Ed Davey writes: How we can tackle rising energy bills

Energy-bills-006As we enter the first cold snap of the year there will inevitably be a focus on the rising cost of energy – particularly after there have been inflation busting increases in gas and electricity tariffs of 6-10% over the past few months.

No country can stop the main cause of this – rising and high world prices for oil and gas. Yet we must do everything we can, to help people and firms struggling with these bills, especially the most vulnerable. And that’s why helping with energy bills has been and will be one of my top priorities.

From the Green Deal to be launched at the end of this month to the Energy Company Obligation, now in force. From the reform of tariffs to increased competition. We must look at all options to help. And that’s why I want your help to push my idea for collective purchase of energy.

Liberals have always believed in the important role of both co-operation and competition. As Competition and Consumer Affairs Minister in the Department of Business, I brought these two things together by launching a co-operative purchasing initiative. Communities coming together to use their bulk purchasing power to get good prices for their members.

When I became Secretary of State for Energy I was keen that this became an important priority for the Department. And so we’ve been backing trial schemes and encouraging the development of this new approach to buying energy. Last April, Which?’s Big Switch saw tens of thousands of households  save an average of over £230 annually and I was delighted when Liberal Democrat run South Lakeland council also launched a collective switch which resulted in many of their households saving well over a £100 annually.

But I was determined that more should be done to help hard pressed households. So at our Autumn Conference I announced the “Cheaper Energy Together” competition to encourage local authorities and community groups to follow our and South Lakeland’s lead.  As currently individual poor households are less likely to switch than better off households I made it a condition of the competition that particular focus should be on the fuel poor.

The response has been phenomenal with over 100 entries. Today I announced that 30 groups representing over 80 Councils and community groups have been successful in getting government funding. For those of you in successful areas make sure that residents know that this is a Liberal Democrat initiative to cut bills – and encourage them to register to take part. And for those in areas  which are not yet part of a scheme – get out campaigning for them to join in!

But reducing energy tariffs is not the only, or even the best, way to cut energy bills. The best way to cut energy bills is to help people reduce their energy use. We are already having considerable success cutting energy use by on around 3%pa over the past few years. But we can and must do more. That is why the Liberal Democrat’s flagship Green Deal, which we will launch at the end of this month, will have a critical role to play – helping households improve their energy efficiency.

Our political opponents want to blame climate change policies for higher bills, despite the overwhelming evidence against this. If we don’t reduce Britain’s dependency on imported fossil fuels, with greater energy efficiency and home grown low carbon, people’s bills will just continue to go up.

Liberal Democrats in government have a great story to tell on what we are doing to tackle rising energy bills. But I need your help as Councillors and campaigners to ensure that these policies are translated into real achievement up and down the country. That’s why over the next few months I and my team are giving a high priority to producing campaigning material and training to help you ensure that these policies are successful in your local communities.

* Ed Davey is the MP for Kingston & Surbiton and Leader of the Liberal Democrats

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  • now you have made cuts to sick disabled widows unemployed I suppose they could stay in bed to keep warm or perhaps 1% could give them some of their tax cut to help with bills

  • You’re dead right that helping people use less energy is the best solution to rising bills, and fingers crossed the Green Deal will help (though no one any longer claims it will deliver on the scale Chris Huhne set out back at 2010 Lib Dem conference)

    However Green Deal loans simply won’t solve the problem for people who can’t afford to heat their homes properly now. Many people in fuel poverty keep have to underheat their homes or their bills are simply unaffordable. If they borrow money to insulate their home, they may well find use the same amont of fuel as before. With the added insulation and reduced draughts, they will benefit from being warmer – which is really welcome and better for their health. But this will not provide the saving they need to repay the loan.

    There are other policies that will provide some help for the fuel poor – but it is clear from Government projections that it falls far short from helping enough houses to stop this problem. If we are to end fuel poverty a much more ambitious programme is needed, which should be funded by the new carbon taxes the Government will begin to collect this year (the receipts from EU ETS auctions and the carbon floor price).

