Retrofitting homes is a key pillar of Joe Biden's $2 trillion American Jobs Plan to "build back better" from the COVID-19 recession. The president urged Congress on Wednesday to mobilize $213 billion to "produce, preserve, and retrofit" more than a million homes for affordability and efficiency. In addition to creating jobs, energy efficiency measures like insulating roofs and walls and installing electric heating will save people money on their utility bills and reduce carbon emissions from the nation's buildings.
But the Biden administration would be wise to look across the pond for a cautionary tale before rolling out any such program too quickly.
Last summer, U.K. Prime Minister Boris Johnson's administration unveiled its own "build back better" economic stimulus package, which centered around a $2 billion program to retrofit England's homes. The program was supposed to fund energy efficiency and clean heat upgrades in 600,000 homes, getting the country closer to net-zero emissions while creating 100,000 jobs, but it was canceled last week after a shambolic six-month run that may have killed more jobs than it spurred.
"When it comes down to improving the energy efficiency of our homes, this is about the worst thing the government could have done," Andrew McCausland, the director of a British contracting company, told the i, a daily newspaper. "It has destroyed confidence in the building business in taking on this work in the future."
Through Johnson's Green Homes Grants program, or GHG, most U.K. homeowners and landlords could receive up to about $6,900 to help pay for insulation, electric heating systems, and various other energy-efficient fixes like new windows, doors, and heating controls. Low-income homeowners were eligible for up to nearly $14,000.
The trouble began shortly after the grants became available at the end of September. In order to apply, building owners had to obtain a quote from an accredited installer, but few existed. Installers said they were reluctant to go through the time-consuming and expensive process of getting accredited without a longer-term assurance that there would be work. The program was designed to run only through March 2021.
McCausland told the Guardian he spent $8,200 and an estimated 160 hours of unpaid work to get his employees accredited. Others said that navigating the process, which involved multiple certifications, was overly complicated, making it especially difficult for small companies with no administrative staff.
Building professionals' wariness was understandable — they had been burned before. In 2015, the U.K. government canceled a similar energy efficiency retrofit program after just two years, resulting in a steep drop in demand for this kind of work.
On November 18, Johnson announced he would extend the Green Homes Grants program for another year, through March 2022. But installers were still unconvinced. Several testified to the Environmental Audit Committee of the British Parliament that a much longer-term commitment was needed to provide the certainty that the industry, and particularly small installers, needed to make the investment in accreditation.
By January, a parallel catastrophe was unfolding. A Guardian investigation found that the administration of the program, which was being handled by an American consulting firm called ICF, was in chaos. When the program first began, installers reported losing business as homeowners put projects on hold while they applied for the grant. Now homeowners were waiting months to hear back about their applications. There was no Green Homes Grants customer service number to call — all communication was conducted via email. Multiple installers said they had hundreds of customers interested in retrofits, but only a few dozen whose applications had been approved.
Program administrators often rejected quotes for being too high, asking applicants to provide more details or seek out additional estimates. On December 24, the program sent notifications to thousands of applicants that said it was unable to verify their identity, and that their quotes were too high. Many homeowners dropped their retrofit plans altogether. Installers were incensed that their work was being devalued and that they were losing customers.
Installers were also going into deep debt waiting for their checks. Once their applications were approved, homeowners received vouchers for the portion of the retrofit the government agreed to cover. They would then hand those off to installers, who could redeem the voucher after completing the work. Bhumit Chandi, a business owner in the suburbs of London, told the Guardian in January that he had installed 16 systems and hadn't been paid for any of them, putting him nearly $120,000 in the hole.
"Chaos is an understatement for what is going on," another installer, Eddie Gammage of EDG Installations, said at the time. "We haven't received any payments at all yet for seven jobs we have completed. I have had to lay people off."
In evidence submitted to the Environmental Audit Committee of the British Parliament, another installer wrote that the Green Homes Grant program had hurt his business more than COVID-19. He said that his revenue had decreased by at least 40 percent, while administration and costs were up by 300 percent. He was considering cutting staff, and reported that his company's cash flow would be negative for the first time in years. "Our credibility with customers has never been at such a low point due to mistakes with the GHG communication with customers," he wrote.
As if things weren't bad enough, in February, Johnson's government delivered a major blow to the program. Though it had extended the deadline to apply for a grant through 2022, Anne-Marie Trevelyan, the Minister of State for Business, Energy and Clean Growth, said that unspent funds from the original $2 billion would not be rolled over after March 2021. Instead, the program would have a new budget of just $440 million. By mid-February, only $130 million worth of vouchers, or about 6 percent of the original budget, had been approved.
Last week, after months of investigating the Green Homes Grants, the Environmental Audit Committee of Parliament published a damning assessment of the program. It wrote that the government had "failed to consult industry adequately," that the plan had set an impossible timeline, and that administration of the grants had been "nothing short of disastrous."
The committee demanded that Johnson's government overhaul, extend, and fully fund the program "to provide a genuine long-term stimulus to the domestic energy efficiency sector. The scheme should not be scrapped or quietly wound down."
But just five days later, the program was abruptly canceled. Business Secretary Kwasi Kwarteng announced that a separate, much smaller energy efficiency program administered through local municipalities would be extended for another year, but that March 31, 2021 would be the last day homeowners could apply for Green Homes vouchers. As of last Saturday, less than half of the 96,000 applicants to the program thus far had been issued vouchers — far from the 600,000 homes the program was supposed to reach. The government expects to fund just $413 million worth of retrofits by the program's end.
A fact sheet for Biden's American Jobs Plan says that energy efficient homes should be paid for through "targeted tax credits, formula funding, grants, and project-based rental assistance." The U.K.'s Green Homes Grant debacle shows that rolling out these sorts of incentives without a long-term commitment to funding, input from the industry, and competent administration risks doing more harm than good.
"The tragedy is not so much that the scheme is cancelled, but that it wasn't planned well in the first place," Chris Stark, chief executive of the U.K.'s independent Climate Change Committee, wrote on Twitter.