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Drive for austerity must not compromise long term government efficiency

20 February 2014 | Viewpoint
UK Houses of Parliament - Big Ben

The public sector needs to continue to invest in energy efficiency, even in these challenging times with pressure on budgets and more cuts on the way. Tim Pryce, Head of Public Sector, explains why.

Public sector organisations are fighting against a rising tide of energy costs. Those that are unable to reduce demand quickly enough through energy efficiency will end up unnecessarily spending an increasing proportion of taxpayers’ money on powering inefficient public buildings and street lighting. The UK public sector has been at the forefront of reducing energy demand and cutting carbon, reducing its own energy use by 46% between 1990 and 2011.  This is a great and often unheralded achievement that needs to be built on.

For this to continue the public sector needs to continue to invest in energy efficiency, even in the challenging times they face with pressure on budgets and more cuts on the way.

The Chancellor of the Exchequer welcomed in the New Year by proposing £25 billion more in cuts. Most of the headlines were grabbed by the £12 billion that would come from the welfare budget, but that leaves an awful lot to be taken from departments already struggling to find existing savings. For example, local authorities already need to find an additional 10 per cent reduction in budgets in the 2013 spending round. 

Lower costs now could mean higher costs in future

As a result, without the right finance, guidance and incentives public bodies are in danger of cutting “good” spending – such as invest to save projects – as well as “bad” spending. Recent cuts mean that public bodies often argue that they are unable to afford cost effective investments into energy efficiency and other invest to save projects. They may also tender contracts on the basis of the lowest up-front costs, rather than procuring on the basis of lowest project lifetime costs – again meaning lower costs now, but higher costs in future.

Furthermore there is often a clear and compelling business case and a quick return on investment for energy efficiency. It can free up other budgets for delivery of front-line services and help meet carbon reduction targets, benefitting the community and the local economy. It also helps to mitigate the future costs of climate change – for example it is very likely that expenditure on flood defences will have to increase significantly in the future to cope with higher rainfall and rising sea levels, and this comes straight out of local authority and Environment Agency budgets. 

Regrettably this business case does not translate into easy action. The Carbon Trust has helped public sector bodies save over £700 million in energy costs to date, which is a lot. But to put it into context, we are aware of at least £2.8 billion of additional lifetime savings that could be implemented – but haven’t been.

Local energy networks power ahead

Fortunately what we are seeing happen with energy efficiency investment is less evident in terms of energy generation. Action here is increasing thanks to support local authorities are receiving on local energy generation and heat networks

The Department for Energy and Climate Change has established a new Heat Networks Delivery Unit to help provide support and fund early development costs. This makes a lot of sense as these projects can create new revenue streams, cut carbon, support local economic development and address fuel poverty. More and more local authorities, such as Bristol, Leeds and Glasgow, are now looking into seriously invest in these.

A similar level of government support for public sector energy efficiency could create even greater savings by unlocking the pipeline of invest to save projects in public buildings.

Government can’t be efficient unless it is energy efficient

With austerity on the cards until close to the end of the decade, it makes no sense to put off taking action until the economy picks up again. The Committee on Climate Change is standing behind the UK’s Climate Change Act targets, and the public sector has a crucial role to play in leading the way on cutting carbon. Its influence extends over buildings, surface transport and waste, which collectively account for 40% of UK emissions. These are areas where the Committee on Climate Change has identified an opportunity to reduce emissions – and costs - by 20% in 2020 from 2010 levels. 

It is crucial that public bodies do not let budget cuts scupper investment in energy efficiency and other projects that give good returns for the taxpayer. Proper investment today means that taxpayer money can be used more effectively in the future: on providing education rather than paying the gas bill in drafty school; or on filling in a pothole in the road rather than just illuminating it with costly street lighting that is two decades old.

 

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