The Renewable Heat Incentive: A reformed and refocused scheme Consultation response by National Energy Action (NEA)

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1 The Renewable Heat Incentive: A reformed and refocused scheme Consultation response by National Energy Action (NEA) 1. About NEA 1.1 NEA is a national charity working to increase investment in energy efficiency within vulnerable households 1. NEA believes that radically improving the fabric and heating of homes represents the most cost effective long-term solution for tackling high energy bills and helping to eradicate fuel poverty. 1.2 NEA has helped millions of households throughout the UK gain access to energy advice and energy efficiency grants. Over 440,000 heating and insulation measures have also been installed to over 360,000 homes through NEA s Warm Zones subsidiary community interest company which focuses on delivering energy efficiency solutions to low income households in deprived areas. NEA also provide the secretariat for the All-Party Parliamentary Fuel Poverty & Energy Efficiency Group, which was first established in 1995 as the Parliamentary Warm Homes Group, to raise awareness of the problem of fuel poverty and the policies needed to eradicate it. 1.3 On the 15 th January 2016, NEA announced the first projects to be funded under a 26.2 million health and innovation programme which will bring affordable warmth to over 6,000 fuel poor and vulnerable households in England, Wales and Scotland. NEA believes this is the biggest Great Britain-wide programme designed and delivered by a national charity that puts fuel poverty alleviation at its heart. The programme is split into three distinct funds; two programmes are being delivered by NEA the Technical Innovation Fund and Warm and Healthy Homes Fund 2 ; and the third is being delivered by NEA s subsidiary Warm Zones cic. 1.4 The Technical Innovation Fund specifically aims to facilitate community-level trials of innovative solutions utilising measures not traditionally within the scope of current fuel poverty and retrofit energy efficiency programmes. Grant recipients from this 4.95 million programme will be working to install a range of technologies (including those generating renewable heat 3 ) and work with NEA to ensure that robust monitoring and evaluation takes place. NEA will also be delivering a programme of community engagement and support in each area. NEA hopes that this work will build on existing evidence and highlight the scale of the opportunity for innovative solutions to help eradicate fuel poverty alongside more conventional measures. 1 Please visit 2 In Scotland a Healthy Homes Fund is being delivered by Energy Action Scotland (EAS) 3 To view the Technical Innovation projects visit: 1

2 2. Background and summary of NEA s response 2.1 Despite NEA s own work alongside our supporters (or previous and current national programmes 4 ), the poorest households continue to be disproportionally housed within the least energy efficient dwellings and lack access to alternative forms of heating 5. This means that millions of the poorest consumers energy (and money) continues to get wasted through leaky roofs and walls and through use of inefficient and expensive to run heating systems. Because of these circumstances, statistically, fuel poverty is still far more likely to prevail in rural and/or off-gas areas and the depth of fuel poverty off the gas network is also reflected in a higher fuel poverty gap NEA has continuously stressed that the main challenge is that the upfront costs of micro-generation and renewable heat technologies are prohibitively expensive for fuel-poor households. Without assistance in paying the capital costs, these households are unable to benefit from the operational incentives targeted at microgeneration or renewable heat. In this context, NEA notes the intention for the Renewable Heat Incentive (RHI) budget to increase from 430 million in 2015/16 to 1.15 billion in 2020/21, an increase of over two and a half times. NEA therefore welcomes the opportunity to shape the reformed and refocused scheme and in particular to make practical suggestions which could ensure the RHI supports the households that need the most help. 2.3 Despite providing support to cover part of the upfront cost of a renewable heat installation, the Renewable Heat Premium Payment (RHPP) required a very high household contribution (sometime as high as 90% of the total capital cost). The RHI for domestic properties currently presents a similar barrier as the scheme pays people for the renewable heat they generate in their home through an operational subsidy. As such, NEA has strong concerns that despite the potential, without further intervention, there will continue to be a lack of equal access for the poorest households to these technologies. 4 In the case of renewable heat, this refers to the following policies; the Low Carbon Buildings Programme, Warm Front and the Renewable Heat Premium Payment and the current Renewable Heat Incentive (RHI). 5 The Government has set a fuel poverty target to improve the energy efficiency of fuel poor homes, by getting as many households as reasonably practicable to a minimum standard of band C by 2030 (with interim targets of band E and band D by 2020 and 2025). Only c.5% of current fuel poor households in England live in the most energy efficient properties (Band C or above) This leaves 2.18m FP households are below band C. Only c. 23K FP households are currently brought up to band C per year and so we estimate it will take c. 95 years to bring all (current) FP Households up to band C and so the Government could miss their target by 80 years. In addition, based on current delivery rates, NEA estimate it will take 32 years for all (current) FP households to receive cavity wall insulation; 19 years for all (current) FP households to receive roof insulation; 21 years for all (current) FP households to receive condensing boilers; 25 years for all (current) FP households to receive central heating system and 237 years for all (current) FP households to receive solid wall insulation. 6 In 2013, NEA and Calor published a short report entitled Energy and Equity: Access to Government Programmes for Rural and Off Gas Households in England. It highlighted official statistics showing that fuel poor households that are off the gas network are typically prone to much more severe fuel poverty and despite policy interventions, these households were least likely to benefit from current policies. We also highlighted that the UK Government did however recognise fuel poverty is a real and serious problem faced by millions of households in the UK today and noted that the Government was determined to act. Through a follow up report in 2014, we also investigated what had changed one year on, in an attempt to track progress towards addressing what were outlined as the key barriers that face rural households being able to access current energy programmes and any progress towards acting on the recommendations we previously made. 2

