Significant Barriers to Energy Efficiency Improvement Remain in the UK

Helen Drury, Policy Advisor at BCSC, outlines the obstacles preventing greater energy efficiency in the UK. 

Amid the recent omni-shambles of government u-turns, delays in announcements on renewables policy and a re-defining of a green tax, it seems to me that George Osborne is actively trying to kill the Green Economy.

In a report published this week by DECC and undertaken by McKinsey, significant barriers to improving energy efficiency in the UK have been identified. 

While there is great potential for improving the building shell of commercial buildings, significant barriers to uptake remain. 

For me, two points from the report really stuck out: Firstly, the complex and constantly evolving policy landscape is having little impact on realising the potential for abatement; and secondly the split incentives for landlords and tenants are causing significant barrier.

The UK climate change policy landscape is constantly evolving and is seen as overly complex by the respondents to the research. Government policy interventions are falling short of its potential. For example, for building energy efficiency, policy is expected to only deliver 3% of the potential.  At the same time, it is estimated the CRC will only deliver 1TWh of the 57TWh efficiency savings potential in the commercial sector. Businesses want certainty, but they also want simple policy drivers that they can understand.

The report also shows that government still has not got to grips with the more complex nature of energy use in the retail property sector where the majority of commercial property is leased (61%).  At the same time, with payback periods for energy efficiency improvements averaging 5 years and investments decisions typically made for a 2 year payback, there are issues around incentivising the upfront cost.  This compounds the issue of a split incentive as businesses are less likely to invest in long payback improvements that they do not directly benefit from.

The government must take these messages on board.  We have been calling on government to simplify this complex and confusing landscape.  A first step will be for the Government to replace the CRC with a simplified tax and combine this with GHG reporting which will increase awareness at the board level.