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Homes and economy to benefit from energy and climate policies - Huhne

Green Deal scheme will kick start £14bn investment over the next decade, supporting at least 65,000 insulation and construction jobs by…

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

  • Green Deal scheme will kick start £14bn investment over the next decade, supporting at least 65,000 insulation and construction jobs by 2015
  • £1.3 billion a year additional help from energy companies for vulnerable and hard-to-insulate homes
  • Overall average household energy bill in 2020 will be 7%, or £94, lower than without energy and climate polices

.£14 billion worth of private sector investment in home energy improvements over the next decade will help insulate households from rising global energy prices and create thousands of jobs in the British insulation and construction sector, The Rt Hon Chris Huhne MP said today.

A consultation on the Green Deal, which will provide home energy saving upgrades to householders at no upfront cost, was published as part of the Energy and Climate Change Secretary’s Annual Energy Statement to Parliament. He also published a new government analysis showing that homes will on average be cheaper to heat and light in future than if the Government was not pursuing policies to keep the lights on and emissions down.

The Rt Hon Chris Huhne MP, Energy and Climate Change Secretary, said:

“The Green Deal is about putting energy consumers back in control of their bills and banishing Britain’s draughty homes to the history books. By stimulating billions of pounds of private sector investment, the Green Deal will revolutionise the way that we keep our homes warm, making them cosier, more efficient - and all at no upfront cost.

“The Green Deal is also a massive business opportunity for firms up and down Britain, helping to power the economy and creating jobs. From one-man bands and local authorities, to the big supermarkets and DIY stores, we want as many providers getting involved as possible because that’s what will give consumers the best deal.

“I want to insulate Britain’s homes not just from the cold weather, but also from the chill winds of global fossil fuel prices. It’s these that are pushing up consumer energy prices, and it’s why our balanced package of policies aimed at achieving energy savings and shifting to more home grown alternatives is the right one for the economy and all of us who pay energy bills.

“There are certainly costs to replacing our ageing energy infrastructure with modern, clean power stations, and we take very seriously any impact of our policies on what consumers and businesses pay. We’ve repeatedly taken steps to reduce this - by removing some planned levies on bills and making others more cost effective and within budget.

“But a crucial - and too often ignored - priority of our whole strategy is to reduce the amount of energy we use in our homes.”

The Green Deal framework will be launched from October 2012. Today’s consultation outlines the following three big benefits of the groundbreaking scheme - and asks for comments from industry and the public:

  • Every British home and business will be able to install packages of energy-saving technologies such as insulation at no upfront cost, making their property warmer and cosier straight away, with repayments made over time out of the energy savings. Strict standards will be put in place to prevent consumers being ripped off by cowboys.
  • A new requirement on energy companies to provide £1.3 billion a year to ensure everyone is able to benefit from the Green Deal - no matter their income or the type of house they live in. Additional help will be available to ensure the fuel poor get better boilers and fix draughty homes, while subsidy will also be provided to help tackle homes that are hard to insulate - including solid wall homes.
  • The Green Deal is expected to kick start around £14 billion of private sector investment over the next decade - with new safeguards to help small family firms as well as big high street names become involved. The Green Deal could support at least 65,000 insulation and construction jobs by 2015.

Up to £150 in cash back could be available for homes taking out a Green Deal - to be funded through private sector Green Deal finance - as part of efforts to make the Green Deal as attractive as possible.

Separately, the Chancellor announced in Budget 2011 that the Government is committed to the success of the Green Deal and will act to encourage and incentivise take-up so the Green Deal will appeal to households, businesses and prospective providers alike, before it is introduced in 2012.

Estimated impacts of energy and climate change policies on energy prices and bills

Thumbnail of 'Impact on households' graphic

Thumbnail of graphic showing estimated impact on average energy bills compared with bills in the absence of policies

The annual estimate of the impacts of energy and climate change policies on energy prices and bills, published today, shows:

  • By the end of 2011 household electricity prices will have increased by around 16% and household gas prices by 25% since the start of the year. This has been due mostly to global fossil fuel prices. Over the past year alone the global gas price increased by nearly 40%. Many experts expect global fossil fuel prices to continue to rise over the medium- and long term, meaning energy bills are likely to increase with or without policies.
  • Government policies currently account for around 7% of an average household energy bill and have contributed very little to these recent price increases. In fact, accounting for the efficiency savings policies already delivered, the average household energy bill in 2011 is only 2% higher than it would have been if these policies were never introduced.
  • In 2020 the average household bill will be 7%, or £94, lower than if the Government was not pursuing policies to achieve energy savings and incentivise the shift from fossil fuels to alternatives. A net saving will start to kick in from around 2013 and, over the remaining lifetime of this Parliament, average household bills will be lower than they otherwise would be, as a result of energy and climate policies. This assumes a central gas price estimate of nearly 70p/therm in 2020. If the gas price was to be higher, householders would be even better off.
  • Government policies will enable more of the most vulnerable to heat their homes more affordably, as they will receive extra help through the new Warm Home Discount, existing energy efficiency schemes and the Energy Company Obligation announced today.

The analysis published today also covers the impact of policies on prices and bills for businesses. Energy and climate change policies affect businesses differently to households. Businesses are not supported by the same range of energy efficiency policies, and not many of them are able to make significant savings due to the nature of the industrial processes involved. Their energy prices are also on average lower than household energy prices - many pay closer to wholesale energy prices - and so a given unit cost will result in a higher percentage increase in bills. These factors combine to mean energy and climate change policies are expected to, on average, add to business energy bills. While it is important businesses play their part in the transition to a low-carbon economy, it is equally important they remain competitive and that the UK remains an attractive location for them. There would be no advantage - neither for the UK economy nor in terms of global emissions reductions - in simply forcing UK businesses to relocate to other countries. That is why the Government is committed, before the end of the year, to announce a package of measures for those energy intensive industries for which the impact of Government policies on the cost of electricity will put their international competitiveness most at risk.

Notes for editors

  1. The Coalition Programme for Government made a commitment to an Annual Energy Statement. Ministers have also committed to publish revised estimates of the impacts of energy and climate change policies on prices and bills every year alongside the Annual Energy Statement.
  2. Following Royal Assent of the Energy Act in October, the Green Deal and Energy Company Obligation consultation published today paves the way for the necessary secondary legislation to be laid before Parliament in the spring, to allow for the Green Deal framework to be in place in October 2012. Over the next year, work will continue to get the Green Deal ready for market. Today’s consultation also contains:
  • proposals to open up the energy efficiency market to other companies and new entrants by recommending that up to 50% of an energy company’s ECO carbon-saving obligation should be met through other providers, such as local authorities, and other Green Deal providers. This will help make ECO more cost effective for consumers, and get more competition into the market so it’s not just taken up by the major players and the smaller providers crowded out
  • details of a new qualification to ensure home energy experts working under the Green Deal have the right skills to advise and be trusted by customers
  1. The Cabinet Office Behavioural Insight Team has four field trials to test different incentives to encourage uptake of energy efficiency measures. Further information is available on the Cabinet Office website.
  2. All of the documents published today are available on the DECC website:
Published 23 November 2011