Are energy efficiency measures mere greenwash?

The latest green initiatives are being dismissed as drops in the ocean
Alexandra Goss

Alistair Darling announced he was ploughing £200m into measures to improve energy efficiency in last week’s pre-budget report but critics have warned these are merely a drop in the ocean.
Top of the bill is a £50m boiler scrappage scheme — modelled on the existing car scrappage scheme — which the chancellor claims will help 125,000 households trade in their inefficient boilers. He also announced that anyone who generates their own electricity will get tax-free cashback worth £900 a year from April.
The additional £150m will be used to extend the Warm Front programme, which will provide better heating and insulation for an additional 75,000 of the most vulnerable households. We look at how the measures stack up.
Boiler scrappage scheme
This headline-grabbing announcement claims that 125,000 households could receive grants of up to £400 towards replacing their old, inefficient boiler.
Anyone with a so-called G-rated boiler, which uses up to 30% more gas than a new one, will be eligible for the scheme if they replace it with a more energy-efficient A-rated model, which can cost up to £2,000. G-rated boilers are typically more than 15 years old.
Such a measure could cut household energy bills by up to a quarter — a saving of £235 a year for an average family home, according to the Energy Saving Trust. Gas boilers also account for 60% of the carbon emissions from an average gas-heated home and the measures announced last week would save 1.26 tonnes of carbon dioxide emissions a year for each affected household.
It sounds great in theory but the pre-budget report failed to provide details of how individuals could apply, when the scheme will start, or whether it will be extended once the £50m runs out. A representative from the Department of Energy and Climate Change, which will oversee the rollout of the programme, said: “We will launch the scheme at the earliest opportunity next year.
“Residential households and privately-rented homes will be the main beneficiaries and it will not be means-tested, as far as I’m aware. As ever, the devil is in the detail.”
Indeed, it is not clear how the estimated 4.2m people in the UK with a G-rated boiler are going to benefit. Giving each of them £400 towards upgrading their heating systems would require funding of almost £1.7 billion — 34 times the £50m that has been set aside by the government.
Barbara Bell at KPMG, the accountant, said: “This measure may sound great on paper but it is merely a drop in the ocean when you look at the millions of people who have an inefficient boiler in the UK. With gas boilers accounting for such a huge proportion of the carbon emissions from an average gas-heated home, the government still has a long way to go.
“It will be interesting to see whether the scheme is extended once it expires. If it is, it could really begin to make an impact.”
Tax-free clean energy cashback
In July, Ed Miliband, the secretary of state for energy and climate change, announced that households would be encouraged to generate their own power through a “clean energy cashback” system, under which they would be paid for any power they produce — whether they use it or not.
So-called “feed-in tariffs” will come into effect in April and will pay for the electricity households generate through solar panels or a wind turbine. Under the plans, homeowners will be paid up to 36Åp for every kilowatt hour (kWh) of electricity produced using solar panels.
If electricity is exported back to the National Grid — when the homeowner is away, for example — an additional 5p per kWh is paid, while savings are still being made on electricity bills.
Darling added to this in last Wednesday’s pre-budget report, announcing that these feed-in tariffs, worth an average £900 a year, would become free of income tax.
The Treasury claims this will save households paying basic-rate tax of £180 in 2010 but this is nonetheless small beer compared with the cost of installing a solar panel, which can be as much as £10,000, according to Sharp Solar, the UK’s largest solar panel manufacturer.
It said that the “pay-back” time for solar panels — the time it takes to recoup an initial investment of £10,000 — would shrink from 14 years to 10 as a result of the measures.
The figures assume you pay £10,000 upfront but earn £828 a year from the feed-in tariffs and save £138 a year on your energy bill — a total of £966, recouping the installation costs in 10 years.
Douglas Watkinson at Deloitte, the accountant, said: “While the changes are welcome, they do add to the complexity of the various incentives available.
“The sheer number of measures makes it harder for investors to understand and take advantage of them.”
Warm Front
The chancellor said the £150m increase in funding for the Warm Front scheme would help an additional 75,000 vulnerable people to receive energy efficiency measures.
Warm Front operates only in England and offers people on benefits up to £3,500 to pay for central heating, loft insulation, draught-proofing, cavity wall insulation and water tank lagging.
Darling also pledged to help a million more vulnerable households with discounts on their energy bills by increasing the level of support that energy companies must provide from £150m to £300m by 2013-14.
Audrey Gallacher at Consumer Focus, the consumer watchdog, said: “The additional money will help to prevent thousands of low-income households from suffering cold, damp homes and fuel bills they can’t afford.”
HOMES HOLIDAY ENDS
The chancellor confirmed that the stamp duty holiday on homes worth up to £175,000 will end on December 31, with the threshold reverting to £125,000. This means buyers will pay 1% on homes between £125,000 and £250,000; 3% between £250,000 and £500,000, and 4% thereafter.
However, aspiring homeowners could benefit from the £150m boost to the Home Buy Direct scheme, which will help 3,000 more people. The Support for Mortgage Interest scheme, which helps those who suffer a sudden drop in income, will also be extended for another six months.