Consumers and businesses concerned about inefficiencies and cost, yet are failing to adopt energy efficiency measures
A report undertaken by CEBR on behalf of pump manufacturer Grundfos has surveyed both UK and German consumers & businesses to ascertain their attitudes and approach to energy efficiency during the current cost-of-living crisis. The overall finding from the research is that despite the pressing concern of energy costs and worry around energy security this winter, consumers and businesses alike are failing to adopt energy-efficient measures due to perceived upfront costs and a lack of information on their positive impacts. When putting a figure on this, it is believed that UK homes and businesses could be losing as much as £3.1 billion per annum in potential energy cost savings[i].
It also found that the increase in energy bills is a major concern for both consumers and businesses, with 64% and 56% of households in the UK and Germany, respectively, citing rising energy bills as a major concern[ii]. Further, 50% of businesses across both countries said they were worried about energy prices, making this the most common business concern, second only to inflation. Yet the study found that simple energy efficiency measures are being missed- it revealed that 14% of businesses have either never had a boiler service or have not had one in the last five years, which could see inefficient boilers adding to energy expenditures. So-called ‘low hanging fruit’ savings are being missed-it provides the example of simple, cheap, and quick-to-install energy efficiency measures such as hydraulic balancing[iii].
Barriers to energy efficiency measures
The study finds that 63% of businesses and 74% of homes are prevented from making energy efficiency improvements and argues that the initial set-up fees are a major barrier to improvement. There is a perception of high upfront costs playing a major part in the decision to invest in heating efficiency, with “31% of UK household respondents listing this as the biggest reason for not investing compared with 20% for Germany. 32% of business respondents across the UK and Germany claim the biggest reason for not improving their heating efficiency is upfront costs.”[iv]
As a result, rather than investing in energy efficiency upgrades, businesses are exploring other means to save on costs, with one-third of surveyed businesses saying they have moved to remote working patterns as means to save on energy. In addition, over a quarter (26%) claimed they would consider reducing employee wages in order to recoup costs lost due to the energy crisis, and 15% have already resorted to this measure.
UK Government and local authorities advised to do more
The findings from CEBR and Grundfos suggest that UK businesses could save £720 million per annum through energy savings if they can overcome the barriers associated with energy efficiency improvements. However, a lack of information and understanding over costs and grants for energy efficiency measures appears prominent- only 37% of UK businesses cite checking eligibility for business grants as a key measure. Yet, a third (33%) believe that government incentives are needed to help fund heat upgrades.
Grundfos’ UK country director Glynn Williams said:
“At a time when the UK faces a precarious economic outlook, homes and businesses cannot afford to be losing out on more than £3.1bn in energy efficiency savings. Yet, there is a clear gap between the barriers and benefits that must be overcome. Whilst there is plenty that the Government can and should be doing, particularly around regulation and enforcement of energy saving measures, there is clearly a large gap in knowledge that must be addressed. We, therefore, call on the Government to launch a public awareness campaign that will finally dispel the damaging myths around energy efficiency improvements and lead to the cost savings our households and businesses deserve.”[v]
In terms of policy, the UK has seen several schemes launched to help with energy efficiency. Notably, The Renewable Heat Incentive (RHI), which provided financial incentives for domestic and business customers to install renewable heating systems, closed in March this year. “Those on the scheme receive quarterly payments over seven years based on factors including the technology installed and its estimated output... Eligible RHTs include biomass boilers, solar thermal, and air, ground, or water source heat pumps.”[vi]
In place of the RHI, the more recent Boiler Upgrade Scheme (BUS), operated by BEIS, provides grants to property owners installing low-carbon heating systems to replace fossil fuel systems in England and Wales: “In contrast to the RHI, it provides up-front financial support (£5,000 for an air source heat pump, £5,000 for a biomass boiler, £6,000 for a ground source heat pump) rather than payments spread over several years.”[vii]
The Grundfos paper, however, identifies several areas that the UK government and local authorities can improve upon to help drive energy efficiency uptake. These largely revolve around the provision of information- helping consumers understand the benefits of low carbon heating, start-up costs, and lifetime costs to create visibility and reduce uncertainty. The study also recommends targeted domestic energy efficiency schemes to drive uptake; it identifies the positivity this could bring to particular groups, such as the socio-economic benefits to the poorest households, and suggests the example of a new grant-funded scheme specifically aimed at this group. Additional measures include targeting those using inefficient, high-carbon heating systems but are not on the gas grid and support and information for those in older properties, perhaps listed buildings where planning laws may restrict energy efficiency measures.
The suggested actions above would require local authorities and government to work together closely to identify and accurately target support towards the groups outlined. A UK government 2012 paper ‘Improving Energy Efficiency in Buildings: Resources Guide for Local Authorities’ stated the following: “Local authorities are uniquely placed to assess the needs of their local areas and residents and to act as catalysts for change to improve the energy efficiency of, and reduce carbon emissions from buildings.”[viii] Yet, an EIC survey of Local Authorities just six years later found that out of those who responded (122 out of 149), none had been issuing fines for failing to display Energy Performance Certificates or Display Energy Certificates[ix].
Rowlando Morgan, head of environment, infrastructure and local growth at CEBR, said:
"The outcomes of the paper underscore a critical lack of awareness as a key barrier preventing the adoption of energy efficient measures, alongside high upfront costs and a lack of available qualified installers presenting further challenges," and also said, "Our findings indicate that the UK government needs to action several new policies including providing clearer information on energy efficiency, targeting schemes to the poorest households and prioritising schemes to offset the upfront costs of installing new heating systems."