The Green Deal and Energy Company Obligation could transform the UK’s housing stock, says John Sinfield. But only if they come with powerful incentives to insulate our homes

Let me be clear from the outset: the Green Deal and the Energy Company Obligation could deliver the most comprehensive upgrade of housing stock since the Second World War. However, more needs to be done to realise that potential or the government risks failing to hit the UK’s carbon reduction targets.

Currently, the main driver for improving the energy efficiency of buildings is the Carbon Emission Reduction Target (CERT), which places a legal obligation on energy companies to reduce CO2 emissions. To do this, they subsidise and promote a number of measures, from shower flow restrictors to heat pumps, as well as loft and cavity insulation. If the energy companies don’t hit their targets, Ofgem has the power to fine them up to 10% of their turnover - a pretty strong incentive.

The CERT finishes at the end of 2012, and will be replaced by the Energy Company Obligation (ECO) and Green Deal. While they could be truly transformative programmes, we need to see more detail about how homeowners will be incentivised to “green” their properties. If the right combination of carrots and sticks are not put in place, the Green Deal may not work for consumers, the government or industry.

Upgrading the thermal efficiency of properties through loft or cavity wall insulation is one of the easiest and cheapest means of reducing energy use. Furthermore, to optimise the potential efficiencies of any other method - be it a new boiler or thermostats, new windows or using renewable energy sources - any building must first be properly insulated. The cheapest energy is saved energy.

Knauf Insulation has analysed the impact on the market of CERT being replaced by the Green Deal and the ECO - based on what we know today - and predicts a significant fall in insulation upgrades, unless the government supports its proposals with specific initiatives aimed at encouraging consumer uptake. This potential cliff edge has massive implications, not just for manufacturers, but also for consumers, installers and the government.

Research shows that, at the end of the current CERT programme, there will be in the region of 3.5 million easy-to-fill cavities and about 9 million lofts that could still be topped up. These represent easy wins in carbon saving for the government and cost saving for homeowners. These savings are too valuable to be left to market forces to deliver.

With the government out to consultation on both the Green Deal and ECO this month, Knauf Insulation is calling for both initiatives to go further. The current plan for the ECO is that loft and cavity wall insulation will not be subsidised for those “able to pay”. And most fillable cavities and lofts are in this group. If the Green Deal is to really deliver, it must drive take-up by these consumers. Consumers who, thus far, have not grasped the benefits of living in an energy-efficient home.

In its recent report to the government, the Commission for Climate Change recommended that the Green Deal and ECO were aligned “with the ambition to insulate all lofts and cavity walls by 2015, as well as 2 million solid walls by 2020”. To achieve this, broader incentives must be put in place, such as stamp duty reductions, council tax benefits or changes in VAT.
It is also crucial that there is a considered transition plan from CERT into the Green Deal and ECO that allows these upgrades to take place. This increases certainty for both installers and manufacturers and will also allow continued investment in new solutions for hard-to-treat cavities and solid wall properties. Installers in particular need to reskill their workforce to deal with the new insulation solutions that will be required.

Where is the downside to filling all the potential lofts and cavities by 2015? It’s good for the environment, good for consumers and helps UK plc to meet its green targets.

John Sinfield is managing director Northern Europe at Knauf Insulation