Thursday, 18 September 2014

Green paper

All posts from: November 2011

Green monster

Thu, 24 Nov 2011

When you are on press deadline on a Wednesday afternoon, how do you start to get your teeth into a 238 page document?

The executive summary alone of the much delayed, eagerly anticipated, and biblically long green deal consultation is 43 pages. Given the planning policy framework document was 52 pages that is crazy. Only a few weeks ago, our web editor Tom Lloyd was told that the consultation was 176 pages but was being hacked back. Well, that clearly didn’t happen. Somewhere in the editing process an additional 62 pages were accumulated. Give the amount of paper required for the printing of this leviathan across the country, this could very well be the least green green policy consultation ever. I would like to make a disclaimer that there is no way I can do the consultation justice in one blog. It will probably fuel at least 10 posts.

Indeed, the majority of green bodies, have not yet made up their mind how to react to the consultation. There is a vacuum of reactions from the usual green bodies other than stock ‘we welcome the publication’ press releases. The fact is that the sector is still digesting its considerable contents and will be forced to do so for some time before being in a position to respond. And to many people’s dismay they are being given just eight weeks to do so – an extraordinary demand.

What chance did I then stand of dissecting it on a press day afternoon – the same week in which the government announced its housing strategy, its consultation of councils’ self financing debt allocations, its TSA standards and the new build figures?

Very little – so instead I went straight for the section that interested me most: page 125 which explores the design of the Energy Company Obligation.

Firstly, a moment of rare smugness (sorry). We revealed that ECO was to be split in to two pots – one for hard to treat homes and another for fuel poverty called ‘affordable warmth’ – it is. We revealed that ECO would be £1.3 billion a year – it is. We said that it would be split between these two pots at a ratio of roughly 25:75 respectively – and it is. We were also the first to reveal social landlords would be excluded from the ‘affordable warmth’ pot of ECO – they are (even if Chris Huhne publically rubbished this at the EEPfH conference last month). We also warned about the narrow emphasis of hard to treat funding on solid wall properties – this is the case. And we reported that a brokerage scheme would be introduced so that energy companies would not have an unfair monopoly over ECO – there is such a system being proposed.

So, on that ECO section: the relevant section states: ‘Some social housing providers have argued that households on the proposed eligible benefits in social tenure homes might benefit from Affordable Warmth support as not all social landlords have easy access to the resources needed to make these improvements, therefore Affordable Warmth should be “tenure blind”. We will welcome evidence on this point. However, in the light of the discussion above, the Government is minded to restrict Affordable Warmth eligibility to properties in private tenures.’

This call for evidence is something that Camco and the NHF are working on – but the sector needs to address properly and coherently if it is to convince the government to change its mind.

At the moment the government argues that the majority of fuel poor live in the private sector (81 per cent in private tenures); that the private sector has the lowest average standards of energy performance; and that in private housing alternative support is less likely to be available after Warm Front has come to an end (it also says that social housing has benefited ‘disproportionately’ from measures through CESP and CERT and from Decent Homes work). These are compelling arguments. And, in terms of getting the best bang for the government’s buck in tackling fuel poverty is hard to disagree that this might be the most efficient way to do so – but that doesn’t mean it is the right way. Based on the current design of ECO, the government might be able to reduce fuel poverty by between 350,000 and 500,000 by 2022 but that doesn’t mean it is helping the people who need it most.

Social tenants are a generally more low income and more vulnerable section of society than private sector residents. They are also in their homes for more of the day as many are retired, unemployed, ill or disabled, meaning they are more likely to be hit hardest by fuel poverty. ECO should help these people – even if it makes the use of ECO less efficient.

As National Housing Federation chief executive David Orr said in his response to the consultation today: ‘the document contains the unhelpful and misleading claims that social housing has benefited disproportionately from subsidy up to now and that the Decent Homes programme has largely sorted, or will sort, energy efficiency in the sector. We will be arguing strongly both that social landlords should have access to the fuel poverty element of subsidy, since fuel poverty has a higher prevalence in social housing than any other tenure.’

Bravo.

