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Government to cut funding for household energy efficiency?

Posted by Helena Ripley on 22 July 2015 at 1:58 pm

On 13 July the Financial Times (FT) published an article that suggests that the new budget for the Department of Energy and Climate Change (DECC) will make household energy efficiency improvements more difficult. This because ministers are decreasing the amount of funding available to help install energy saving or generating measures in your house. Of course, all of the environmental and cost saving benefits are still there, but the article suggests that there will be significant cuts to the grants available. 

What’s the news about energy efficiency? 

In brief, the article suggests a large decrease in the funding available for household energy efficiency improvements, as well as other cuts to the DECC budget. Starting off with the changes to the money available for installing energy efficiency measures, there is speculation that the Green Deal Home Improvement Fund (GDHIF) will be greatly reduced, from £220m this year down to £150m next year. The whole scheme is suspected to be coming to an end in 2017. The GDHIF is not the same as the Green Deal; the GDHIF allows you to claim back money on new energy efficiency installations in your home, up to a certain limit. That limit is also falling . The FT article claims the Green Deal could also be in danger of being reduced or removed as it has fallen short of minister’s expectations. 

The article also reviews the possible future of the renewable heat incentive (RHI), which is facing further cuts. After noting that the RHI has had a persistently low uptake since it started in 2009, with only £25m spent on domestic schemes and £195m on non-domestic projects, the article reveals that this fund could cost DECC billions because it guarantees annual payments for seven years. 

Andrew Warren, who is one of the trustees of the National Energy Foundation and has strong links with DECC, says “Energy efficiency currently takes around 2% of DECC's budget. If these figures are accurate, it will bear 60% of the departmental budget cuts”. 

What else could be cut?

The article speculates on the possible job cuts that might be seen within DECC, then points out that they spent £2.2 billion dealing with  the nuclear industry in the year 2013/2014.  It goes on to discuss the contribution DECC will make to the International Climate Fund. This is a five year project, ending in 2016, with a budget of £3.8 billion. Currently it is managed jointly by DECC, the Department for International Development (DfID) and the Department for Environment, Food and Rural Affairs. The article highlights the possibility that DfID may take more responsibility for this fund. 

What does this mean for us?

We know that there is a reduction in the funding available through certain DECC projects- there have been several blogs on the YouGen website over the years about the decreasing amount available through the Feed-in Tariff (FiT) and RHI schemes. Indeed, this was the original plan when these grants were first made available. They were set up with the understanding that solar PV and thermal technology (among others) would improve over time and the price of the modules would decrease. Therefore the government gave the older, more expensive, panels a higher subsidy by means of the FiTs. The newer ones have been subsidised, in effect, by technological developments. 

Some cuts and reductions are to be expected. GDHIF grants may be maintained only for a brief period, given the reduced funding. The ongoing reduction in available FiTs and RHI will continue. Nonetheless, we should treat the extreme measures suggested in the article with caution until the full details of the chancellor’s budget in respect of energy efficiency are made known. The FT writers themselves mention this, and include a quote from DECC saying that “[its] budget will be set out by the chancellor and any estimates before that are pure speculation”. We will have to wait until the autumn spending review to find out exactly what cuts DECC faces. 

In the meantime, there are some grounds for optimism. A blog released by DECC on 9 July states that “[their] priorities are clear: keeping bills as low as possible for hardworking families and businesses and powering the economy while decarbonising in the most cost-effective way”. The blog acknowledges the challenges that DECC are facing at the moment: “Our modern technological society cannot function without power” but notes that “tackling climate change is also non-negotiable”. 

Photo credit: Jon S

More information about Feed-in Tariffs on YouGen

More information about the Renewable Heat Incentive (RHI) on YouGen

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