Distrust could hamper Green Deal

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Public mistrust of the "big six" energy firms may undermine the UK government's planned Green Deal, according to the International Energy Agency.

The energy firms are supposed to deliver a mass programme of home insulation under the Deal.

The IEA warns that customers could be deterred by high prices and instances of poor service and mis-selling.

It says the government needs to tell people more about the benefits of insulating their homes.

This international attention on the Green Deal may prove uncomfortable for ministers who have already been facing complaints that The Green Deal does not do enough to help the 8.5 million people heading for fuel poverty, and has not been publicised enough.

The Prime Minister recently discussed problems with the Green Deal after Cabinet Office officials took evidence from critics.

Andrew Warren from the Association for Conservation of Energy told BBC News: "The IEA report echoes what we have been saying. Allowing the energy companies to lead on the Green Deal would be a mistake given the lack of public confidence.

"It can only succeed with new policy incentives and potentially trusted firms doing the work."

Under the spotlight

The IEA's special report on UK energy is generally complimentary about the ambition of UK energy policy, though sceptical on some key details.

Start Quote

It is welcome news that one of the world's most authoritative expert bodies has applauded our long-term vision”

End Quote Charles Hendry Minister of State for Energy

It praises the government for setting long-term targets to combat climate change then imposing policies to achieve them.

The IEA points out that energy experts worldwide will be scrutinising the outcome of the UK's Draft Energy Bill which attempts to rig the power market to ensure a balance of low-carbon energy sources, including nuclear.

But it warns that the proposed reforms are complex and untested, and that policies supporting low-carbon energy may be in conflict with each other.

If it goes wrong, the report says, the reform could lead to higher prices for consumers and greater inefficiency as firms try to wreak the biggest concessions from government and regulators instead of competing to drive down costs.

It also raises an alert over consumer attitudes in the future: "Currently, it appears that there is support for the need to diversify generation sources so as to provide increased energy security and reduced emissions," the report said.

"Investors are likely to ask themselves how enduring the new policies will be if resistance to rising costs is to increase in the future." The report also says support for government policies will wane unless there is more international commitment to cut carbon.

Charles Hendry, Minister of State for Energy, said: "We are working to make the UK a leading place to invest in low carbon energy infrastructure. It is welcome news that one of the world's most authoritative expert bodies has applauded our long-term vision."

Mr Hendry added that the government was working with industry to make sure the benefits of the Green Deal are fully understood.

Power switch

For all its admiration of UK ambition, the report notes that, so far, CO2 cuts have come at little expense.

"Since 1990, CO2 emissions from the energy supply sector have decreased by 15% and business emissions by 41%. However, emissions from households have increased by 8% and from road transport by 4%.

"Emissions reductions are primarily explained by switching from coal and oil to natural gas in power generation in the 1990s, reductions in energy-intensive industry output and improvements in energy efficiency."

It outlines other major challenges to the UK energy system - vehicles and heating - and commends the UK for being a leader in renewable heat. But the IEA warns that the 12% renewable heat target is a tough target, especially given the on-going struggle to improve insulation in UK homes.

On vehicles, the report urges the UK to press Europe for tougher standards on trucks and warns that the UK's 10% target for renewable energy use in the transport sector represents a "major challenge".

It says that up to 2030 the government's focus appears to be on biofuels, but it expresses concern that cheaper imported biofuels are dodging rules on sustainability.

The report urges the UK to make new laws quickly outlining its future policy for the use of fuel from waste, advanced biofuels, hydrogen-fuelled and electric vehicles.

The energy agency also recommends a greater role for DECC in promoting these policies.

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