Wales can benefit by beating home energy targets

At first sight it seems the problem is solved. Improvements in home energy efficiency will meet the Welsh Government’s target of 3% reduction per year in carbon dioxide emissions, all the way to 2020.

This is the conclusion of a new report by the Energy Saving Trust (EST) on behalf of WWF Cymru which shows that, even in the absence of new Welsh Government policies, the 2020 target will be reached simply by ‘business as usual’ – just the normal replacement of central heating boilers with new high efficiency types when old ones break down.

Is there a catch? Well, EST points out that success does require that emissions from power stations fall at the rate projected by the UK Government – which might be a tad optimistic, but it’s not something that the Welsh Government has much control over.

So should Welsh Ministers start reining back spending on energy efficiency policies? Definitely not! Not if they want to reduce households suffering from fuel poverty. Not if they want to increase employment. Not if they want to reduce the burden on the NHS. And not if they are serious about tackling climate change.

The report by EST shows the advantages to be gained, in terms of reducing carbon emissions, from different scenarios involving home refurbishments. These cover loft insulation, condensing boilers, cavity wall insulation and draught-proofing – all heat related because 60% of the energy used in homes is for space heating and 20% is for water heating. (Lighting and cooking take about 3% each, and the balance of about 14% is for appliance use.)

Applying these measures could reduce emissions from homes in Wales to just over 5 million tonnes of CO2 per year by 2020, beating the Welsh Government’s target of a continuous reduction of 3% per year from the 2006-2010 baseline (7.67 MtCO2/yr), even if grid decarbonisation didn’t happen quite as quickly as hoped.

How much would this cost? EST’s estimate is £860 million to £1.3 billion over the next five years. This is comparable to the estimate, based on a report by Cambridge Econometrics and Verco, that £800 million* needs to be spent in Wales by 2020 as part of a programme to get all homes in the UK up to a good level of energy efficiency (SAP rating of C) by 2035.

The knock-on benefits in Wales of that programme would include the following:

• £3.20 returned through increased GDP per £1 invested by government;

• Increased employment by up to 5,400 net jobs per annum over the period 2020-2030, mostly in the service and construction sectors;

• £43 million per annum in total energy bill savings across the housing stock, after comfort take (including energy price inflation);

• Net benefit of £248 million per annum from the total energy bill savings across the Welsh housing stock;

• 1.18 MtCO2 reductions per annum by 2030, after accounting for direct, indirect, and economy-wide rebound effects;

• A return of 42 pence in National Health Service (NHS) savings for every £1 spent on reducing fuel poverty (due to improved health and reduced healthcare expenditure resulting from warmer and more comfortable homes, and improved air quality);

• 26% reduction in Welsh imports of natural gas in 2030, worth £155 million in that year.

Is £800 million by 2020 for Welsh home energy efficiency too much to expect? Well, according to the National Energy Action organisation, £690m will be received by the Treasury in the next five years through VAT and carbon taxes from domestic energy consumers in Wales. It would make sense, given all the benefits mentioned above, for the Government to ring-fence this sum for investment back into the domestic sector. Especially when considering the NEA’s estimate that ‘over the next 15 years over 7,000 vulnerable people in Wales will die needlessly due to the cold’.

The balance between the £690m and £800m (or even the EST’s estimate of over £860 million) could be made up by the Welsh Government. After all, the Scottish Government is proposing to invest £114 million per year in home energy efficiency. If the Welsh Government were to make a proportional spend based on relative budgets, it would mean about £50 million/year. Given all the benefits, this must surely be a good investment.

With the passing of the Well-being of Future Generations Act, the need to do things differently in government (including its spending, cross-departmental collaboration, and preventive policy making) for a sustainable and secure Wales is now a legal requirement. A comprehensive roll out of energy efficiency measures at the scale outlined above should therefore be a cornerstone of a future Programme for Government.

*£800 million based on the £1.3 billion over 5 years to get the UK on its way to all homes being SAP C by 2035 use 6% as the cost in Wales relative to the UK. Wales is only about 5% of the UK population but our homes are harder to improve; e.g. more single walled construction. Therefore 5 % of the benefits and 6% of the costs identified in the report have been assigned to Wales for this rough assessment.