Short communicationA post mortem of the Green Deal: Austerity, energy efficiency, and failure in British energy policy
Introduction
The Green Deal was created by the British Government as an innovative pay-as-you-save energy efficiency finance mechanism for the able-to-pay market to deliver retrofits at a large scale without the need for public subsidies in an age of austerity. It was supposed to become ‘Europe’s most innovative and transformational energy efficiency programme’ [13]. In 2011, the Department for Energy and Climate Change (DECC) estimated that by 2020 the Green Deal would support the retrofit of 14 million homes i.e. almost 2 million homes per year [12].
The reality is that the Green Deal has failed dramatically to deliver even a small proportion of this. In fact, only about 6000 homes per year were retrofitted using Green Deal finance—a total of approximately 14,000 by the end of March 2016 since its launch in January 2013 [5]. Given the inability of the Green Deal to deliver retrofits to a large number of homes, the new Conservative government announced in July 2015 that it would no longer fund the Green Deal as it was not providing value for money. Even though the Green Deal mechanism is officially still alive, albeit without any government support, it is withering away with a rolling average of currently a few hundred retrofits per year. Taking stock of the impact of the Green Deal as part of an inquiry into home energy efficiency, the House of Commons’ Energy and Climate Change Committee [21](p. 15) concluded that the ‘Green Deal is widely regarded to have been a failure’. And the National Audit Office concluded that ‘the Department’s £240 million expenditure on the Green Deal has not generated additional energy savings […]. The Green Deal has therefore not been value for money’ [24](p12). In our view, the Green Deal is probably the biggest failure in the history of UK energy efficiency policy.
What went wrong? In this paper, we analyse both the reasons for the failure and the underlying politics that eventually led to the effective termination of the Green Deal.
Section snippets
Impact of the Green Deal on energy efficiency retrofits
Early assessments of the proposals predicted that the introduction of the Green Deal and the restructuring of the energy savings obligations would lead to a decline in energy savings of around 80% [28]. Whilst such projections are always uncertain, recent figures confirm that they were broadly correct. Energy efficiency improvements have drastically stalled since the introduction of the Green Deal and the Energy Company Obligation (ECO). Figures from the Climate Change Committee [4] and the
Pitfalls of the Green Deal
The underlying pay-as-you-save concept of the Green Deal is a compelling one, particularly taking into account the rising levels of investment needed and therefore the need for new sources of capital. It also potentially helps to solve the landlord-tenant dilemma where the landlord bears the costs of making energy efficiency improvements, but the tenant reaps the benefits in terms of energy cost savings. The Green Deal received a lot of attention and generated interest across Europe with
Initial optimism
All of the issues set out above were known in advance. The vast majority of people familiar with energy efficiency policy design were always very skeptical about the Green Deal. Despite criticism prior to the launch of the Green Deal, initially there were very optimistic statements from Government Ministers and officials. When the Green Deal was launched in January 2013 after a delay of several months Energy and Climate Change Minister Greg Barker announced that the Green Deal would ‘transform
Discussion
Why the events unfolded in this particular manner can be understood by the factors that are discussed below.
Conclusions
Even though the Green Deal is officially still alive it is dying a slow and rather painful death with only a few dozen households using Green Deal finance every month. The introduction of the Green Deal, which was meant to revolutionise and transform energy efficiency, resulted in a collapse of the domestic energy efficiency market. This is perhaps ironic, but no was not unexpected to informed observers. The three main reasons for its failure were poor policy design largely resulting from the
Acknowledgements
The original research on which the paper is based was undertaken as part of the UK Energy Research Centre supported by the UK Natural Environment Research Council under Grant no. NE/G007748/1. Nick Eyre also acknowledges generous support for his research fellowship from the Frank Jackson Foundation. Jan Rosenow’s time was funded by the UK EPSRC through the Centre on Innovation and Energy Demand (CIED; http://cied.ac.uk/; grant number EP/KO11790/1).
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