What’s the future of government support for energy efficiency initiatives?

Jan 18, 2021

By David Weatherall. Director, Future Climate

In December a government Energy White Paper and a  new report from the Climate Change Committee were published. These gave details on how the government expects businesses to cut carbon emissions, and the regulations and support they’re planning to make sure this happens.

To fight climate change, the government has committed to net zero carbon emissions in the UK by 2050. That means big changes to business buildings. Energy use in buildings accounts for 23% of all the UK’s carbon emissions.[1]

There’s already a number of carbon and energy regulations that affect larger companies and the buildings they operate in. But the changes announced in the Energy White Paper will now require smaller companies to start cutting energy and carbon in their buildings, too. For companies that rent their premises, the government has said that these properties will need to meet an Energy Performance Certificate “B” standard, where practical, within the next nine years. There’s also additional funding support for energy efficient buildings and heating systems in the pipeline.

For industrial and manufacturing businesses most of the energy use and carbon emissions come not from buildings but from the machinery used on site.  The government’s White Paper also provides some indications of its future directions for helping manufacturers decarbonise industrial processes.

The official Committee on Climate Change estimates that to hit the 2050 net zero target the UK needs to cut nearly two-thirds (63%) of current carbon emissions by 2035.[2]

How is your business going to cut two thirds of its carbon emissions?

This blog provides details on the changes the government is planning. To understand how to cut carbon and save energy in your business buildings, Smarter Choices can provide a free detailed assessment of your premises.[3]

Cutting carbon in business buildings

In its analysis of business buildings, the Committee on Climate Change points to a mixture of basic energy saving measures and new technologies to achieve a two-thirds cut in carbon by 2035. The measures include:

  • Installing new controls for energy-using systems such as heating and lighting and improving businesses’ energy and carbon management
  • Insulation upgrades
  • Switching to LED and other high efficiency lighting
  • Switching to high efficiency refrigeration[4]

And the big change will be to heating systems. The plan is to phase out use of gas and oil for heating our buildings.  The Energy White Paper sets a target date of 2035 for no new gas boilers in homes, and the Climate Change Committee assumes no new gas boilers will be installed in business buildings after 2033.[5]

Instead of gas heating, there’ll be a big switch to electric heating, particularly heat pumps. Heat pumps provide super-high-efficiency electric heating by extracting latent heat from the air or ground around the buildings.

As well as heat pumps, over the next fifteen years many more business buildings will be connected to district heating networks as towns and cities link buildings together to share heat at a community level. And, in the future, businesses may begin using hydrogen as a fuel to power heating systems.

The new policies

To encourage businesses to take action the government has set a new target of Energy Performance Certificate band “B” for leased buildings by 2030.  On the A-G energy performance scale, B represents a good level of energy efficiency: currently 87% of business buildings don’t meet this standard.[6]

By 2030, it will be illegal to rent out a business building that doesn’t meet the  “B” standard where improvements can be made cost-effectively. That means improvements only have to be made up to the point that they will pay back, through lower energy bills, over a seven year period. The government estimates that by 2030 under these regulations 64% of buildings will reach B, 20% will reach C, with the remainder at lower standards.

To illustrate this the government provides the example of a small shop built in the 1960s. Currently an EPC E standard, the shop (and/or the landlord) can make cost-effective imrovements to meet the B standard by upgrading its lighting and changing heating to a reversible “air to air” heat pump that can provide both heating and cooling, at a  total cost of £2,139.[7]  That’s just one example of a very small scale business, many larger companies and their landlords will of course need to make much more substantial investments.

Where will the money come from? There’s already some financial support from the government to help companies pay for new low carbon technologies. For example, the Renewable Heat Incentive can provide funding for heat pumps and other low carbon heating systems. This incentive is ending in September 2021,  but is due to be replaced in 2022 by a new “Clean Heat Grant.”

And there are other plans for new grant funding support. The Energy White Paper says there will be a new fund for smaller businesses, “that will facilitate the installation of efficiency measures.” The government’s looking at two options for this scheme. One option is that energy companies will be obliged to help small companies install energy saving measures. The other option is an auction process where the government will give grants for the most cost-effective energy saving opportunities identified in business buildings.

But grant support will only go so far. Most of the investment will need to come from businesses themselves. Energy efficiency technologies are increasingly cost-effective with short payback periods. Smarter Choices can help your business identify the most cost-effective potential energy improvements and plan an investment strategy.

Alongside the new EPC B regulations, the government is planning a new labelling scheme for businesses with buildings over 1000m2.  This will be a scheme to provide business owners and their investors with more information on how to reduce energy consumption and lower both carbon emissions and energy bills. We’re expecting to hear more about that labelling scheme in a consultation in the new year.

What about energy saving in industrial buildings?

For manufacturing businesses looking for help with cutting energy use and carbon from machinery, the government’s Industrial Energy Transformation Fund was launched in 2020. The fund is providing £315 million to help businesses with high energy use. One application round had already closed. Phase 2 of this funding scheme will launch in 2021.

Beyond this funding, the Energy White paper provides few details of how smaller manufacturing businesses will be provided long term help to decarbonise. Instead the government’s current focus is on supporting innovation for a  major switch in the technologies used in manufacturing – driving the uptake of carbon capture usage and storage and the use of hydrogen as a fuel.  But there’s not yet detail on how smaller companies can be involved in that.

An Industrial Decarbonisation Strategy will be issued in 2021.

What Happens Next?

There’s further government announcements expected early in the New Year with the publication of both a Heat and Building Strategy and the Industrial Decarbonisation Strategy. But in the meantime if you’d like to know more about how you can save energy and carbon in your business buildings, contact Smarter Choices for a free energy assessment.


[1] The Sixth Carbon Budget: Buildings (6CB:Buildings) Climate Change Committee 2020, Page 13 Sixth Carbon Budget – Climate Change Committee (theccc.org.uk)
[2] The Sixth Carbon Budget: The UK’s path to Net Zero Climate Change Committee 2020, Page 13 Sixth Carbon Budget – Climate Change Committee (theccc.org.uk)
[3] Terms and conditions apply. See smarter-choices.uk
[4] Based on 6CB:Buildings (see footnote 1) Table 3.6, Page 24
[5] 6CB:Buildings (see footnote 1) Page 39
[6] Based on Energy Performance Certificates issued 2017-2019 MHCLG: Table A: non-domestic Energy Performance Certificates by energy performance asset rating Live tables on Energy Performance of Buildings Certificates – GOV.UK (www.gov.uk)
[7] Consultation: The Non-Domestic Private Rented Sector Minimum Energy Efficiency Standards BEIS 2019 P.28 Non-domestic Private Rented Sector minimum energy efficiency standards: future trajectory to 2030 – GOV.UK (www.gov.uk)