Prime minister Liz Truss will need to directly address the UK’s status as one of the least energy-efficient nations in Europe to properly deal with the current crisis of spiralling gas and electricity prices, the Institute for Government has said.
Last week Truss set out measures to protect consumers from soaring energy costs by freezing average household energy bills at £2,500 a year for two years from October and offering businesses similar support for six months.
A new IfG report says that while the move, which is expected to come with a £150bn price tag, will provide a degree of certainty to consumers and matches the scale of the crisis, it contains no measures to tackle the UK’s energy-efficiency problem.
Report authors Rosa Hodgkin and Tom Sasse said Truss had so far ignored energy efficiency in her response to the crisis but maintained that the case for action was “even stronger” now the government was taking energy costs directly onto its balance sheet.
Hodgkin and Sasse said the UK’s heavy reliance on gas for household heating and the nation’s poorly-insulated housing stock meant high energy prices would be a “major vulnerability” beyond the short term.
They said energy-efficiency measures could make a much bigger difference than energy supply aid in the medium term and that the nation was paying the price for a “decade of failure” on making homes and businesses more energy-efficient. They added that the UK could learn valuable lessons from initiatives in Germany, France and Italy.
“The UK’s old housing stock meant it faced a steeper challenge than other countries, but it scaled back subsidies in the 2010s,” Hodgkin and Sasse said.
“The last two major policy interventions – the 2012 Green Deal and the 2020 Green Homes Grant – were poorly designed, failed to boost uptake, and harmed trust among consumers and installers.
“It also ditched plans to tighten regulations on new-build homes in 2015. Policies have also struggled to drive improvements in non-domestic buildings, which face different issues and challenges.”
They added that the lack of a strong supply chain for retrofitting of homes and other buildings remained a key barrier to driving improvements that would need to be addressed in the future.
Hodgkin and Sasse said figures published by the Tony Blair Institute for Global Change suggested a major programme to reduce energy use, including by boosting insulation, could reduce aggregate household energy costs by £27bn as early as next year.
“If the government focuses only on short-term financial support, and long-term measures to boost supply that are unlikely to have a major impact, it will find itself in an even more difficult position in a year’s time,” they said.
“Funding very high energy costs through borrowing, without a strategy to reduce demand, will prove unsustainable.
“Launched immediately, a concerted national effort to improve energy efficiency could deliver significant savings within a year – and substantial benefits in the years beyond.
“Such a programme was already required if the UK is to stay on track for net zero. In an era of energy instability, it should now be seen as critical for protecting consumers and businesses and boosting resilience.”
The Department for Business, Energy and Industrial Strategy said £6.6bn was being invested in improving energy efficiency over the course of the current parliament as part of the government’s Help to Heat programme.
It said “huge progress” had been made over the past 12 years, with the number of properties with an energy-efficiency rating of “C” or above at 46% and rising, up from just 14% in 2010.
This story was updated to include a response from BEIS at 12.25pm on 14 September 2022