Green Deal – more learning less criticism

It is easy to criticise the Green Deal, and many people have done just that in the last few weeks, but it is a very complex response to a complex problem – how to make the UK’s housing stock more energy efficient.

It is inevitably a camel – that is to say a horse designed by a committee.  We need to use this first phase of implementation, and let’s face it we are only in month 9, to measure results, learn and improve the system.  It is now generally agreed that the most cost effective way of addressing our energy issues of high costs, energy security and emissions, is by improving energy efficiency and this is undoubtedly happening at an increased rate due to high energy prices.

Even recently we had statistics that showed average household energy use has gone down by 25%, most of this is probably due to economising – switching things off more often or turning thermostats down – but some is due to previous energy efficiency programmes such as CERT and CESP (now replaced by ECO). Our challenge is how to improve the rate of improvement
of energy efficiency beyond its “natural” rate and the Green Deal is a serious attempt to do this in the residential sector, possibly the hardest sector to address.

To improve the rate of energy efficiency improvements we need to build demand for greater efficiency, build supply of efficiency goods and services and build the flow of finance into energy efficiency investment.  The Green Deal attempts to do all three.  The problems include; we don’t know how to build demand for efficiency – despite high prices people don’t wake up and say I want to buy an energy efficiency retrofit for my house (or building).  Behavioural economics, changing local social norms and identifying the factors that really push people to make such a major decision are all critical factors on the demand side.

On the supply side we need to greatly improve the accuracy of energy modelling – the approach taken by Green Deal just isn’t good enough.  Other countries have similar problems – in California research shows that a frighteningly high proportion of energy surveys get the savings wrong by 50% – a major error especially if you are investing yours or someone else’s money.

Accessing the right kind of finance is critical – the Green Deal’s 6.9% interest rate is too high for home owners with good credit.  Those with cash in the bank may use that rather than borrow. We need to use the public money put into Green Deal into better research on all three aspects, demand, supply and finance – rather than on marketing campaigns that are doomed to only push a few people into action.  We need to learn how to create market pull.  Of course the number of people having Green Deal assessments is much higher than the 132 signed up for implementation last month – we also need to see how many of the others have taken action on their own without further involvement from the Green Deal.  Then we will get a better idea of what is working and what is not.