£240m home energy efficiency scheme delivered 'negligible' carbon savings

A flagship home energy efficiency policy which cost taxpayers £240 million failed to deliver energy and carbon savings, the National Audit Office has said.

Improving energy efficiency in the UK's 27 million homes, which are responsible for more than a quarter of the country's energy demand and greenhouse gas emissions, is seen as key to tackling climate change, energy security and fuel poverty.

But while 1.4 million homes had benefited from measures ranging from new boilers to insulation by the end of last year under government schemes, just 1% of households took out "green deal" loans.

The 14,000 households opting for the loan scheme, in which providers met the upfront costs of installing efficiency measures and householders paid the money back from savings they made on their energy bills, fell far below expectations.

The now-abandoned scheme's failure to persuade households that energy efficiency measures were worth paying for meant it cost the taxpayer £17,000 per loan plan, the report found.

The scheme, which cost £240 million to set up and run, including grants to stimulate demand, did not deliver additional energy or carbon savings, which would have been made anyway through other schemes.

An investigation into the Green Deal Finance Company, set up to provide finance for the scheme, also found a £25 million loan from the government was unlikely to be paid back by the company, which paid 13 members of staff £1.3 million in 2014.

The National Audit Office concluded the green deal did not achieve value for money and delivered "negligible" carbon savings.

And the design of the "energy company obligation" (ECO), which requires suppliers to install energy saving measures in homes to cut carbon emissions, to support the green deal reduced its value for money too.

The £3 billion ECO scheme, whose costs are passed on to consumer bills, saved only around 30% of the carbon emissions of previous programmes, partly because of an initial focus on "harder to treat" homes which cost more to make efficient.

Taken together, the government's various energy efficiency schemes in the past few years cost £94 for each tonne of carbon they saved, significantly more than the £34 per tonne of carbon dioxide of the schemes they replaced.

Amyas Morse, head of the National Audit Office, said: "The Department of Energy and Climate Change's ambitious aim to encourage households to pay for measures looked good on paper, as it would have reduced the financial burden of improvements on all energy consumers.

"But in practice, its green deal design not only failed to deliver any meaningful benefit, it increased suppliers' costs - and therefore energy bills - in meeting their obligations through the ECO scheme.

"The department now needs to be more realistic about consumers' and suppliers' motivations when designing schemes in future to ensure it achieves its aims."

Responding to the report, Labour's Meg Hillier, chairwoman of the Committee of Public Accounts said: "The Department of Energy and Climate Change has been flying blind when it comes to implementing the green deal and energy company obligation.

"The schemes have cost over £3 billion to date, but the department has achieved little energy savings compared to previous schemes."

A spokeswoman for the Department of Energy and Climate Change said: "As the NAO itself has said, government schemes will deliver over £6 billion of energy bill savings to the most vulnerable and have already helped make more than one million British homes warmer.

"Government is clear about the need to have firm financial controls in place to protect consumers, which is why we took action last July to address the issues in this report - stopping funding to the Green Deal Finance Company and setting up an independent review of the energy efficiency sector.

"We are now designing a new scheme that will help make even more homes warmer and bring people's bills down."