3 2.4 Whilst NEA welcomes DECC s stated intention to address these issues and improve access for those less able to pay (by introducing assignment of rights to payments, to allow new 3rd party financing models to develop) NEA highlights within the response that in order to respond to this challenge, DECC cannot rely solely on these market driven capitalisation models to provide equal access to low income off gas households. NEA argues that a alongside this, DECC should provide an annual ring-fence within the budget for fuel poor households off the gas network who cannot afford the upfront costs of renewable heat technologies (and potentially provide a small ongoing operational subsidy to ensure these households are compensated for any increase in fuel costs or maintenance costs). This should also be undertaken alongside a continuation of the Central Heating Fund which should be committed year on year to align with the duration of the current gas distribution price controls, ending in NEA believes this dual approach would be a much more accessible and reliable way for the programme to directly support the achievement of the fuel poverty targets to improve the energy efficiency of fuel poor homes to band E by In addition, from 2017, it is hoped that ECO resources should be used to provide targeted insulation improvements to these households to ensure they have access to a policy that can provide the required levels of basic insulation. The latter will be made even more feasible when enhanced data sharing is introduced (hopefully by the end of the year) which can reduce policy costs and help the most vulnerable households access this support. 2.6 Finally, NEA s response highlights that NEA was funded by DECC to carry out an investigation into the barriers associated with take up of, and access to, microgeneration and community energy by fuel-poor households. The project sought to identify the key barriers and, working with industry and representative organisations, develop a series of policy options for addressing these barriers in turn. For each policy mechanism, NEA sought to undertake an overview of strengths and weaknesses and provide an indication of factors affecting the timeframe for their potential introduction. Subsequently, NEA commissioned a specialist consultant to review the project findings and provide a high-level assessment of the cost of introducing these new mechanisms 7. Whilst sections of the report may need updating, the response highlights what non-financial barriers were cited and provides a summary of how technical and consumer standards barriers could be addressed in particular. 7 Delta Energy & Environment: 3

4 3. Response to key consultation questions which related to the issues above Q1. Do you agree with the proposed policy approach for degression and trigger setting? NEA has no firm views on the technology specific degression and trigger setting. However, when assessing the potential for alternative heat technologies, NEA would urge DECC to take account of the following table taken from Fuel Poverty: a Framework for Future Action Analytical Annex 8. This analysis, undertaken by DECC, estimates the social costs and benefits of each intervention considered in the FP-MACC and enable policy makers to estimate the net social cost of making progress towards the fuel poverty targets. All the costs and benefits of interventions considered in the FP-MACC are estimated using approaches consistent with those used in Impact Assessments of current or committed policies that are delivering or will deliver those interventions (including the RHI). In terms of overall appraisal framework, all interventions considered in the FP-MACC are also assessed using the HM Treasury Green Book methodology. DECC s stated approach to estimating the social costs and benefits of interventions (excluding energy bill rebates): 8 Fuel Poverty: a Framework for Future Action Analytical Annex, July 2013, page 60. 4