This is hammered home when you look at the way they propose to distribute affordable warmth funding. Page 122 of the consultation states that the government plans to target the affordable warmth cash at low income households that ‘include an older person, a child or someone with a disability and who do not have access to alternative sources of support to improve their heating arrangements’. To find these people this it suggests using benefits status as a guide. This, it says, is because the benefits system is an effective and accurate means of targeting households on low incomes in a way that can easily be verified and regulated. This mean a link to the DWP’s planned Universal Credit IT data base that comes in to effect in 2013

Another way it suggests distribute the funds would be through an area-based approach as it used for CESP funding. It says that it anticipates that energy companies might use benefit status to work out eligibility when distributing funds. This could be tricky for the first year of the scheme when the Universal Credit system has not yet begun.

But aside from these details, if the government believed its own rhetoric surrounding the social sector being far more benefit driven than any other sector then it would seem odd to exclude it from fuel poverty funding.

In among all the bad news confirmed in the consultation, there was also some good news. Green Party MP Caroline Lucas this week championed the social tenant’s cause. She tabled an Early Day Motion to parliament calling for landlords to granted access to vital green subsidies as part of our Green Light Campaign. Since going to press we have received the backing of seven other MPs after just one day – including one Conservative - and counting. Please get your local MP to sign it here.

Another piece of good news is that during the FIT debate last night Chris Huhne showed then first signs he might support one of our two main campaign aims: that social housing solar photovoltaic schemes are classed as ‘community projects’ rather than as aggregated schemes which will be subject to the especially debilitating FIT rate of 16.8p/kWh.

On the same day that Caroline Flint led a Labour attack on the cuts to the FIT (which was defeated) Mr Huhne was asked specifically whether social housing PV schemes would count as community projects. He replied: ‘On social housing, I have already said that we will consult on whether it is appropriate to have a separate tariff for genuine community projects.’ This is clearly very good news. However, to balance it out he also said that the design of the scheme, which was introduced by the Labour government, means it is currently not legally possible to introduce a special rate for not-for-profit organisations such as social landlords. Hmmm. Well, we will see.

Something we can not claim to have predicted ahead of our rivals was the size of a government package of green deal incentives. Today Danny Alexander announced that there would ‘a special time-limited ‘introductory offer’ to kick off the green deal: £200 million. This, aside from being sold in the language of a market trader by the Treasury which clearly insisted that if there was to be any new money announced then they, not DECC, would do the announcing (see also David Cameron AND Nick Clegg stealing Grant Shapps’ thunder for the housing strategy announcement because there was new money involved) is a welcome move. Although vague on detail, it was met with enthusiasm by WWF et al. The next round of ‘nudges’ should be unveiled very soon so I will reserve judgement until I have heard the whole package of carrots and sticks before comment.

In the mean time, I have the remaining 200 pages to return to.

Green dealing

Thu, 17 Nov 2011

I will endeavour not to mention our Green Light campaign in this week’s blog.

Despite the fact that we have garnered more than 400 signatures and have the support of many more associations, consortia and bodies like Shelter – as well as the Labour Party and Green Party - I am going to quit banging on about the campaign.

I am sure you all have better things to do than hear about how it takes less time to sign up than it does to visit the water cooler. (Much less, actually).

So, even though you definitely should back Green Light if you haven’t already, instead I am going to steer you towards my favourite other subject, the green deal.

Many of you, like me, will be itching to read a copy of the long awaited green deal consultation.

For some time you will have heard the expression ‘shortly’ or ‘forthcoming’ or, maybe, you might have heard someone prick your excitement with the word ‘imminently’.

Perhaps, like me you have been told as many as five different dates for when it is expected. Well, I am now feeling moderately confident that next week we might actually have a physical document in our hands with tangible detail on how the green deal will work.

At the very latest I am assured it will be the 29th of this month, but in all likelihood it will be sandwiched as part of the bumper package of other government announcements scheduled for next week; on Monday we have the housing strategy with the right to buy consultation, and on Friday the growth strategy.

Both of these (especially the latter) are more eagerly anticipated and pressing than the green deal consultation – and therefore the contents of the green deal consultation could well get lost in the media wash.

Clearly, Inside Housing will be all over the design of ECO and the nitty-gritty of the green deal like a rash. But there are some bigger questions – like what can landlords actually do with the green deal? – which few are really asking right now.

