Dan Alchin, Energy UK: Role of the private sector (business) in making change happen

Kaela: So our next speaker is Dan, and I just asked how to pronounce his name. Dan Alchin, hopefully, who is from Energy UK. And he's going to be talking about the role of the private sector. So we've heard about local government, we've heard about community sector, now we're going to be hearing about the role of private sector in making change happen. Hand over.

Dan Alchin: Morning everyone. Just to start things off, I'm Dan from Energy UK. Energy UK, for those of you who aren't familiar with us, are an organisation that represents electricity and gas suppliers to the companies that sell you getting electricity for your homes, British gas, GDF octopus energy and the like. We also represent electricity generators, so the owners and the operators of wind farms, solar farms and power stations. I'm here today to talk about the role of the private sector and the role of businesses. Probably coming to no surprise that I think businesses have a crucial role to play and are going to be fundamental if we're going to successfully reach Net Zero and de-carbonise our homes. Broadly speaking, when I say business, and what do I mean in what to expect of business is to play in this transition, well I think there's four big roles that business are going to have. I think like today, businesses are going to be the ones that are developing, installing and selling to everyone the technologies they need. [audience interjeciton] Oh, fine. Sorry. Like today, I think businesses are going to be the ones selling, manufacturing, and installing the products and services we need to improve our homes. Again, like today, when it comes to things like boilers, they're going to be the ones servicing and repairing them as well. Looking further into the future, also going to key role for businesses in helping us finance those improvements through loans, new types of mortgages, helping people and householders to meet the upfront costs of installing products and services that will reduce their emissions. And then finally, I think businesses are going to be at the forefront of delivering innovation. They always are. Look at the mobile phones in our pockets today and compare that to the mobile phone 20 years ago. That's businesses innovating and improving technology because customers demand it, and there will be a role for businesses in that when we look at how we de-carbonise our homes.

I've got up on the screen there a nest [?] thermostat. That's a smart thermostat that controls the temperature of your home and the level of heat the boiler's producing. That's one that you can control from your phone and learns based on what you what you tell it over time so it can heat your homes in a more effective way. So that gives you an example of innovation that businesses are delivering. It is important to note in that regard that this is not a new space for businesses. Businesses have been active trying to help people improve their homes for 20,30 years now, and we've actually already done a lot. ECO was mentioned by Jonathan in the previous presentation. We're under that scheme. We've seen energy suppliers so the likes of British Gas and [inaudible 00:03:03] improve over two million homes since 2013 by installing energy efficiency measures like insulation and new boilers. Every year, we also replaced over a million boilers in homes across the country. That's 100,000 gas engineers going into people's homes and conducting work. Since 2014 we've also seen 100,000 new renewable heating installations installed. This is private sector businesses doing work in people's homes to help them reduce their carbon emissions. And it's all contributing to a growing number of people working in a low carbon economy. And that's ordinary tradespeople like your builders and your plumbers and your gas engineers .

