When I looked at the details of the UK government’s Spending Review at the end of November I was struck by one announcement that seemed a bit out of the ordinary. It was a rare appearance of something that has become quite uncommon these days: new money for public sector to invest in projects that will reduce carbon emissions.
Specifically, there is a commitment from the Department of Energy and Climate Change to provide £295 million over five years into improving the energy efficiency of public sector buildings, alongside a further £300 million for up to 200 heat networks. The heat networks are expected to generate enough heat for the equivalent of 400,000 homes, with the public contribution helping to leverage up to £2 billion in private sector capital.
Both of these are very sensible uses of public money that can deliver substantial energy cost savings or create new revenue streams. There are also several additional indirect benefits. For example, improving the energy efficiency of schools can create better learning environments. In hospitals it can enhance patient comfort and potentially clinical outcomes as a result. And heat networks can address challenges such as fuel poverty, or even boost economic development in a regenerated area.
But taking a wider perspective, there are going to be some challenges in ensuring that proper value is obtained from this public investment. The accumulation of public sector cuts and job losses over the past few years has meant that there is a worrying shortage of individuals with both the skills and experience to identify and properly prioritise projects, then negotiate the best possible deal with the private companies that can deliver them. Those that remain are under pressure from increasingly high workloads and straitened budgets.
Over the past decade the Carbon Trust helped a huge number of public sector bodies to prepare five year carbon management plans, identifying opportunities, building business cases and setting an investment strategy. But many of these roadmaps have not been followed. Detours have been required to deliver frontline services today, at the expense of reducing overheads in the long term.
Similarly DECC’s Heat Network Delivery Unit has helped to generate real momentum behind district heating schemes. But heat networks remain a relatively new concept for most local authorities in the UK, with implementation lagging decades behind other northern European countries. This means a comparatively high level of technical support is needed at this early stage to help them to understand best practice in procurement and how to implement governance structures.
It is likely that all, or almost all, of this spending commitment is going to be used to directly finance projects. However, to help make sure that this money delivers the strong outcomes then it makes sense to invest just a small amount of it – perhaps just one or two percent – into building a pipeline of high quality projects to fund and capacity within the public sector to manage them.
This will help to empower the public sector to implement the changes needed to meet our national climate change ambitions at the lowest cost, at the same time as improving their own operational efficiency. At its simplest then lower energy bills, or revenue streams from selling heat, means there will be more money to spend on delivering public services in the long term.
I know from personal experience the dedication and talent that exists within the public sector. So I hope that alongside this very welcome investment from the Spending Review that they are given the support and resources needed to spend it wisely.
Richard Rugg is Director of Programmes at the Carbon Trust.
The Carbon Trust Public Sector Conference was hosted in London on 10 February 2016.
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