  • >more should be done to help hard pressed households

    Here is a set of actions that would deliver real benefits within months:
    1. Totally cut the subsidies give to wind supply to the national grid – the UK evidence todate shows that it is just not suitable generation source for direct connection to the grid.
    2. Encourage councils and housing associations to put both solar-voltaic and solar-thermal panels on the roofs of their housing stock. Likewise provide incentives/schemes to encourage poor’er households to do likewise where they get cheap/free energy from roof panels but don’t get paid the feed-in tarriff (this going to the panel provider).
    3. Cap our generation capacity (for domestic usage) and update the planning regulations so that all new housing developments shall not add to the UK’s overall energy demand, hence they have to insulate/reduce consumption in existing housing to gain the capacity for the new houses.

    Whilst the above won’t stop energy bills spiralling upward they will mitigate the increases to some extent and who wouldn’t say yes to having substantive energy improvements made to their house so that they reduce both their consumption and bills?
    Point 3 has an interesting side effect, it potentially creates a largescale market with a degree of certainty of demand, which will create job opportunities and economies of scale.

  • I can’t find any websites that give detailed information on the green deal. Even the governments own website is extremely vague.
    Does anyone have a link to anything that will give detailed breakdown of examples of costs, expected savings, interest rates for loans, proposals for costs to energy saving safeguards for consumers, default on loan proposals, accreditation of assessors and contractors, lines of liability for poor installations, evidence that home insurers are on board with the scheme, etc?
    I can’t believe that with 15 days to go, there aren’t very clear details, and lines of responsibility on these important issues with this scheme?

  • Stuart Mitchell 15th Jan '13 - 7:22pm

    I don’t see that co-operative purchasing initiatives are any kind of solution at all. They only benefit the select few who take part – and as you allude to yourself, those select few are far more likely to be internet-savvy types who are already well off rather than the “fuel poor”. In fact, the more successful these co-operative schemes are, the more likely it is that those who are left on the standard tariffs will end up paying even more.

  • Results of the first South Lakeland collective:

    “In July this year[2012], SLDC was the first local authority throughout the whole of the UK to launch a collective energy switching scheme. A total of 1,669 householders registered for the scheme that included 1,554 residents from South Lakeland and a further 115 households from outside the district. Figures show that 20% of people registered either in person at council offices or over the telephone with the SLDC Contact Centre. Registering in this manner is a new concept as very often switching opportunities are only available online.

    So far from the first scheme, 517 people have accepted their offer representing a switching rate of 31% which has exceeded all expectations for the council’s first community energy collective switching scheme. ”

    [Source: http://www.southlakeland.gov.uk/newsroom/news-stories/environment-news/10-january—power-up-your-com.aspx ]

    Calculation from another article ( http://www.thisismoney.co.uk/money/bills/article-2218059/Councils-bulk-buying-energy-scheme-slash-bills-300.html ) I conclude there are approximjately 46,000 households within the district. This gives an initial sign-up/response rate of ~3.6% – slightly better than would be expected from a business direct mail campaign (although slightly less than nonprofit fundraisers). There is less benchmark information about the conversion rate, but from my experience 31% is good and I suggest the expectation was probably 14~20%.

    For the second Power up Your Community scheme (launched on 14-Jan) the expectation would be for slightly better response and conversion rates, due to the greater awareness brought about by the first scheme.

    So in summary the South Lakeland collective campaign can be called a success. However from a business proposition viewpoint, the scheme operators (the district council and their partner iChoosr) only get paid out of commission from the households actually switching to the deal, they will be wanting to achieve a far higher participation rate.

    As for the query about needing to be internet savvy, one of success factors given for the initial South Lakeland scheme was that registration was with a known and trusted organisation (the council) and that householders were able to sign up “either online, by telephone or by visiting one of the council offices”. So I expect that collective schemes may be useful but to be successful I suggest they need strong local leadership and engagement, although probably not to the same level as that needed to be a winner in the BT Race to Infinity campaign that ran in Oct-Dec 2011.

  • Just putting into context what Ed Davey has been promoting/spinning in his article.

    The DECC has announced the results of three competitions for £46m of funding:
    1. £31 million to help vulnerable householders keep warm this winter – Tackling Fuel Poverty
    This is divided between 61 projects
    2. £10 million to kick start the Green Deal with ‘Pioneer Places’ projects
    This is divided between 40 projects
    3. £5 million to set up collective switching schemes – ‘Cheaper Energy Together’
    This is divided between 31 projects

    [Source: http://www.decc.gov.uk/en/content/cms/funding/funding_ops/lacomp/lacomp.aspx and the associated press notice.]