5 Q4. a) Are there any other features of the budget cap policy that could be improved? b) Do you have any suggestions of how these improvements could be delivered? NEA notes that the budget cap is designed to be a final protection on the budget assigned to the RHI schemes and it would not be appropriate to set individual budget levels for each technology. NEA agrees with this approach however, as noted above, NEA believes that DECC should provide an annual ring-fence within the budget for fuel poor households off the gas network who cannot afford the upfront costs of renewable heat technologies (and potentially provide a small ongoing operational subsidy to ensure these households are compensated for any increase in fuel costs or maintenance costs). The anticipated approach to budget setting and the cap will therefore need to be adjusted in light of this recommendation from 2017/18 onwards. Q.15 Do you agree that the proposal to introduce heat demand limits will contribute to achieving the aims of the reform of the RHI? NEA welcomes that one of the reasons stated for this proposal is to make the scheme more accessible to the less able to pay as well as to ensure that homes with lower heat demands, including smaller homes are able to benefit from the scheme when installing low carbon heating technologies, not just those properties with higher heat demands. We agree that one way to achieve this would be to introduce banded or tiered tariffs, paying more per unit of heat generated in smaller homes and limiting returns to larger homes. NEA also notes that this response highlights other approaches are warranted if this policy is to support the achievement of the fuel poverty targets to improve the energy efficiency of fuel poor homes by statutory dates (see section 2 and below). Q18. Do you have alternative proposals, beyond those summarised above, for further changes which may help increase deployment among those less able to pay? As noted in section 2 of this response, NEA welcomes a recognition within the consultation that the policy must be adjusted to increase deployment among those less able to pay. The proposal to introduce assignment of rights could be positive in this regard and could replicate the relative success of the rent a roof PV models. However, NEA would stress that DECC cannot rely solely on these market driven capitalisation models to provide equal access to low income off gas households and argues that alongside this, DECC should provide an annual ring-fence within the budget for fuel poor households off the gas network who cannot afford the upfront costs of renewable heat technologies (and potentially provide a small ongoing operational subsidy to ensure these households are compensated for any increase in fuel costs or maintenance costs). NEA believes this dual approach would be a more reliable way for the programme to directly support the achievement of the fuel poverty targets to improve the energy efficiency of fuel poor homes to band E by In addition, from 2017, it is hoped that ECO resources should be used to provide targeted insulation improvements to these households to ensure they have access to a policy that can provide the required levels of basic insulation. The latter will be made even more feasible when enhanced data sharing is introduced (hopefully by the end of the year) which can reduce policy costs and help the most vulnerable households access this support. 5

6 It is important to note that such an intervention has precedent. Before the closure, eligible applicants to Warm Front were guaranteed to receive assistance and could benefit from a grant of up to 6,000 to those off the gas-grid. The grant could be paid for measures such as insulation and alternative heating such as more efficient electrical heating, oil heating systems and renewable heating. NEA urges the Government to recognise the opportunity to reintroduce similarly accessible mechanisms and also draw on the experience of other UK nations. For example, in Scotland, the Warm Homes Fund is a 50 million initiative from the Scottish Government and is managed by the Energy Saving Trust in Scotland. It provides unsecured loan funding and development grants for projects to support householders and communities in fuel poverty. It aims to do this through the development and implementation of renewables-based energygeneration schemes which will reduce fuel poverty and provide affordable warmth. Funding is also provided to Registered Social Landlords (RSLs) and local authorities, as well as energy services companies set up by these bodies. Development grants of up to 10,000 can be provided for feasibility studies and options appraisals, and up to 20,000 for development strategy work. Low interest unsecured loans with no arrangement or administration fees of up to 5 million are available for capital measures. These additional steps would also help open up the RHI scheme to those least able to pay. In addition, NEA stresses this activity should also be integrated alongside a continuation of the Central Heating Fund (CHF) which should be committed year on year to align with the duration of the current gas distribution price controls, ending in NEA has previously highlighted how the depth of fuel poverty facing some households is exacerbated if they are reliant on more expensive and possibly inefficient sources of space and water heating when compared to households on the gas network. NEA therefore welcomed Ofgem s revised connections targets and associated additional allowed expenditure for Fuel Poor Network Extension Scheme under RIIO-GD1. Coupled with Ofgem s Stakeholder Engagement incentive and Discretionary Reward Scheme (DRS), GDNs are now encouraged to maximise positive outcomes for their fuel poor customers and engage the most hard-to-reach households that could benefit from a gas connection. However, support is not limited to these conventional heating measures and specifically, Ofgem stated in its review of FPNES, even where a gas connection is not viable, we still expect GDNs to play an active role in working with other organisations to facilitate alternative forms of assistance, and we expect GDNs to use this (DRS) incentive to develop non-network solutions for fuel poor households, and to work collaboratively with other parties to provide funding for in-house works. 9 As a result, NEA stresses a need for DECC and Ofgem to work closely to align the RHI, CHF and FPGNES policies. Such integrated policy development would help meet Ofgem s stated vision that insists the end-point for a fuel poor customer in contact with their GDN should not be the offer of a gas connection. Through further collaboration GDNs obligations under the FPNES can be a trigger point for joining up to supplier obligations and other government led support like the RHI and CHF (or local schemes) to close funding gaps and enable access to energy efficiency measures (including renewable heating) and other fuel poverty assistance. Crucially this would help address a gap in provision for those households that will never benefit from a gas connection and will inevitably fail the economic test within the FPGNES and won t have the capital to invest in renewable heating or basic levels of insulation. Heeding these approaches could also ensure Ofgem felt more confident in introducing a new 9 Ofgem (2015). The findings of our review of the Fuel Poor Network Extension Scheme, p. 12. Available: pdf. 6

