Author: Gary Engelbert
UK targets for carbon reduction in housing have lead to a number of new government initiatives to support spend on energy efficiency works
The UK Government has committed to an ambitious target of 30% carbon reduction by 2020. Housing plays a significant role in meeting this target as it contributes just over a quarter of overall UK carbon emissions. As part of this drive for energy efficiency a number of government initiatives are in place that help fund relevant works in domestic properties:
We estimate that the incremental spend on measures to be worth £10.8Bn to 2017/18 based on modelling the profile of each initiative
The most significant initiative is the new Energy Company Obligation (ECO)…
ECO took effect from January 2013 and is an obligation placed on the big 6 energy companies to finance energy efficiency measures with specific targets on energy savings. The scheme is paid for by energy companies who typically increase energy bills to their customers in order to fund it. Spend is likely to be back-loaded in 2 yearly cycles as the deadlines for meeting carbon savings approach. ECO will focus on providing energy efficiency measures to low income and vulnerable consumers and those living in hard-to-treat properties. Therefore, there will be a sharp rise in the need for contractors and specialists involved in insulation measures (specifically solid wall insulation) in areas of social depravation. The initiative is envisioned to last for at least 10 years at a broadly similar level of investment.
…whilst Feed-in-tariffs (FiT), the Green Deal and the Renewable Heat Incentive (RHI) will increasingly support spend in later years
Feed-in-tariffs (FIT) are regular payments from energy companies to householders and communities who generate their own electricity. During 2011 uptake increased dramatically culminating in early December when everyone was rushing to install Solar PV while the payment rates were high. Installation of Solar PV will likely drop off in 2013/14 and 2014/15 driven by the reduction in generation rates, but then start to grow again (although never recovering to the ‘boom’ levels of 2011).
The Green Deal is a further, potentially significant source of funding. It enables private firms to offer consumers energy efficiency improvements to their homes, at no upfront cost, with payments recouped through a proportion of the reduction on their energy bills. Although slow to start, the Green Deal will undoubtedly be a driver of spend in future years. There are 45 measures approved to receive funding under the Green Deal, covering insulation, heating and hot water, glazing and micro-generation. Installers must be authorised and may specialise in one or multiple measures.
The Renewable Heat Incentive provides a continuous income stream over 20 years to anyone that installs an eligible renewable heating system. Unlike FiT, it will be paid for by the Government not by energy users. RHI has been delayed for domestic customers, the Government now intending to announce the final details in summer 2013 and open the schemes for payment from spring 2014. We expect spend to grow over time, as the scheme kicks off and as technologies such solar water heating and air source heat pumps become cheaper and more effective.
This is a new and exciting market that PMSI have worked in consistently while it has developed over the last 5 years. We see huge opportunities for the companies able to exploit this “growth wave” and have built up a database of potential investment targets.