I want to talk a little bit more about the energy company's obligation as it was mentioned in the previous presentation. Under that scheme, that's where we've seen energy supplies improve over two million houses since 2013. And a scheme like this has really existed in some form or another since about 1994. There have been laws requiring the largest energy suppliers to install insulation and new boilers in people's homes. The current scheme, ECO, is targeted helping those people most in need. Those people on the lowest incomes, living in the poorest quality homes. And the way the steam works is supplies have to go out and find people that are in need of support and need measures being done to their home, and then they fund the installation of those measures and organised their installation. The money for then delivering all that is then recovered from all of us by our energy bills. on average, I think it costs each household about £24 a year. £24 of your annual energy bill goes towards delivering this scheme. The challenge with the ECO, in my opinion, is that you pay that £24 via your energy bill regardless of your ability to afford it. And the more energy you consume, the higher your energy bill, the likelihood is the more of it goes towards this scheme. Now the challenge and what are the issues then that businesses find when they're looking to try and help people on this transition? Well, I think you look at the progress I just talked about. The majority has come about via schemes like ECO, where people have been required, well, where businesses have been required to invest and been required to help assist people. All of this has come through where there have been heavy government incentives that have heavily encouraged them to do so. But when we look and look at the challenge ahead of us, 28 million homes needing improving, I think it's probably unrealistic to expect government require our mandate or to fund all of that work to occur. I think the really hard truth of actually reaching that Zero, and all of us improving our homes m is that we're gonna have to reach into our own pockets. If we're serious about tackling this challenge and improving our homes it's going quite each and every one of us, probably to invest our money in our own homes. And this is the challenge I think businesses really find at the moment when we look at both four roles is there isn't sufficient demand. I think the card hard truth of it is at the moment the majority of people don't want to invest their own money, don't want to invest their own time and aren't really interested in energy efficiency or changing their heating source to something that is lower carbon. There's a number of reasons for that, some of which I think we've already explored. You know, improvements can be expensive. They can also be disruptive. For 30 years under programmes like ECO, we've been delivering it to people for free. So why would people suddenly be willing to pay for it? And equally, unlike a new kitchen or a new bathroom, you improve the efficiency of your home. It doesn't increase the value of your home. It doesn't increase the amount of money you can get if you want to rent it, there isn't a value in it that we recognise. So why make the investment? And then finally, I think it was touched on yesterday, if you rent your own home like I do, well, I'm not going to invest in my landlord's property and my landlord's not gonna invest in a property where he sees no return or reward for doing so. All of that makes it a challenging environment for business to fulfil its for for four roles. There isn't the demand for the products and services they want to sell. Luckily, however, both challenges aren't unique to the United Kingdom. They're common across a whole host of countries. And other countries, we can look at Germany, we can look at France, the Netherlands, much closer to home we could look at Scotland, have actually started to address these challenges and started to build a market in an environment where businesses can help people live in warmer, more comfortable homes. So the question logically becomes well, what have they done? I think there's three things I want to pull out as recommendations I think we can take from those countries is how we can start to address this lack of demand challenge. One, and I know this is quite a potentially a brutal thing, I think we got new rules on new regulations around the quality of homes. You know, by the time we reached 2030, 2035, I think we need to be saying to people If you're home doesn't meet a certain efficiency standard or doesn't have the right heating systems, maybe you can't sell it, maybe you can't rent it because it is no longer fit for purpose. That's very harsh. And therefore, I think the experience from other countries also tells us that we need to package that with incentives.

We need to also encourage people to take action, you know, carrots to go with the stick. There's a whole host of things we could do here in terms of subsidies or grants. But also one thing that we often talked about is could we start varying taxes? Could you vary stamp duty or council tax based on the efficiency of a property to reward people for making an investment? And then all alongside this, we need to ensure that good quality work is being installed so people can have faith in it. And then we need national media campaigns to encourage people to act and make sure people are aware. I think if you do those things, you give people a reason act and a reason to engage and a reason to invest. And in doing so, you give businesses certainty that in most four roles I talked about at the beginning that there'll be a market for them, and that people will be interested in engaging with them and buying the products and services they're selling. And furthermore, you also create new opportunities and new jobs and more income, and you build a stronger economy overall. Now, of course, before I wrap things up, no matter what, there are always gonna be households where no matter what incentives your rules you put in place, who are just not gonna have enough money to invest in their own properties, you know, and I think we need to recognise that and therefore I think, alongside new incentives in rules to encourage those that can afford to improve their own properties to do so. We're getting the government to take action as well. And government to put in place robust and serious programmes of support for those least able to engage and least able to upgrade their own properties. I see that being a crucial role for government because otherwise we're going to end up with the people that least able to afford it, least able to engage, being left in cold, cold, damp homes that are highly polluting.

So just just wrap things up. I think businesses are gonna be crucial. I think they have a huge role to play from developing technologies, installing technologies and engaging with all of us to improve our own homes. But at the moment we have a problem of demands. People, frankly aren't interested in what businesses are selling and that needs to change. We need to find a way to engage people in this debate and take them with us so that we encourage them to invest their own money in improving their own homes. Thank you very much.