7 additional requirement for all properties which receive new connections under the FPGNES to also have to install basic insulation. This precedent is already evident under the RHI and its introduction within the FPGNES would enhance the affordability outcomes which could be realised by any new gas connection or the installation of renewable heating. More broadly, the coupling of new sources of heating with basic insulation would ensure both the RHI and the FPGNES becomes more consistent with DECC s Heat Strategy and the aim to squeeze fossil fuels out of domestic space heating by Finally, NEA would request that DECC continue to work with Ofgem to analyse the contribution that the final GD-1 connections target, the CHF and FPGNES will make to towards the interim milestones and 2030 fuel poverty target and supporting the successful implementation of the new fuel poverty strategy for England. This requirement should be built into any annual reporting on all the aforementioned schemes and any analysis should be made publically available if any estimates have already been calculated. Q20 to Q24 Improving Performance and Quality standards NEA has responded to question 20 to 24 in one response (see below). In 2011/12, NEA was funded by DECC to carry out an investigation into the barriers associated with take up of, and access to, micro-generation and community energy by fuelpoor households. The project sought to identify the key barriers and, working with industry and representative organisations, develop a series of policy options for addressing these barriers in turn. For each policy mechanism, NEA sought to undertake an overview of strengths and weaknesses and provide an indication of factors affecting the timeframe for their potential introduction. Subsequently, NEA commissioned a specialist consultant to review the project findings to date and provide a high-level assessment of the cost of introducing these new mechanisms. Whilst the report noted the potential of low carbon technologies to deliver affordable warmth, the following non-financial barriers remain unaddressed or unresolved: Information provision for communities and householders Basic information on low carbon technologies for the domestic sector is readily available from suppliers and a number of Government-sponsored websites. However these do not generally provide informed discussion of how applicable the technology may be to specific households and communities; financing methods; capital costs; installation procedures; reliability and maintenance; and product lifetimes. Technical and consumer standards Where properly specified and installed by an accredited professional, and operated by an informed end user, these technologies can provide energy services (heat and power or cooling) more cheaply through greater fuel efficiency or through harnessing plentiful renewable sources. Where quality criteria are not met these technologies have the potential to be a significant cost burden on the householder and, in some more extreme instances, an actual hazard to the dwelling s occupant(s). The report noted Government need to strengthen protections in this area. Technical support for householders and local authorities In terms of the householder, it is critical that the most vulnerable people are able to use new systems correctly to maximise the benefits. This means providing simple controls and non- 7

