10 steps for sucessful energy-efficiency incentive schemes

When it launched in September 2020, MCS welcomed the Green Homes Grant – the government’s most recent consumer incentive for low-carbon heating.

But over a tumultuous six months, the voucher-based scheme has been beset by many operational difficulties, including significant delays in installers being paid for completed work.

Ian Rippin, CEO of MCS – the national standards organisation for domestic renewables – delves into the issues surrounding the Green Homes Grant and outlines a 10-point blueprint for how consumer-centric schemes should work:

In the 14 years since the inception of MCS, we have seen government incentives come and go. Some have been effective and efficient – the Feed in Tariff (FiT) comes to mind.

FiT helped drive the adoption of Solar PV and was associated with a significant reduction in the cost of installation. Its legacy is still felt today, with Solar PV being the dominant technology installed under MCS.

As an organisation, MCS has extensive knowledge of past schemes. In fact, MCS directors were involved in the delivery of Clear Skies back in 2002, one of the very first voucher-based government schemes for low-carbon installations.

While FiT appears to be the most respected scheme, The Green Deal – the energy efficiency scheme initiated by the now defunct Department of Energy and Climate Change (DECC) in 2013 – is perhaps the most derided.

A report from the National Audit Office said The Green Deal has “not achieved value for money” and that “DECC’s design and implementation did not persuade householders that energy efficiency measures are worth paying for”.

Back to today, and the current furore over the Green Homes Grant, which already faces the axe. I have sympathy for colleagues at the Department for Business, Energy and Industrial Strategy (BEIS) who were tasked by the Treasury to implement an ambitious policy in just a few short weeks. One that is administered by an organisation with no direct industry experience.

Compare the Green Homes Grant with the Renewable Heat Incentive, which took well over a year to design and implement. The fact is low-carbon schemes need time in development before launch.

MCS has called for long-term policy commitments that give officials, the sector, and its consumers a fighting chance of making them a success.

It would be hugely ambitious to distil all the factors that would ensure the success of future schemes; there are just too many variables involved.

That said, I would argue that the blueprint for a successful incentive scheme should follow these 10 steps:

1. Keep it simple

We should resist the temptation to throw everything into a scheme’s design. The evidence suggests that the search for maximum compliance can be counterproductive.

Most systems work best if they are kept simple. People often become frustrated with complex processes, which can prompt them to look for shortcuts. MCS knows this from its own Standards

work. As human beings, we respond best to procedures that are intuitive and feel like they are there to help us achieve a desired outcome.

The Green Homes Grant has been heavily criticised by both consumers and installers for being overly complicated. Securing a voucher involves a series of checks, which all appear necessary on the face of it.

Value-for-money checks could be simplified by reverting to a model that consumers already understand. In this market, securing at least two competitive quotes can work for the consumer, mirroring how most of us behave when making other major purchases for our homes.

It’s much simpler when a scheme uses real life examples from the sector to illustrate value for money. An algorithm can be difficult to understand when not framed within the boundaries of such an initiative.

This move would be welcomed by our installers: in response to our latest survey, almost half (42%) stated that the administrative challenge associated with the scheme had put them off signing up to the Green Homes Grant.

2. Don’t fix what isn’t broken

Changes to established methods are disruptive. At a time when the sector needs the most support, it is odd that a new scheme like the Green Homes Grant would require the adoption of different processes and procedures.

Most MCS certified installers understand what is required of them to comply with Standards. MCS isn’t perfect, hence why we consult with our installers to help us shape the improvements we are making.

However, incentive schemes of the future need to rely more on the sector’s existing quality assurance framework. Our aim is for MCS to have a greater a role in supporting the delivery of the upcoming Clean Heat Grant than we had for the Green Homes Grant.

3. Support the consumer

Renewable energy technology is not well understood by the average homeowner. The ‘microgeneration’ sector is still in its infancy, as we move on from the early adopters to wider uptake.

I celebrate the fact that there have been more than 1.2 million installations registered with MCS since launch. However, the same level of deployment over the next 10 years would be nothing short of a failure, given the important role microgeneration technology can play in decarbonising our homes.

MCS has advocated that future incentives are accompanied by an integrated and targeted package of consumer support. The aim of which should be to help households and property owners access the right renewable systems for them and the area they live in.

4. Empower the installer

Any market intervention comes with the potential for unforeseen consequences. Schemes that don’t fully appreciate the relationship built between supplier and consumer, and the process of delivering a customer’s project, are destined to fail from the start.

Engaging installers early in the operational design of a future scheme can help remove some of these risks. Importantly, it can also secure advocates for new initiatives, designed with consumers and installers in mind.

Trialling new schemes within the sector should be a prerequisite for any future initiative before full launch.

5. Plan for launch

We all know that ministers like to play politics by making bold statements. Doing so with any form of consumer incentive naturally causes people to suspend their purchasing decisions until they can apply.

This delay can be catastrophic for industry if it extends beyond a few days. Overheads still need to be met and, without sales, cashflow quickly comes under strain.

Ministers should resist the urge for political glory and headline grabbing announcements until the infrastructure is in place to launch and deliver the scheme properly.

6. Get the balance right

Nothing is more harmful to industry than stop-start incentives and cliff-edges.

Incentive schemes – whether grant, voucher or tariff-based – need to be sufficiently attractive to generate interest and increase sales; but not so attractive that they drive undesirable behaviours and cause price inflation.

Getting the balance right from the outset is never easy. The best solution, as proven by FiT, is a real-time mechanism that reduces the level of incentive when installation numbers or other triggers are met.

If clear and transparent, these mechanisms will allow industry to plan. They also apply downward pressure on price inflation, which can be met by increased efficiency in the supply chain as volumes grow.

7. Plan long-term

Allocate a realistic budget and make it available over nothing less than three to five years. If we learn nothing else from the Green Homes Grant, it should be that a big budget set against an impossible deadline is doomed to failure.

Ultimately, this can be meaningless in terms of positive impact and incredibly damaging to industry, which needs time to increase capacity by recruiting and training staff. Good, competent people don’t grow on trees.

Although modelling uptake over a three-to-five-year horizon can be difficult, combined with the delicate balance mentioned above, a scheme can still be managed within its allocated budget.

8. Efficient three-way communication

These schemes have three main parties involved: the consumer, their chosen installer, and the scheme administrator.

Systems should enable clear and effective communication between all three when processing applications and claims.

Concerns over GDPR have caused unnecessary delays with the Green Homes Grant, with the administrator feeling unable to discuss application questions with the installer – even relating to the quotation.

Instead, all queries had to pass via the consumer. A simple clause in the application process where the consumer consents to certain information being shared with their installer would have resolved this and created a far better customer journey.

9. Engage and promote

The organisation appointed to administer a scheme should be required to publicly and personally engage consumers and industry to promote it and receive feedback. Scheme management should be visible and accountable, not anonymous. Administration needs to build credibility and trust – without which we will not reach our net-zero aims.

10. Local, joined-up delivery

Administration of these schemes can be complicated but it’s important that the organisation is joined up internally.

Helplines for both consumers and installers, voucher processing, redemptions/payments, fraud prevention – all should operate seamlessly together in UK time.

The government has a real opportunity to learn from the mistakes of the Green Homes Grant as it prepares to launch the Clean Heat Grant in 2022. At MCS, the aim will always be to support policy, critique improvements and advocate for installers.

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