Sleeping giants

The community energy saving programme was meant to be one of the jewels in the crown of government attempts to make homes more energy efficient.

The scheme, launched in 2008, was designed specifically to target some of the UK’s poorest neighbourhoods. It is expected to fund improvements to 90,000 homes in the top 10 per cent of deprived areas across the UK - saving 2.9 mega-tonnes of carbon dioxide by December 2012 in the process.

Under the scheme, social landlords or councils working with private sector landlords apply to the UK’s major energy companies for funding. To do this they assemble an offer based on the condition of their stock, the number of homes in need of work, and the amount of funding needed. The energy companies respond by offering a portion of the funding needed to carry out the work.

The Energy and Climate Change department estimates that reaching this carbon reduction target will cost the big six energy firms - British Gas, e.on, EDF energy, Scottish & Southern, Npower and Scottish - around £350 million in total.

Since the programme opened for business in September 2009, however, activity has been slow and shrouded in secrecy. According to the most up-to-date statistics from energy watchdog Ofgem, two of the six big energy firms had not granted any applications by March. A number of sources suggest that energy firms have spent somewhere in the region of £12 million in total so far.

So are landlords struggling to access the programme, how bad has the energy giants’ performance been so far and will it improve?

A slow start

What little reporting there has been from Ofgem so far reveals that only a trickle of CESP agreements have been made to date. Ofgem’s first annual report on CESP to energy and climate change secretary Chris Huhne said there was only one CESP scheme up and running by 31 December 2009. The regulator received a further 19 scheme notifications from four energy suppliers and one energy generator, up until the end of March - according to its most up to date figures.

This means that in the first six months of operation two of the biggest energy companies approved no CESP payments at all. Ofgem refuses to reveal the names and also states that energy companies are not required to report how much money they spend on the scheme. The first official report from Ofgem into how much carbon has been cut so far will not appear until May 2011. It adds all six are now involved in the scheme.

Ofgem says it expects the scheme to be ‘fully underway’ by May 2011, and there is no chance energy companies will fail to meet their carbon reduction targets, given that they will face a hefty fine of 10 per cent of their global turnover if they do so.

Richard Baines, director of sustainable development at 1,800-home Black Country Housing Association, says the slow progress so far could cause bigger problems later on.

‘There is going to be a scramble at the end of the programme for the companies to reach their obligations, which may result in them being less selective about what sort of schemes they approve,’ he states.

Mr Baines claims CESP’s area-based approach means energy companies are preoccupied with urban landlords whose concentrated stock means they can offer efficiencies of scale.

‘It is extremely difficult to get onto the scheme: the energy companies wouldn’t talk to us as we have pepperpotted stock which means more journeys for contractors carrying out work,’ he says. ‘They get a lot of enquiries, but they are not able to satisfy the enquirer with an offer that will mean the landlord can afford it.’

Difficult process

A source at one firm which carries out energy efficiency improvements says that some social landlords which have looked at applying for grants have fallen at the first hurdle when they come up against CESP’s complicated application process.

To secure CESP funding, landlords must assemble a small mountain of paperwork. They need a letter from their local authority giving the green light for the work to go ahead, and they must calculate how many of their properties fall into the super output areas in the top 10 per cent of the most deprived areas in the country.

Once they have done this, the landlord will approach an energy company for funding, but even then the scheme could end up on the rocks. The energy firms can pay out between 10 and 80 per cent of the full cost, which means some social landlords struggle to fund the whole scheme.

Mark Johnson, director of property services at Nottingham City Homes, applied for funding for work to between 450 and 600 of the arm’s-length management organisation’s homes. Mr Johnson was surprised by the gap between the cost of the works and the amount the energy companies would offer. He adds: ‘It is very complicated to work out how much of the scheme can be funded by energy companies. The 80 per cent funding we got was not enough to do the work.’

In the end, the ALMO managed to secure the remaining 20 per cent from its parent council and the Homes and Communities Agency.

Olivia Powis, London regional manager at the National Housing Federation, also believes that the scheme’s focus on carbon reduction rather than on the amount of money the companies are spending, means they are avoiding the most hard-to-treat properties. She said some landlords had been rejected ‘because their offer is not attractive to the companies in terms of the proportion of stock available and finances’.

Inside Housing contacted each of the big six energy companies to ask why the sector feels they are moving so slowly on CESP. The three that responded say they are fully committed to the programme, and that they have more schemes in the pipeline.

Jeremy Parsons, head of energy efficiency obligations at British Gas, says: ‘There are challenges in putting a rural scheme together, as there are with non-rural schemes, regardless of location. As the largest deliverer of the CESP programme we have been working to ensure we have a strong mix of schemes in our CESP portfolio.

‘We are very committed to doing what we can to help address rural fuel poverty. Our scheme with Dumfries and Galloway Housing Partnership is a flagship scheme with a raft of highly innovative measures in an area with widespread rural fuel poverty.’

Mark Bird, eco-consultancy manager at Walsall Housing Group, says he ‘can’t find a single fault with CESP’. WHG had the first CESP deal with British Gas to deliver improvements to around 150 hard-to-treat solid wall properties on a street-by-street basis.

DECC claims that CESP’s results so far are ‘promising’. As it begins to hold talks on its successor programme, however, it might want to consider how it can help tenants in deprived areas across the country, not just in the areas suiting energy companies.

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