8 technical instructions and/or training. Also, increasingly, local authorities are being asked to specify what energy technologies are appropriate to new developments. Given these responsibilities, funding should be made available for a systematic educational programme for relevant public sector professionals (senior officials from local councils, planning officers) so that all local authorities can identify existing and potential opportunities. The summary below outlines how barriers to technical and consumer standards and Information provision for communities and householders could be addressed. This is particular relevant given the consultation notes the adequacy of the current Micro-generation Certification Scheme (MCS) to provide or drive adequate performance and quality standards. The chart below illustrates feedback from an NEA questionnaire in An average score is used to show the response across the sample. A score of 100 would mean current provisions (defined by the sub-question) currently meet the needs of groups very well; a score of 0 would mean services meet the needs of groups very poorly. There was a clear gradient in the opinion of respondents when considering how well the needs of the general public, lowincome households and vulnerable households are met by the updated Micro-generation Strategy or the requirements of the MCS. The implication of the results is that respondents believed at that time that there was a further need to ensure both the revised strategy and the requirements of the MCS were enhanced for vulnerable households. The consultation on the revised Micro-generation Strategy included a section on what type of insurance schemes the industry should consider and other suggestions on how to enhance technical and consumer standards. NEA emphasised that, in this context, it is crucial that a householder can report unsatisfactory work and be assured that the body that handles this procedure is independent and can take robust remedial action if necessary. While good industry practice has subsequently been introduced, in the future the Government and the Industry must accept that where installation is sub-optimal or completely deficient as a result of sub-standard work, there should be financial and reputational implications for the installer and/or contractor. This recourse must not simply rely on the householder having the time or the resources to follow a litigation route. This would be cost-prohibitive for low-income households. Unfortunately, as things stand, other forms of protection and redress appear to be deficient from the point of view of a low-income consumer. The idea of asking householders at the point of installation to make a contribution to an insurance pot has previously been 8

9 considered. If an installation were sub-optimal or completely deficient that householder (or another who had also paid into the scheme) could be reimbursed for the cost of the work. Whilst established practice elsewhere in the industry, CIGA for example, without direct financial support for low-income households, this option may not be feasible. The householder is likely to be aware that this decision could be to their detriment but due to lack of financial resources at the time of the work they are unlikely to be persuaded or able to contribute. If this type of scheme were to go ahead, provision must be made for these circumstances from the outset. Before and after evaluation of project management and improving the householder experience is also critical to driving improvements in, and the perception of, the microgeneration or renewable heat sector. The policy proposals leading from the barriers outlined in the previous NEA report indicated a need to revisit the revised Micro-generation Strategy and the need for the MCS to be enhanced. Introduction of a short questionnaire to rank satisfaction with the installation process Because micro-generation and renewable heat measures invariably involves a significant intervention, it is highly likely that any private sector resident (and the majority of social tenants) will be present when work commences on the installation of the technology and at completion of the work. To ensure that all households, not exclusively low-income and vulnerable households, can benefit from an enhanced installation process, NEA suggested: As part of the process of the customer signing off the maintenance check, the householder should be asked to answer a short questionnaire to rank satisfaction with the installation process. During this assessment it will be necessary for the installer (or a contracted party carrying out this task) to be qualified and competent in communication with potentially vulnerable households. 10 The questionnaire should be available in an accessible format (to meet the needs of the householder) but the questions should be standardised so that feedback can be shared with the MCS administrator. This information can then be used to provide ongoing scrutiny of installers covered by the MCS. Aggregated reports (presenting non-household-specific information) can then be supplied by the administrator to either central or local government which would then be able to advise householders on the record and reputation of installers The following table presents a format which has been used to investigate most of the remaining policy options. These comprise NEA s initial thoughts on the advantages and drawbacks of this new initiative: Proposed policy Advantages Drawbacks 10 There will also be a need to reassure households that information they provide will be treated in confidence, will not be associated with them personally in any report and that responses will be presented anonymously. 9

10 option Introduction of a short questionnaire to rank satisfaction with the installation process Increases the likelihood that system will be operated correctly (hence more cost and carbon savings) Drives improvements in delivery and customer service to households Improves perception of the micro-generation sector Improves both national and local government ability to recommend MCS-accredited installers and track installation issues Enables installers to perform a valuable role in referring low-income and vulnerable households to further advice, support and other Government schemes that could also contribute to Government objectives. Questionnaire could be time-consuming for both householders and installers Current lack of infrastructure within MCS administrator to produce aggregated reports (presenting non-householdspecific information) to either central or local government Willingness or capacity of either central or local government to advise householders as to the track record of installers The feedback from householders is obviously limited to the installation (potentially before householder has had time to assess the quality of the work and the practical implications of the installation Potential for the feedback from householders to be modified (however this can be mitigated to a great extent by duplicate copies being produced, one for the householder, one for the installer and one to be submitted to the MCS administrator). Delta Energy and Environment provided feedback on this proposal noting that the REAL Assurance scheme already has a well-established consumer questionnaire but also recognising that the main focus of this is on the sales process and that, as such, the process captures only a fraction of the issues of concern to NEA. 11 According to REAL, they get a good response rate but only for installations that use the REAL Consumer Guarantee for Installation Services 12 in the region of one quarter of installations. Questionnaires are sent out by them in reply-paid envelope, and are returned directly to REAL. REAL then share findings from these questionnaires with relevant third parties e.g. the Energy Saving Trust when they are appointing contractors for grant-funded 11 The questionnaire that REAL sends to households that have microgeneration installed by a REAL member is here See 10

