What has gone wrong with the Green Homes Grant?

This post is by Jan Rosenow and Louise Sunderland of the Regulatory Assistance Project.

The Green Homes Grant risks becoming the second government home energy efficiency scheme in a decade designed to fail.

The last decade wasn’t a good one for energy efficiency policy in the UK. We all remember the Green Deal, the coalition government’s flagship energy efficiency policy that was supposed to support 14 million home retrofits by 2020. It was terminated in 2015, after two years, having achieved fewer than 20,000 home retrofits. If anything, it was an example of how not to design an energy efficiency policy. The failure of the Green Deal left a gaping hole that was never plugged.

When the Covid-19 pandemic began to take its toll on the national economy last year, the government looked for ‘shovel-ready’ projects that could create new jobs and support economic recovery. Quite rightly, energy efficiency was identified as an opportunity because of its jobs potential. Energy efficiency works are particularly labour intensive and, compared to more centralised infrastructure investment, the jobs are distributed all over the country. In addition, much of the expenditure in publicly funded energy efficiency programmes is offset by tax receipts and other revenue streams generated as a result of the activities promoted.

To capture this potential, the government announced the Green Homes Grant in June 2020, a £2 billion programme to rapidly deliver energy efficiency improvements. This was the first major energy efficiency programme funded by general taxation since the termination of Warm Front in 2013. Expectations were understandably high.

The grant had short-lived intentions
Under the original design, the Green Homes Grant budget was to be spent between late September 2020 and the end of March 2021. This required funds to be absorbed at a rate of more than £300 million per month, six times more than the current spending rate under the Energy Company Obligation, the largest remaining energy efficiency programme in Britain.

But the scheme failed to live up to expectations: two months before the original end date, only about five per cent of the funds had been allocated, with around 20,000 of the targeted 600,000 homes receiving support. Recognising the challenges of rapidly spending the funds, the government extended the grant for a year, a decision welcomed by the industry. But it has come at a cost.

Rather than maintaining the £2 billion allocated, the government is planning to only roll over £320 million into the next fiscal year, effectively cutting the budget by 80 per cent. The rationale is that the Green Homes Grant was only ever intended to be short-lived to help with economic recovery post-Covid. This can only be described as a huge disappointment, given the scale of energy efficiency improvements required across the entire UK housing stock and that the impact of Covid on the economy is still increasing.

A programme over winter was doomed to fail
Ramping up the supply chain to deliver shovel ready projects at the scale planned, with only a few months’ warning, was always going to be extremely challenging, especially since the shovels had been blunted for a decade by successive cuts to energy efficiency programmes.

The incredibly short timescale for spending the £2 billion budget added challenge upon challenge. First, many installation companies that did not already have the required accreditation to deliver measures judged there was insufficient time to get it. And the very short term nature of the new work, with no long term trajectory of government support, was a disincentive to invest in the quality label. Why invest in a market that will not be there next year?

Second, it was winter. Installation of key measures for the UK housing stock, such as external wall insulation and replacing heating systems, are more challenging during the winter months. Poor weather conditions can slow down projects, and households are reluctant to disrupt their heating system during a cold snap. With the programme originally running from late September to the end of March, weather was a predictable factor that would limit impact. The government, it seems, was quite literally trying to stick their blunted shovels into frozen ground.

Germany has done it successfully
Far from concluding that investments in energy efficiency are not suitable as an economic stimulus, the experience of other countries shows how to do it successfully. Following the 2008 economic crisis, the German government announced the largest economic stimulus programme since World War II, including £2.6 billion in additional funding for energy efficiency. The main purpose of the programme was to help the struggling construction sector and support jobs. And it worked.

But why? The main difference between this and the Green Homes Grant was that Germany used an existing and well-established energy efficiency programme, administered by the publicly-owned bank KfW. This structure has existed for more than 30 years. Trades are accustomed to delivering within its rules and have adapted their services to the required standards. Businesses are structured around the long term market it creates. The knowledge of the future market makes scaling up to benefit from a one time injection of investment a safer bet.

The programme shouldn’t be scrapped
What can we learn from the failure of the Green Homes Grant to meet its expectations? First and foremost, it is clear that designing any entirely new, national scale, big budget programme to achieve only short term impact is almost certainly doomed to fail. Long term policy stability is required to build capacity and trust in a supply chain that can deliver high quality work at scale.

Short termism also gives entirely the wrong message to householders, almost all of whom will need to carry out energy related renovations to their homes in the not too distant future. ‘Here today gone tomorrow’ government support undermines the communication of this long term shared project.

The final and overarching point, relevant to all policies and programmes, is that they must be designed for the outcomes wanted. The desired outcome is not the distribution of the budget but the activity needed on the ground. The Green Homes Grant would have looked very different if the design had started with a clear knowledge of the needs of the households commissioning the works, of the structure of the supply chain and of the physical efficiency measures it would deliver.

Rather than scrap the programme, the government should reform and extend the Green Homes Grant in such a way that provides industry and householders with a robust funding framework for energy efficiency for years to come.

18 comments

  • It’s my understanding, that much of the money, for instance for the installation of Heat Pumps, is not new money, but a upfront payment of 5k (or 10k for households on benefits) of the already available RHI payments, that are normally spread over 7 years. I applied very early on, did everything required, yet have only received incorrect and conflicting information and no date of when I’ll receive the go-ahead. My chosen contractor is at his wits end and the help line can’t help as the scheme is run by a US company, who you can’t talk to. Who would have thought this government, built on a basis of failure and chumocracy would screw this up. Most damingly this is not just a financial and commercial disaster but also an environmental one, setting back a lower carbon energy market by years.