One organisation that is renowned for its holistic outlook and is in fact asking that very question is Bioregional. As we report this week, the options are limited without considerable ECO funding.

The charity has found green deal finance alone will only cover £4,000 of energy efficiency work at a typical home, with a further £10,000 of work for flats or £20,000 of work for houses falling outside the scope of the scheme.

This was based on research and modelling for a scheme to retrofit 2,500 homes in the south London suburb of Hackbridge.

The green deal measures that were covered included loft insulation, cavity wall insulation, lagging and boiler exchanges – all things that most providers have already undertaken to some extent through CERT and CESP.

For many this research will confirm what we already know: that in order to achieve major savings in social housing, more difficult – or expensive – measures will need to be undertaken.

Much of the ‘low hanging fruit’ measures have already been picked. And to meet the ‘golden rule’ and achieve savings in social homes landlords will need MORE not less ECO funding.

In the words of Joanna Marshall-Cook, energy project manager at Bioregional: ‘I’m not sure what scope there is for social housing providers to use that [green deal] unless they are going to go down the solid wall insulation route, and that would need ECO funding.’

Without improved access to ECO, many landlords may well look at the green deal and wonder what the point is. Why should they bother?

Which, awkwardly brings us back to our Green Light campaign to ensure landlords are not excluded from any ECO funding.

But I said I wouldn’t loiter around this, so moving on…

In other news, we this week reveal exactly what the hit of the Carbon Reduction Commitment could be for councils.

The scheme, which was made a far blunter tool by Chancellor George Osborn this time last year, is effectively a tax on carbon emissions complete with a league table to name and shame the biggest green sinners.

The table was published for the first time last week and Inside Housing put in some leg-work to find out what the impact of the CRC is likely to be for cash-strapped authorities. The result is an eye watering £86 million hit. Given how little green funding is available to councils, and taking into account that the feed-in tariff – which was previously an easy way of cutting emissions while generating a tidy income – has been slashed back, this is actually not an insignificant sum.

If you need evidence of what £86 million could do to improve social tenants’ lives, just look at the £4 million that was today distributed among 24 social housing providers from across Britain under the Renewable Heat Premium Payment scheme. Despite being a small amount of money, the government received 125 bids from landlords. It all counts.

The Local Government Association has hit out against the scheme for creating unnecessary admin and distracting councils from investing in worthwhile carbon reduction measures.

They are certainly not alone – the scheme has been widely attacked for being laborious and overly complex. But ultimately it is too late for complaining. Big businesses are feeling the sting – but should tax payers be paying the costs of their local government’s inefficiencies? I am keen to hear what you think on this.

Either way, it will be a welcome stimulus for councils to adapt and change with the private sector.

Fighting FIT

Fri, 11 Nov 2011

You can imagine that Greg Barker had been dreading today for some time.

The climate change minister this morning stepped into a two hour meeting with a room of furious solar sector representatives desperately seeking some grain – even the slightest shard – of hope that their years of work and investment was not all about to go down the drain. He had none for them.

It was always going to be awkward coming face-to-face with the people hit hardest by your policies.

But today must have been especially awkward given a number of the people in the room have this week instructed their lawyers to begin legal action against the minister’s Department of Energy and Climate Change.

Solar Century, which is leading a consortium of other solar companies, said that it is seeking an interim injunction to stop the Department of Energy and Climate Change from using the 12 December as the cut-off date for the current tariff.

It describes the date as being ‘illegal, irrational and unreasonable’. The group, which has not yet named its other members, wants to stop any cuts to tariff levels being made until DECC has completed a ‘proper, review and followed the correct processes’.

This follows the example set by Friends of the Earth which laid down an ultimatum to climate change minister Greg Barker on Monday warning him to amend the proposed cuts by 4pm on Friday or face a judicial review.

Now an expensive and potentially bitter legal clash looks inevitable. It is hard not to sympathise with a sector that has just had the rug pulled out from under it with just six weeks notice.

As Jeremy Leggett, chair of Solar Century, said: ‘The banks get eight years to change, we get less than eight weeks.’

However, past experience of private companies combating policy reforms of this coalition suggests that this is not the best way of gaining traction.