11 schemes. They believe that social housing providers, for example, could be encouraged to use REAL s insight when undertaking their own due diligence assessment of contractors. The REAL questionnaire is currently relatively short. Whilst it is recognised that there is a trade-off between length and the return rate, NEA would suggest that the introductory section should include questions about when the householder was informed about the installation; this would lead into a series of more detailed questions about the installation overall: the duration of the visit; was this longer or shorter than expected; did the installer complete the work in one visit or was this done in several stages; was the client satisfied with installation and location of controls; are controls readily accessible; and are there any complications associated with mobility or disability issues. Respondents might also be questioned on aspects of the installation that were particularly good or unsatisfactory; whether they had any worries or concerns about the installation; whether associated disruption or damage required remedial work; if so, what type of repair works were needed; are all appliances fully functioning post-installation; was any problem encountered in restoring the energy supply; how satisfactory (or otherwise) they found the overall experience; and any other comment they would wish to make on the whole process. Clearly, one of the major aims of this approach would be to meet the additional needs of vulnerable households. The questionnaire would therefore seek to know whether the householder was asked about any specific characteristics of household members such as health conditions; disability or mobility issues; or any communication / literacy/ language problems. This would enable assessment of the suitability of the support and advice the householder received and whether this was appropriate to their needs. Householders indicating that they, or a member of their household, have a specific health condition, experience disability or mobility issues or face communication/literacy/language problems should be asked further questions. These questions would seek to establish whether they were offered any extra help as part of the installation, for example, details of free energy efficiency measures, benefit entitlement checks or the offer of a referral to other agencies that could provide additional support. Other key issues to cover would be whether they have been given details of whom to contact if they had any questions post-installation (this should of course be a free-phone from both landlines and mobiles). Asking the householder to think about the advice or instructions they received about their installation, the questionnaire should ask how satisfied they were with this advice and whether the installer provided any written or verbal advice or instructions. If written guidance was provided, is it in a format that is accessible; if verbal advice was given, were instructions provided in a manner that is easy to recall. Other issues like did the installer inform the household about which tariff would work best with the technology and how to switch tariffs or energy supplier; did the installer inform the householder about any other independent advice or where they could get more information about other microgeneration technologies for the home; or sources of energy efficiency advice and assistance could also be included. Other factors to consider may be did the installer provide details of relevant advice lines and the householder could be asked how confident they are about where to go for help with any problems or faults. This list is not exhaustive but is presented here for illustrative purposes. Further work to develop this option would include the design and draft questionnaire, explore implications for installers, and continue to work with REAL to develop a questionnaire. Costing and how MCS could support the process Whilst these estimates may now be out of date, if the MCS Administrator were to carry out a separate post-installation questionnaire, NEA and Delta s previous estimate was this might require an additional full-time post at the MCS administrator; with overheads this would cost 11

