Climate Change, Environment, and Infrastructure Committee

Chris, would you like to kick off?

Yes. Thank you, Chair. Yes, I completely agree, we definitely do we need an overarching strategy that is comprehensive and long-lasting. It needs to be agreed on a cross-party basis, I think; it needs to endure and people need to trust that it will endure. I think the current Welsh Government would like to have that, but I think it has been seriously knocked off course by COVID and then by Ukraine, which has made it very hard. It is wicked problem and wicked problems are necessarily very difficult, but I do think that there's an awful lot that Welsh Government could be getting on with right now to prepare the ground so that the vast majority of homes—that's to say those that are privately owned—will be ready, willing and able to decarbonise themselves.

Okay. Donal, would you like to add anything?

Yes, thank you, Chair, for that. Yes, I pretty much echo Chris's points. I think the question you get asked a lot is, 'What is the one thing we need to do?', and hopefully the message from today is that there are lots of things that we need to do. But, I suppose if there was one message, it is that long-term plan, providing certainty to the public and providing certainty to industry that this is the direction of travel. We have to transform our housing stock, we have a relatively small amount of time to do that, and therefore Government needs to be making the right signals and putting in long-term permanent changes, I think, to how we use energy and how the construction industry works to do that.

There's a part about getting the house in order for Government, but it's also communicating that to the public, and I think that perhaps that latter part has not been done to a great deal in the past. I think it's often been quite a technocratic exercise, certainly in England at Westminster level. We need to have a conversation with the public about this, and that probably looks like some national media campaign, social media, using community channels and stuff. So, I do think that long-term plan really is at the core of this—very much the first thing that needs to happen is to put that in place.

Okay, thank you. Rhiannon.

Thank you. Yes, I would just add that, in the absence of a strategy across all tenures, what we definitely do need right now is a long-term pathway to meet decarbonisation targets, at least up until 2030. So, something that illustrates that commitment between Government, housing associations, local authorities, other players, and as Donal was saying, something that provides certainty around jobs, pipeline of work, what skills are going to be needed and what sort of funding arrangements we might expect to see coming up. And it is all about signalling what's coming. Really, my point would be that what we need to see now is action: what action is actually going to be taken to get us there?

Okay. I just want to flag something up, because in response to a report by the Equality and Social Justice Committee, actually, chaired by our colleague here, Jenny Rathbone, the Government responded to some of the recommendations there, one of which was on this point about the need to formulate a clear, long-term strategy. And in response, the Government said that the Welsh Government is developing a comprehensive strategy and delivery plan that incorporates work across housing tenures. I'm just wondering whether you're aware of that or whether you're involved in any way. Chris is shaking his head.

Thank you. Unaware of it. Would love to be involved.

Yes, and probably disappointed that you're not involved, but there we are. I thought that I'd maybe flag up that the Government, at least, believes that they are doing it, but maybe they need to do it with a bit more gusto, I think, is maybe what some people would tell us. Okay. Diolch yn fawr. We'll move on. Janet.

Thank you, Chair. Apologies for being late. At this point, I'd like to declare an interest because of my own declared property interests.

What are your views on how the Welsh Government should be adapting and broadening its approach to ambitions for decarbonising—it says here, 'the private housing sector', but for me, all sectors of housing? We shouldn't be leaving anybody or any property behind. Obviously, I'm not talking business, I'm talking more the domestic related.

Although the focus of this inquiry is specifically the private sector.

Yes.

Rhiannon, would you like to go first on that?

I think, clearly, there's a need for scaling up. I think—

You don't? You think this just needs to apply to social housing?

Well, in terms of programmes like the Warm Homes programme, they absolutely need scaling up; we recommended that in our retrofit report a couple of years ago. It wasn't delivering at the scale required to really eradicate fuel poverty. But what we're going to be seeing now in terms of the private housing sectors is a reluctance to borrow, a reluctance to get into debt. So I think there's going to be a need to really look closely at what sort of support and financing options are going to be available to people to be prepared to actually invest in the energy efficiency of their homes. That is where we want to get to for all households—that people are not paying for heat that is lost through walls and windows; energy efficiency is a really important point that we need to get to in all households, and nobody should be left behind on that journey.

I agree with you. Because so much of the housing stock in Wales is old properties. In my constituency, I've got single people who've lost their—elderly, old people, living in big homes that are not energy efficient, and it's those who, when I ask my question, I'm in mind of. And then, this is for the Office of the Future Generations Commissioner for Wales or New Economics Foundation only, since the publication of your report, have there been signs of progress towards a programme of retrofit in the private housing sector?