Legal action smells of desperation and signifies an abandonment (however justified) of negotiations.

Past examples (think developer Cala which was eventually swatted aside by Communities Secretary Eric Pickles in its opposition of the scrapping of the regional spatial strategies), and the fact that the government will have taken water-tight legal advice before making the announcement, would suggest this latest effort might be in vain.

That said, there are rumours that local authorities are also considering some form of challenge.

If this is true, although lawyers doubt it is likely to happen, few could blame them. As we report this week, the fall out is massive.

Social landlords are facing abortive costs of £5 million and contractors like Mears have been very badly burned, limping away from the market without a deal to show for their efforts - just an expected £2 million write off and a £2.8 million hit to their annual profits.

Ironic then, that among all the gloom, there was the one deal sealed yesterday that three weeks ago would have been mega news.

The first – and possibly the last – rent-a-roof deal was completed by West Country Housing with PV company Anesco to install 1,400 panels.

After months of lengthy negotiations with banks not a single deal had been signed due to concerns about how the complicated third party contracts could reduce the value of lenders’ security in the unlikely event of a housing association loan default.

Well, somehow law firms Trowers & Hamlins and Eversheds have worked with their clients to overcome these difficulties at a time when nearly every other rent-a-roof deal has been abandoned.

It will stand as a testament to what could have been. Or, more optimistically, what could still be for the rest of the sector if our new campaign Green Light is successful.

We launched it last week with the aims of getting social housing FIT schemes categorised as ‘community projects’ rather than ‘aggregated schemes’ so they get help from the government, and that social landlords are given equal access to ECO funding for the green deal.

So how is our attempt to ensure landlords are not excluded from vital green subsidies going? Pretty darn well, if I may say so myself.

In our first week we have received unprecedented support for Green Light with over 300 signatures on our petition and pledges from across the sector.

As we will reveal today, we have the backing of some major Labour heavy-weights including shadow energy secretary Caroline Flint, and shadow housing minister Jack Dromey – not to mention the support of groups representing around 1.4 million social homes (and that is not including the millions of homes represented by members of the National Housing Federation and the Chartered Institute of Housing.

While the government doesn’t look likely to back down over the FIT cut coming into effect on 12 December, we believe there is scope to negotiate a fairer more equitable settlement for social tenants.

It is the voice of these tenants that will make the difference for Green Light – which is why we were so pleased to receive the support of the TPAS this week, which represents 1,700 tenants groups, and energy giant E.ON which represents millions of customers across the UK.

If E.ON, a company driven by profit can see the logic to our campaign, then the government should too.

There is huge pressure on the government to tackle rising fuel bills. When red top papers like the Daily Mirror take a leaf out of Inside Housing’s book and launch a campaign called ‘Fair Price for Power’ on the back of the FIT cut you know that the government will be concerned (note: it reported on Monday that the cut to the FIT means more than 100,000 housing association properties won’t have PV installed – hence the campaign).

As a further bellwether of the mounting consumer concern, if you need one, even the BBC’s Panorama set its sights on an investigation into how government policy was impacting bills earlier this week.

There is a row underway over the statistics cited about the impact on bills by climate change minister Greg Barker - but even ignoring that, as long as the poorest are protected then that is what should matter.

As it stands they have, subsidised the FIT but only home owners have benefited from it.

Leeds City Council had hoped to save their tenants a massive £30 million over 25 years through a 5,000 home PV scheme that has now been shelved as a result of the government’s announcement.

That equates to around £120 a home a year for the people who need it most. This is the big test on whether the FIT cuts are about getting votes or common sense.

While Inside Housing is not disputing the need for a cut to the FIT, we struggle to see how it can make sense to hit the poorest people the hardest if it is the impact on people’s energy bills that matters.

A similar dilemma will emerge if the government makes them pay for the ECO but not let them benefit from affordable warmth funding.

With your continued support, we are confident we can persuade the government that social tenants need more, not less, help if they are to avoid falling into fuel poverty.

Green light

Fri, 4 Nov 2011

‘Apocalyptic’. That is how one major PV provider described the news of the government’s cut to the feed-in tariff.