12 in the region of 100,000. As the Department will be aware, the MCS is currently wholly industry-funded and this would have the practical effect of increasing prices for all consumers. This overhead may well be justified, however. NEA believes that adapting the current industry-led practice in the manner highlighted above would not have a direct cost implication and could be implemented within six to twelve months. According to Gemserv, the MCS Administrator, they also have put in place arrangements for monitoring members' compliance with the Code. Members must agree to comply with the requirement for regular monitoring. This includes audit compliance checks, mystery shopping and consumer satisfaction. This activity is currently underdeveloped and there is still not sufficient auditing of whether the installation has met the full MCS standards and has been properly commissioned, sized or installed etc and specific barriers for low income households seeking redress 13. Whilst undertaking a detailed retrospective analysis of the technical performance of each micro-generation installation would be extremely costly to carry out on a per installation basis (Delta highlight indicative costs of several hundred pounds per installation or even higher), auditing a sample of installations may help to drive up standards for technologies. During the review of NEA s initial proposals, Delta also highlighted an emerging model which tries to address this issue; Sweden s Heat Pump Court. 14 The findings of the court are publicly available and therefore it is known which installers have had successful claims against them. This would have the same practical impact as the suggested aggregated reports (presenting non-household-specific information) which it was proposed could be supplied by the administrator to either central or local government and then used to advise householders on the record and reputation of installers. Currently, the Swedish Heat Pump Court which is industry run requires the consumer to pay a 170 fee to have their case heard. This fee is then refunded if their claim is successful. The presence of a fee deters speculative claims by customers and Delta recognised that this may put off vulnerable customers. With the emergence of the likely explanation of the Energy Ombudsman and the likely separation of Ofgem with E-serve 15, it may be possible to create a mechanism for the householder to challenge the installer or manufacturer if their system is not performing (for example a heat pump operating with low COP). Further work to develop this option would include discussion with the Department and Ofgem on the current proposed scope for the Energy Ombudsman and a further analysis of any inferred costs (either direct start-up costs or those costs/savings to the industry). Universal product warranty In addition to the suggestions made above, to ensure that where any unsatisfactory installation resulted in higher bills or was hazardous and required remedial work, NEA also proposed that: Installation work should be covered universally by the product warranty, for a standard minimum period (NEA would suggests 3/5 years) This should be a requirement in the MCS. 13 Currently, if an installer (or product manufacturer) has not complied with MCS, or the REAL Code, then it is possible for householders to take action through the courts if their installation is not performing according to claims. Delta understand that there have been a number of such cases in the UK, and on every occasion the installer / manufacturer has settled out of court. However, vulnerable customers would be one of the least likely customer groups to take this kind of action. 14 More information can be found in this Delta-ee paper: 15 CMA remedy Energy Market Investigation. This role may possibly sit within eithers sphere of influence/authority. 12

13 This enhanced consumer provision should be funded by the company in question. The following table presents NEA s initial investigation of the advantages and drawbacks of this policy option: Proposed policy option Universal product warranty Advantages Increases the likelihood that, should the system be faulty, the system will be fixed and operational for a given period (hence more cost and carbon savings) Improves customer service to households by standardising the approaches used across the micro-generation sector Drawbacks Cost implications for installer Current lack of infrastructure within MCS administrator to oversee this standardisation in practice Delta highlighted that micro-generation and renewable heat products typically come with a variety of warranty periods 1, 2, or sometimes even 5 years. In some cases, elements of the product have a longer warranty or guarantee. Although this information may have altered subsequently, compressors in a heat pump can come with a 2-year guarantee. In Delta-ee s view, a mandated 3-year warranty would help to build customer confidence, and would protect customers from failure in the third year after installation (assuming a standard twoyear warranty). The cost to manufacturers of providing the warranty would be passed on to all customers. Again whilst this estimate may now be out of date, the cost of an extra year s warranty was previously estimated in the region of for a heating (heat pump, micro-chp or biomass boiler) installation; a cost in the region of 50 for a PV or solar thermal system is considered realistic. Further work to develop this option would include liaison with industry about the practicability and cost implications of this approach and would explore implications for MCS administrator in overseeing and enforcing this requirement. Warranty expiry maintenance check To ensure low-income and vulnerable households can benefit without being subject to unforeseen post-installation expense NEA initially suggested: As part of the correspondence to advise on a warranty that is about to expire, attempts should also be made by the installer to carry out a maintenance check on the equipment and identify if the householder has the means to cover the cost of ongoing servicing and repair. 13

14 Once an appointment (and subsequent inspection) has been carried out, a report outlining any faults or possible wear and tear should be provided to the householder. This should explain what repairs are covered under the existing warranty and an estimate of the costs associated with its future operation (presumably no longer under warranty). As above, this report should be available in an accessible format (to meet the needs of that household) but the format should be standardised. If an installer has made reasonable steps (including issuing a letter to the household and a subsequent reminder) but is still unable to make an appointment (and subsequently carry out the inspection) ahead of the warranty expiring, copies of the original correspondence and a new letter, marked in a distinctive way, should be issued explaining that the warranty has expired and subsequent repairs will now be charged for etc. In a similar manner, if a householder makes an appointment but fails to provide appropriate access to the technology ahead of the warranty elapsing, copies of the original correspondence and a new letter, marked in a distinctive way, should be issued explaining that the warranty has elapsed and subsequent repairs will now be charged for etc. This enhanced consumer provision should be made available free of charge and funded by the company in question. The table on the following page presents NEA s initial investigation of the advantages and drawbacks of this policy option are presented on the following page. Proposed policy option Advantages Drawbacks 14