    There doesn’t seem to be any follow on funding to the above other than that alluded to by John Dunn, where householders can through the Green Deal take out loans via their energy bills on energy efficiency measures. So whilst the above are good initiatives, the funding seems to be more about enabling marketing and awareness activities rather than substantive delivery.

    At the same time we are seeing the government adding an estimated £17 billion on to the nations energy bills over the next ~20 years as part of the over generous deals with wind farm operators. Whilst this works out to around £35 per household per year [ http://www.telegraph.co.uk/news/9800957/Wind-farm-contracts-that-will-lead-to-higher-energy-bills-should-be-re-written-says-MP.html ] it is still significantly more than what the government is, so far, prepared to invest in energy efficiency.

    To my mind energy efficiency is probably more important and delivers a greater return on investment than off-shore wind, as it can significantly reduce energy consumption and hence lowers the nations energy bills, and in so doing reducing the number of new (nuclear) power stations the government will have to commission. Hence the DEFF needs to be looking to substantially reduce the monies going to the lost cause of wind and increase the monies actually available and being spent on improving the energy efficiency of our homes.

  • “I don’t see that co-operative purchasing initiatives are any kind of solution at all. They only benefit the select few who take part – and as you allude to yourself, those select few are far more likely to be internet-savvy types who are already well off rather than the “fuel poor”. ”

    Except it is far easier to promote this sort of scheme to the non-internet savvy. It’s not a complete solution to every problem that there is – but it does give people an option. There is clearly a problem that the market doesn’t work because of people not shopping around for the best providers – this is an attempt to remedy that.

    I suspect the second round of these schemes will see more people signing up when word has got round about the benefits of the first.

  • Thanks for the comments.

    John. The Green Deal is being launched on 28th January when much more information of the type you are suggesting will be available. As well as government promoting the Green Deal as it is a market based mechanism we know there will also be substantial promotion of it by individual providers and installers. In the meantime the DECC website has some basic factsheets http://www.decc.gov.uk/en/content/cms/tackling/green_deal/gd_quickguides/gd_quickguides.aspx

    Stuart, as Hywel said we expect collective purchase through trusted third parties such as local authorities and Age UK to be particularly appealing to those who are less internet savvy.

    Roland. Thanks for posting the information on South Lakeland. As Hywel says as these schemes develop I would expect there to be even greater take up. There are a number of other measures to deal with energy efficiency and fuel poverty such as the £1.3 billion pa ECO scheme for home insulation and the Warm Home Discount of £130pa for those in receipt of pension credit and some other benefit recipients. So the initiatives listed are just those I announced yesterday rather than the entirety of our support.

  • Thanks Ed for coming back and showing that you have read comments.

  • Helen Dudden 20th Jan '13 - 8:33pm

    All housing should be insulated and with decent heating, for a start. All social housing, all housing. I thought that this was one of the factors to reduce the energy we use. I have a home that is not insulated, when you turn off the heating, the temperature drops to a dangerous level. Listed buildings, and the need to make housing for all, that is within thermal comfort. I believe we should use less, not more.

    Mr. Davey, I thought that you believed in the concept of saving the carbon footprint. It promotes health, will save the health service spending than needed. Also, homes will be less damp.

    I f I was in your position I would have a lovely time working to save energy, and making this happen.

  • Helen Dudden 20th Jan '13 - 10:42pm

    I see there is advertisements for solar panels and grants, I don’t think that to be a good idea on a block of flats five storeys high. Bath is one of the leading carbon footprint areas because of this problem, a lot of the property is used for social housing, and with the higher bills, is the tenant expected to take this on? We need suitable housing, that is a fact, and some of the buildings use energy like it will go out of fashion. At present, I have been writing on the need for housing that is affordable to live in, it goes round in circles. The wind farms are not the only option we should consider, it seems that is where the most interest is at present. How about the listed buildings, and insulation in those ,and the completion of the Decent Homes that is way behind too.

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