  • You have not mentioned that much of the GHG money was taken from the Renewal Heat Initiative fund. I have got the GHG voucher for my Air source heat pump, but that £5K is taken straight off the rhi payments I would have received over the next 7 years.

  • Every window company I have approached said no we can’t do that as the grant scheme is designed for the big companies to do, who want to charge you £12,000 – 14,000 to fit your windows and doors.
    So us working class are not going to take it up as we may as well spend £3000 getting our windows and doors than spend £8000 to get an extra £5000 grant…..

  • I agree that the grants should be carried over into the next financial year and paid promptly so that people are not penalised for trying to be green!

  • My address is not showing on the website and I have tried to report this with no response. I would love to have work carried out. I have owned and lived in my flat for 15 years. So why is my address not showing. Its a joke.

  • I had been trying since last September to get a grant for a new gas boiler for my flat until i gave up in January .
    I did get the feeling all along in those 4 months that my application was not going to happen.
    In the end i went to Scottish Gas ,one phone call , one member of staff who arranged my 2 year iterest free loan and an installation date, 1 week later job done.
    Home Energy is not fit for purpose in my opinion, all they done in that time is made me lose a lot of my faith in human nature and give me a very stressful and anxious 4 months.
    All in all a horrible experience being kicked from pillar to post.

  • As an installer a few of the key points are missing from this posting as to why the GHG is failing:

    1 – It is way too complicated for most homeowners with primary and secondary lists.

    2 – It doesn’t cover the energy saving improvements that homeowners want to make, for example end users seem to want to get PV solar over Air Source Heat Pumps, or certainly want to get the PV first before the ASHP.

    3 – After spending months at home over last summer end users are already upgrading their homes and lots of energy efficiency installers across the sector already had quite full or even full order books often extending months ahead, so with the additional complexities of joining GHG didn’t feel that it was going to be worthwhile to their business and now that they find that payments from the GHG are been delayed, giving cash flow issues, it’s put more installers off.

    I don’t even know why solar thermal was even picked, it’s dead technology in the UK it’s been superseded by PV, and was never really suitable to our climate, so basically a complete waste of time.

    What they should have done and could have been implemented very quickly was resurrect the FIT scheme for PV solar, that scheme on the whole worked and could deal with volume, over 900,000 homes during it’s 9 year life.

  • Excellent blog and analysis. What a tragic waste of an opportunity but, hopefully, a better designed scheme will be implemented.

  • I applied for vouchers for a Heat pump, on the day the scheme was opened. I already had my quote ready for the launch. The vouchers were issued about the 8th of December and the heat pump was installed just before Christmas. The contractor was paid on the 9th February. I had no problems with the Gov dept or my contractor. No complaints from me.

  • It very much depends on whether you want to improve the housing stock or create jobs. The roof insulation that was installed here was frankly a waste of effort (coombed ceilings and only the horizontal section insulated). It would be better to scrap VAT (or make it negative!) on products to improve buildings’ energy efficiency and let the house owners select the best option for their property and do it themselves if they so choose. Annoying to have so my of my tax money wasted this way when there is a real need for Britain’s housing stock to be improved.

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  • I looked into this but it’s hugely complicated and when I contacted some of the supplies linked to it I was told they were part of a different scheme. I gave up after wasting hours

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  • The GHG was doomed to failure for the reasons identified, however there’s an underlying problem. The funding model is the same as for the failed Green Deal, allowing a budget of £4,700 for each home. This figure is based on work by Pedro Guertler, a colleague and co-author of Rosenow’s, who in 2014 presented a fundamentally flawed assumption of insulation falling in cost by 30% by 2030. That assumption was in turn based on an unidentified 2010 report. The funding model is over a decade old, and fixed to deliver only the cheapest possible insulation: petrochemically derived plastics, which led to a high proportion of failed EWI installations under the Green Deal. This is completely inadequate to deliver the intended “whole house approach” developed since the Bonfield Review to avoid perpetuating the same expensive errors as the Green Deal. To “build back better” and deliver a “green recovery”, we must stop using high embodied energy, flammable and toxic plastic insulation to wrap our homes. Because it’s impermeable, the evidence shows that plastic insulation traps damp in walls, leading to damp, mould, and respiratory disorders. It also emits VOCs, contributing to poor indoor air quality which has come into sharp focus under lockdown, contributing to the UK’s high rates of indoor transmission and mortality rate.
    The decision to terminate the GHG was absolutely correct to prevent perpetuating the same gross errors of the Green Deal. To get retrofit right, we must start using healthy, inert, natural materials and stop using plastic. It will cost more, but it will deliver the desired green recovery, improved health and productivity, whilst futureproofing our homes against climate change impacts.

  • Patricia Fletcher

    I applied for a GHG for loft insulation in November 2020. I received the voucher in December 2020. The grant awarded stated inclusive of VAT but the figure exclusive of VAT had been quoted. A simple mistake to correct you would have thought. 4 months later and after numerous emails, phone calls, this still hasn’t been resolved. An agent I spoke to stated a cost justification was needed from my proposed contractor, which had been supplied twice in a very detailed quote; another agent said this agent was wrong and everything was in order. GHG admitted the mistake was on their part. So it seems the Scheme Managers/Administrators are not up to the job. Interesting to find that this outfit is ICF Consulting Services, which is a US company with offices in the UK. One of their senior directors used to be a Special Advisor to the Cabinet Office. The firm has won over 80 Government contracts. See Guardian article at https://www.theguardian.com/environment/2021/jan/26/us-firm-running-eco-grants-scheme-has-won-multiple-uk-government-contracts.
    I wait in hope for my voucher!

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