO than other regions.
A full list of LSOA qualifying for the CSCo is available in the a July 2012 DECC guidance document available here. The data provided by DECC is not in the most usable format so it’s helpful that the Centre for Sustainable Energy (CSE) has produced an Excel version of the LSOA data – download here. The CSE dataset also adds ward name, ward code and region to the original DECC dataset – to give the data extra value. The CSE dataset show that London LSOA make up 815 out of the total 5159 areas selected – just under 16 per cent. Hence, this should mean that if energy suppliers deliver their Carbon Saving Communities Obligation to the same ratio as the number of low income areas identified through the LSOA data, £30m of insulation (ie 16% of £190m) should be directed to some of the poorest homes in London, free of charge, every year, from 2013.
Grant funding will be also directed to low income households through other elements of the ECO (the affordable warmth and carbon saving obligations) but in contrast to the CSCo this will be directed to i. the non-social housing sector and will also be predominantly directed to ii. harder to treat housing through the installation of Solid Wall Insulation (SWI).
The ECO brokerage
November 2012: Though there has been much discussion on the ‘start’ of the Green Deal and Energy Company Obligation (ECO), there has been little mention of the new ECO brokerage system that had been proposed. The key idea behind the brokerage – a new online system that would allow Green Deal Providers to access ECO funds by bidding in projects which energy suppliers could choose to ‘buy’ – was that it would potentially allow a wider number of actors to participate in the ECO, such as local authorities and community groups. It would also provide DECC with greater transparency with regard to the costs met by suppliers in meeting their ECO obligation, something which DECC has little information of to date under CERT.
The brokerage was discussed in a workshop at last week’s Local Government Association’s Green Deal and ECO conference where the following updates were provided by DECC:
- DECC had established a brokerage working group to discuss how the system could operate. No agreement was reached however on the key issue of what level the brokerage would play in suppliers achieving their ECO targets – ie to what extent suppliers would be obligated to purchase ECO ‘points’ from Green Deal Providers submitting projects – or if suppliers participation in the brokerage system is to be volutnary
- An ECO brokerage consultation document was to be issued in the ‘summer’. DECC’s Green Deal’s progress document in June 2012 stated that “we will seek voluntary commitments from the energy companies to use the brokerage mechanism from October to allow other organisations to access ECO subsidy. In September we will consult on whether there is a need for further legislation to oblige energy companies to use the ECO brokerage mechanism and if so how much subsidy they should be required to trade.” All of this is behind schedule.
- In yesterday’s Green Deal webchat DECC Minister Greg Barker stated “Energy Compnies can already start delivering against their ECO targets already but we want to open the market up further and will be consulting shortly on the ECO Brokerage.”
- DECC announced at the LGA conference that they had hired a ‘trader’ within the department and a few trial trades will take place this December to help with some ‘active learning’ on how such a system could work
- DECC also stated that they ‘would not oblige energy companies to use the brokerage – but could do’
- The brokerage would operate as a ‘blind mechanism’ – ie energy companies would not see which specific organisation were bidding in projects, to ensure that all trades were fair
- The brokerage would not deliver 100% of all ECO projects: existing obligation programmes had established good relationships between energy companies and local authorities and other housing providers. Such bilateral contracts should continue
- Related to the above – British Gas – who were at the workshop – stated that their aspiration was to continue building such longer term partnerships
- Only Green Deal Providers would be allowed to submit projects into the brokerage system. Local authorities and social landlords would fit this criteria – and some are looking at registering as Providers. There would still be scope for smaller organisations, such as community groups, to participate in the brokerage, as they could partner with a Green Deal Providers to submit projects, without having to go through the necessary ‘due diligence’ Green Deal Provider process themselves
- A key concern raised was the ability of local authorities to develop projects to submit into the brokerage when funds were being withdrawn from key growth sectors such as environmental and energy services.