15 Maintenance check on the equipment where warranty is about to expire Drives improvements in delivery and customer service to households Reduces the uncertainty relating to maintenance costs associated with micro-generation for low-income households Improves perception of the micro-generation sector Improves industry s ability to track installation issues Enables installers to perform a valuable role in optimising the ongoing value of that system by ensuring it will continue to be operated correctly (hence more cost and carbon savings) Cost implications for installer of additional maintenance visit and possible cost of repairs Current lack of infrastructure within the installer to generate this correspondence with householder. Willingness or capacity of either the householder to make an appointment or the installer to chase the appointment Communication barriers may prevent the most vulnerable from benefiting if the scheme relies on householder responding to a written communication Foreseen costs that sit outside of the warranty (either because of limited nature of cover or duration) may still be unmanageable for some lowincome households. Responses to the questionnaires provided some external feedback on the feasibility of these approaches. 66% of respondents believed a short questionnaire to rank householder satisfaction with the installation process would improve technical and consumer standards. 63% believed that this requirement would not impose an onerous burden on installers. 89% believed that a regulatory requirement should be introduced to ensure remedial works already covered by the warranty should be a requirement of the MCS. 88.9% believed that carrying out a maintenance check prior to the warranty expiring would improve technical and consumer standards, with 66% of respondents believing that the additional cost resulting from this approach would not be a significant barrier. Overall, Delta believed that enabling the customer to maximise the benefits of the product warranty period was also desirable. Information provision for communities and householders 15

16 In NEA s practical experience, and also acknowledged more widely, it is critical that householders, and vulnerable people in particular, have access to and are able to benefit from advice on energy measures in order to maximise the potential benefits. In the first instance, as explored in the previous recommendation, this means providing simple controls and nontechnical instructions and training relating to the measures installed. The Energy Saving Trust has produced guidelines on providing effective advice to tenants. 16 If advice is to be effective: It needs to be specific to individuals and their circumstances and it is necessary to gather information from tenants, diagnose their problem(s), explain the available options and recommend further action that can be taken...the distribution of general information (e.g. leaflets) is not considered to be energy advice. The list below highlights the areas where tenants regularly need advice on micro-generation installations: If the new system is replacing the main heating source (for example a heat pump is installed) it is necessary to explain not only the operation of that specific technology but the full system, including implications of changing controls (for example, how to work the programmer, setting room thermostats) If the new system is expected to save the household money, the advice/advice provider should be able to explain this in the context of the individual, for instance, how the new system will require changes in paying for fuel (for example, the most appropriate tariffs, changes to the amount the householder may have to pay through direct debit, to what extent the new technology will require a household that is off the gas grid to reduce or stop the delivery of solid or liquid fuels) The advice/advice provider should also be able to explain running costs of the new system (for example, expected savings, inclusive of any expected comfort taking, the costs of servicing, the cost of using electric boost functions and how this might vary depending on the time of day/tariff and/or any need for supplementary electric heaters most notably for heat pumps) The advice/advice provider should be also be able to offer further advice and support (for example, other low-cost and no-cost measures that could be adopted, local and national grant and discount schemes, or who to contact for further advice or repairs) Where advice of this nature is provided directly the practical results are hugely positive. Through the provision of advice, there is a key opportunity to both amplify the benefits of the technology and to maximise the experience of the initiative/programme that helped finance the project in general (Feed-in Tariff scheme, Renewable Heat Incentive, ECO or a local initiative). This in turn can have a positive impact on the take up of these schemes amongst friends, family and neighbours etc. Though energy advice provision is currently undertaken by energy suppliers, a number of Government-sponsored websites, consumer organisations, statutory bodies and charities etc, NEA (and the majority of respondents) believes there is a need to ensure that material is clear and consistent, does not confuse those in need of advice and that support on more complex issues is readily available and suitable for all households. 16 Energy Saving Trust, Guidance on Energy Efficiency Advice to Tenants, London: Energy Saving Trust,