Rural Heat Strategy

7 min read11 March 2015

Rural Energy Efficiency – delivering value for money

Rural householders should not be written off as too difficult to help, we just need to work harder to ensure that they benefit equally from the shared goals of eradicating fuel poverty and reducing our carbon emissions. Calor’s key policy recommendations are:

• Define rural properly and focus activity accordingly.
• Make sure universal schemes are truly universal and adapt them where necessary to make them more effective.
• Encourage low cost market-based solutions which cost less than the notional cost of the carbon they displace and play to the strengths of British industry and the existing supply chain/skills base.

Reaching Rural Communities

There are around 2 million British homes, comprising 4.6m people and located in rural areas with no feasible access to the gas grid. Off-gas grid communities often comprise a collection of relatively isolated buildings, located over a wide geographical area and which tend to be older, stone-built, with solid floors and walls.

Fuel poverty is a particular problem in rural areas with nearly three times as many households in fuel poverty compared with urban. However, off-grid locations have seen little focused support to alleviate the problem.

The countryside presents Government with different and difficult challenges - in terms of building fabric and technology suitability. Calor argues that a focused energy efficiency strategy for rural off gas grid communities is needed. So what needs to happen?

Define the issue correctly

Firstly, let’s get the definition of rural off gas grid right and then focus activity. Energy efficiency schemes such as CERT, CESP and now ECO (Energy Company Obligation), have failed vulnerable rural consumers due to the way these schemes have been designed and then implemented.

This is a scandal as poor and vulnerable people living in rural communities are contributing towards these schemes via their electricity bills. It is an unintended and unfortunate irony that those in greatest need are forced to pay for schemes that will exacerbate their poverty making it more difficult to keep themselves warm in winter. Labour might want to consider the DECC Select Committee’s idea of transferring costs from the bill to the tax payer as this is less regressive. Consumer Futures recently issued a report which showed that the cost burden of ECO was being disproportionately carried by poor and vulnerable off gas grid consumers.

On the positive side ECO devotes a sum of £23.5m specifically for rural areas. However, the Government’s current definition of rural is settlements with less than 10,000 people, which is more on gas grid market town than a typical off grid village. This means that energy companies can achieve their legal obligations under ECO without going anywhere near off gas grid Britain. As such the definition of “rural” needs to be tightened to ensure we get targeted activity in off grid rural areas.

Universal should mean universal

Secondly, as all rural consumers pay towards these supposedly universal schemes, they should be able to benefit from them. The utility companies must work to provide affordable solutions for off-grid homes such as replacement boilers, which they are currently refusing to do.

Another example is Feed-in Tariffs which are also paid for through energy bills, but rural off grid consumers find it hard to meet the minimum energy efficiency requirements laid down by Government for their Energy Performance Certificate (EPC) as off-grid homes typically score one if not two grades lower than the level required.

This makes it much harder, if not economically impossible, for rural property owners to benefit from what are yet again supposed to be universal schemes. A more equitable treatment of rural off grid householders needs to be applied.

Further innovative solutions around existing universal benefits must be explored to address the poverty aspects of this issue. Calor supported the recent Private Members’ Bill that proposed paying elderly people who live off-grid their Winter Fuel Payment in July rather than September, so that they can buy their winter heating fuel earlier and stock-up at lower summer prices. Unfortunately this Bill was not supported by the UK Government.

This simple improvement could make a huge difference to vulnerable people in the countryside. The same approach should be applied to improving overall energy efficiency in rural areas i.e. offer solutions which are practical, affordable and easy to deploy.

Value for money solutions

The vast majority of British homes have central heating which comprises a boiler with radiators. This has become the system of choice due to a combination of factors, which include the British climate and our housing stock.

Most new heating systems are distress purchases. Your boiler breaks down so you call someone out to repair it only to find out you need a new one. The priority then is to get it done quickly and for the least money. At this time you are totally dependent upon the trusted expert – the installer – and will normally go with their recommendation. For any policy to succeed it must be deployable through this market model.

The last Government mandated the installation of highly efficient condensing boilers in British homes. It also launched the extremely successful boiler scrappage scheme in 2010 which took 125,000 inefficient old boilers out of homes early i.e. before they failed and resulted in a significant reduction in bills and carbon emissions.

Calor has seen the impact of these policies, combined with other factors (better insulation, higher energy costs, recession), on energy consumption. In the past 10 years our average central heating customer has reduced their fuel usage by over 20% on a weather adjusted basis. The same has happened to natural gas demand in urban areas and we believe this decline is set to continue.

The priority has to be to maintain this downward trend and the good news is that gas technology still has an enormous amount to offer. For example, two thirds of properties still have older non-condensing boilers and therefore still have significant savings available. We are also seeing a raft of exciting new technologies coming on to the market which will further accelerate the decline in energy consumption and carbon emissions and can be used in off gas grid areas as well. These include Flue Gas Heat Recovery, mCHP (micro combined heat and power) and Gas Absorption Heat Pumps – a renewable gas technology which could be easily retrofitted on to a home’s existing central heating system. Unlike their electric counterparts which often perform poorly after installation, are disruptive, need costly electricity grid upgrades and can be cripplingly expensive to run and subsidise. This is where the Coalition has made a big mistake to the detriment of those least able to afford the subsequent tax and fuel bills. Repeatedly, carbon reduction methods have been applied without any sensible cost benefit analysis. Labour should re-examine the policy menu and excise carbon reduction policies which cost more than the value of carbon they remove.

So gas technology still has a way to travel and offers the best value for money for both the bill and tax payer.

Low carbon industrial policy

The UK is the largest gas boiler market in Europe and has a huge domestic industry with sector leading companies based here in Britain employing many thousands of people, plus the more than 100,000 heating installers working in peoples’ homes.

Policies which directly support these established British manufacturing and service industries will have the greatest beneficial impact on the economy at large and have the best chance of success. We saw this at first hand where the boiler scrappage scheme which gave a boost to both British manufacturing and the order books of British installers.

Rural Energy Efficiency – delivering value for money