Everyone had expected bad news for weeks. In fact, as I wrote last week, a careful campaign of expectation management through what appeared to be strategic leaks from the government meant that the halving of the FIT from 43.3p/kWh to 21p/kWh was not a major surprise to anyone.

What was a massive shock was the government’s decision to hit social landlords harder than any other sector and slash the FIT to just 16.8p/kWh for multiple installation ‘aggregated’ PV schemes.

This was a worse than worse case scenario for most landlords. The move has effectively shattered the solar dreams of the social housing sector – and with it, any prospect passing on the benefits of reduced bills to their tenants, many of whom are low-income vulnerable people, and all of whom have paid for the scheme through their energy bills to date.

As I have blogged in past weeks, this is an increasingly familiar story: owner occupiers reaping the rewards of green schemes ahead of poorer non-home owners.

The government is planning to exclude social landlords from accessing the fuel poverty pot of the Energy Company Obligation – or ECO – funding which is paid for by energy companies through consumer’s bills to subsidise retrofit works in the forthcoming green deal.

The National Housing Federation has warned that this could have a devastating impact on landlords’ ability to deliver energy savings through the green deal for their tenants.

In both cases the end result is the same: an increased risk of the most vulnerable people sliding into fuel poverty and their landlords having no funding to help them out.

That’s why Inside Housing has launched its new campaign - Green Light. The campaign has two simple aims.

The first is to ensure landlords get equal access to ECO funding – all we ask is that social landlords are on an equal playing field to other sectors. Already, as we report this week – and following my analysis of Chris Huhne’s rhetoric last week – there appears to be a softening on the government’s position on this, so a win is achievable.

Second, that social housing schemes are classified as ‘community projects’ rather than aggregated schemes.

The only ray of light so far, as tipped in last week’s blog, is that the government is considering helping PV schemes that can be demonstrated to have a community, rather than commercial purpose.

It said on Monday it would consider helping ‘genuine community projects to be able to benefit from the FIT’.

This is vague – but it is the best we can expect to win. Once again, we are not calling for special treatment; we simply don’t think it is fair that the most vulnerable and poor are hit the hardest.

If you agree then we want to you sign up to our campaign.

In only a day and half we already won the backing of figures like Green Party MP Caroline Lucas alongside energy giants E.ON, the UK Green Building Council, Sustainable Homes, Chartered Institute of Housing, National Housing Federation, Northern Housing Consortium, PRP Architects, a host of contractors and solar providers such as Carillion, and landlords including Peabody and Affinity Sutton.

We need cross sector support to fight for the right to protect the fuel poor and get the support the sector needs to deliver the government’s carbon reduction targets. Please sign up.

So now the fall out of the FITs cut. As we report this week, rent-a-roof schemes, in which third party PV providers offer free PV in exchange for a portion of the FIT, have been stopped in their tracks.

None have taken place so far because of ongoing wrangles with lenders over the impact the deals could have on the value of bank’s security.

But progress was being made on this front. The first deals were coming to the fore – indeed there is one deal on the brink of completion that could end up being a testament to what could have been; a solitary product of millions of pounds and months of resources that now look to have been wasted.

Trowers & Hamlins warn landlords face an expected £5 million of wasted ‘abortive costs’. That spend equates to a lot of retrofit measures – or homes for that matter.

For self-funded schemes, now is the time to return to the drawing board and hope that the returns needed to pay for the cost of capital still add up.

For many it won’t.

The government is now claiming that it warned to expect a return of 5 per cent and that should still be obtainable under the new tariff.

However, already landlords such as Peabody - which had plans to invest a massive £23 million of its own cash into PV - say otherwise.

Having done their maths, it says that based on government guidance, it anticipated a return of 7 per cent against a 5.3 per cent cost of debt. A 5 per cent return will not let its scheme wash its face so this means a major rethink.

There are other unintended repercussions of the FIT cut.

One point that should really concern the government is that a growing number of experts are warning that the sudden policy change has rocked investor confidence to the point that now the green deal, which is heavily reliant on private sector finance, is at risk.

I will be speaking to banks, institutions and private equity investors over the coming weeks to find out what the true cost of this week’s ‘apocalyptic’ FITs cut for landlords will be.

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