(This article provided some of the data for the Guardian's article on energy efficiency on 18.01.14. I have put it at the top of this web site in order to make it easy to find. Chris Goodall)
Research published by DECC last month showed that home insulation measures deliver half the savings that are claimed. A study of homeowners installing a package of cavity and loft insulation and a new boiler in 2010 indicated a 19% reduction in energy use, and a likely saving of about £140 at current gas prices. The government’s Energy Saving Trust claims savings from these measures of twice this amount. The smaller than expected reductions in energy use mean that the typical UK householder will lose hundreds of pounds a year from taking out a Green Deal loan.
The DECC study is part of a long running research project to track energy use in British homes. Actual gas and electricity use is logged for a large sample of households. Homes installing energy efficiency measures under government schemes can be compared to a control group of houses with initially identical gas and electricity consumption.
The results released on 21st November tracked those homes that had cavity wall insulation, loft insulation or a new boiler installed in 2010. The numbers showed the reductions in energy use in 2011 in these houses. Energy use in UK houses is tending to fall so the DECC survey estimates the extra reduction in gas bills arising from the energy efficiency measures compared to the control group average.
The table below gives DECC’s estimate of the cut in energy consumption arising from the individual reduction measures
|Measure||Percentage reduction in gas use||Estimate of kilowatt hours of gas saved|
|New boiler||9.2%||1,800 kWh|
|Cavity wall insulation||7.8%||1,400 kWh|
|Loft insulation||1.7%||400 kWh|
a) Loft measures include full insulation where the house had none laid and also ‘top-up’ measures to take the depth to 270mm.
b) The homes having, for example, new boilers would have had a different control group to the cavity wall houses. So the baseline energy consumption may well be different.
c) The average (mean) gas consumption across all the houses in DECC database was 14,100 kWh in 2011.
d) By coincidence, those homes installing all three measures together achieved a saving of 19.0%, almost exactly the same as the individual elements combined.
At today’s gas prices, what are these savings worth? (I have used the lowest Big Six energy company costs of 3.874p per kWh for an address in Oxford). And what does the government’s Energy Saving Trust say that the measures should save a householder?
|Measure||Annual value of savings||EST estimate of savings|
|New boiler||£69.73||‘£105 to £310’ depending on the age of the replaced boiler|
|Cavity wall insulation||£54.24||‘up to £140’|
|Loft insulation||£15.50||‘up to £180’ when loft had no insulation otherwise ‘£25’.|
The DECC survey also looks at homes that had all three measures installed in the same year. The typical saving was 3,600 kWh, producing a saving in 2013 prices of £139.46. This compares with the EST’s headline saving estimate of £270, almost as twice as much as actually achieved. (I have used the EST’s figure of ‘up to £140’ for cavity wall insulation.
What would this package of measures cost today? The EST web site gives a minimum figure of £3,050. In other words, the typical return to energy efficiency investment is less than 5% per annum. (£139.46/£3,050) It may still make sense financially in these times of low interest rates on savings but the benefits are not large in cash terms.
The DECC study also shows that many households saw an increase, not a decrease, in their gas consumption after installing cavity wall insulation. The report doesn’t provide a number but a chart (Figure 3.3) suggests that perhaps 40% of homes with new insulation experienced increased bills compared to the control group. This may be because the insulation was installed badly - a depressingly common phenomenon - or because the occupants decided to heat their house to a higher temperature as a result of the better insulation.
The implications for the Green Deal, the government’s main energy efficiency policy, are very troubling indeed. Unsurprisingly, the DECC statistical report doesn’t make this clear. The Green Deal arranges for householders to get loans to improve their properties. The interest is charged at commercial rates and repayment is made through the electricity bill.
According to the EST figures, the typical householder installing loft and cavity insulation and a new boiler would need to take out a loan of about £3,050 to pay for the measures. At an interest rate of 8% and repayment over 20 years, the annual addition to the electricity bill would be £342.87, compared to the average savings on the gas bill of £139.46. In other words, a family taking out Green Deal finance would be over £200 a year worse off as a result of doing what the government suggests and improving the energy efficiency of their home.
Outside government, everybody knows the Green Deal is a disaster. The scheme is excessively complicated, over-bureaucratic and expensive. The initial assessments for the programme use software that is misleading, and often simply wrong, in its estimates of cost savings from energy efficiency. (I know; I had one done on my house).
More generally, I want to ask this question. If the research arm of DECC knows the true figure for the likely cost savings from energy efficiency measures, why are other parts of government continuing to promulgate much larger figures in order to get householders to take out Green Deals? When is DECC going to get sued for not telling people trying their best to save money that the Green Deal will typically cost families hundreds of pounds a year?