Lessons from a German bank could cut energy bills for UK homeowners

9 November 2011

Radiator

UK home owners could see reduced energy bills if the government’s energy policy takes lessons from a publicly owned German bank that has pioneered energy-efficient construction over the past 30 years, a new report has found.

The report, to be launched by co-author Professor Paul Ekins of the UCL Energy Institute, University College London, at the Cutting Carbon Costs conference at the London School of Economics on November 8th, welcomes recent UK energy policy initiatives but says much more needs to be done.

Insight from Kreditanstalt für Wiederaufbau (KfW), the German bank that has had 30 years of experience of major housing programmes to increase the energy efficiency of German buildings, has provided a number of possible lessons for the UK. The KfW scheme includes brokering low-interest loans, giving performance-related grants, insisting on expert advice and installation to ensure appropriate work is carried out to a high standard and adopting a ‘whole house approach’ to energy saving.

With the Energy Bill 2011 having been successfully passed by Parliament in the UK, and the details of the Green Deal, Energy Company Obligation and Green Investment Bank being finalised, Professor Ekins says that while much can be learned from KfW, the context in the UK is very different, and the application of the lessons from the KfW experience will need to take that into account.

Further help and support for householders of this kind are vital if the current opportunities for a step change in home energy efficiency are to be realised

Paul Ekins (UCL Energy Institute)

Professor Ekins said: “The headline message of the report is that the UK policy initiatives are much to be welcomed, and are going in the right direction. Despite this, KfW experience suggests that the initiatives will need to be strengthened if households are to realise the full benefits of home energy efficiency improvements, and get a grip on their home energy costs, which have increased substantially in recent years.

“Further action will be required in the form of targeted regulations and up-skilling in the construction industry. Modest public funding for energy efficiency measures is also needed, and information and other market interventions that raise awareness about the benefits of home energy efficiency. Further help and support for householders of this kind are vital if the current opportunities for a step change in home energy efficiency are to be realised.”

The report highlights several key lessons from KfW policy which should be implemented in similar UK schemes, including:

  • KfW provides repayable loans on favourable terms, or performance-linked investment subsidies, rather than unconditional subsidies or tax concessions, as a more reliable and sustainable funding mechanism.
  • The German schemes provide qualified expert advice and installation so that appropriate work is carried out to a high standard. The UK has much still to prove in this respect, through the accreditation mechanism for energy advisers and energy efficiency installers that is being set up under the Green Deal.
  • German policy requires investments in energy efficiency to be made before subsidies for renewable energy are paid, as the UK Government now says it is planning to do. This increases the proportionate contribution renewable energy can make to meeting overall demand, saves money, and makes a bigger contribution to the wider goal of climate protection.
  • German policy assumes it is better to adopt a ‘whole house approach’ to energy saving, even if measures are adopted piecemeal, and high energy efficiency measures only implemented bit by bit as people work on different parts of their houses.
  • Policy aims to support experimentation and innovation, to build awareness and familiarity for new approaches to energy efficiency, and to identify successful approaches that can be taken to scale.
  • Public buildings have an important role to play, to provide conspicuous examples to the public of what can be achieved by ambitious retrofit measures. This is particularly the case in schools, nurseries and children’s centres, where such measures can have important educational benefits as well.

Links:

UCL Energy Institute