Not that we've seen. We haven't seen much progress on this. The private housing sector, I think, continues to lag behind, and I'm sure that Chris and Donal will have more to say on that. But our report, the FGC report, the purpose of that was to look at the total funding required for the decarbonisation of all homes. It made some recommendations in terms of the funding levels required, and suggestions for how to fill some of those gaps. And there were things in there, for example, the establishment of a Wales energy service company that could look at the social housing side of things and set up regulatory—look at all the financial, administrative and regulatory aspects of that. And we haven't seen any decision yet on establishing a WESCO, for example. But as I say, that was for social housing. But we also haven't seen anything coming forwards to start addressing those big funding gaps in private housing.

Thank you. And for those—[Interruption.] A little point.

Briefly, yes.

Yes. On the private rented sector, there's some nervousness growing now just about the sheer numbers of section 21s that are being served. There's lots of talk about rent freezes, rent controls; would you say that, again, those kinds of moves will disincentivise landlords to then spend on their properties, if they think, 'We've got a rent control coming in, we've got a rent freeze coming in; I can't afford it'? Would you agree with me, or not?

Yes, quite possibly. This isn't something I've looked at particularly closely, in terms of that. But landlords, again, are going to be facing the squeeze as much as anyone else, so, yes, that definitely needs to be considered.

Yes. Thank you.

Okay. Thank you. So, Donal and Chris, just to respond, maybe, to this; obviously, the cost-of-living crisis is having a huge bearing on so many aspects of life these days, it's invariably going to have an effect on what both individual home owners can achieve, maybe, and also the public funds available to support some of that, potentially. Any views on how, maybe, plans should change to reflect the circumstances that we find ourselves in? Donal, first of all.

Sure. So, just to echo a previous point, I do think that a multitenure approach is really needed, partly going back to that point around the message, and also around the pepper-potted nature of many streets—we've got right-to-buy properties intermingled with social homes. And it's as much about communicating this to a community of people who talk to each other as it is about focusing on specific tenures.

The point around the cost of living, that's a double-edged sword in a sense—clearly, people's circumstances are getting much more difficult, but the case for energy efficiency has never been stronger. Recent modelling that we've done shows that the payback period on certain measures is now incredibly short, compared to where they were, based on that cost. So, I think it is about being clever about how we pay for things and about spreading the burden between Government, between landlords and between those who are able to fund this themselves, potentially, through different forms of financing.34

So, yes, the point around landlords, I think, is that you do need a regulatory approach. I do think you need those sticks to improve the general condition of the stock, and it tends to be the worst-performing stock of all. But there are ways of helping landlords. We've just done a piece of work with the Chartered Institute of Housing for Wales, which has shown that many landlords are not really aware, and they need as much help as the owner-occupiers. They are often worse informed, and so I think any strategy needs to bring landlords with them, but also look at the fact that you cannot be letting out substandard properties through the 2020s. There are things that Government can do to support them—different forms of financing—but I do think that regulation does have to form a part of that picture, personally. There will be instances where landlords are struggling, for sure—accidental landlords and stuff like that—but I think the greater good lies with helping tenants, to be honest.

Okay. Jenny, you wanted to pick up on something.

Yes. I understand the reluctance of individuals to take on new debt, given the uncertainty of interest rates, but governments don't go bust. What role do you think there is for governments to set up a loan scheme with a charge against a property, which gets over the pepper-potting issue you describe, whereby you want to do the whole street but people will have different contracts?

I'll let Chris come in in a second, but, just to respond to that, that is something I've recommended in multiple reports: Government using its powers to borrow cheaply, to offer low-cost finance, tying that to the property, either through something like the council tax bill or another property link mechanism like energy bills—that line of credit, potentially, being available to landlords. I think there are also ethical questions about pushing the entire repayment onto tenants, through an energy bill or something. So, I think that would need to be designed carefully, but I think the principle is certainly sound. Long-term, low-interest loans I do think are part of the piece, in combination with regulation and other things. I think any one instrument on its own is only going to be as good as the policy landscape around it, but I do think that is an important element of this story.

Okay, thank you. Chris.

I agree with Donal. The loans against the property—equity loans—are essential. They've been tried in the USA and when they're done properly, they work very well. They won't work for everybody, but they're a tool in our armoury. But before throwing money at the problem, we really do need to know what it is that needs to be done, and we have very, very poor information about 1.4 million homes in Wales. So, the starting place in a long-term approach is to gather data about the homes, assess what is properly needed, what their trajectory should be, what is, as some people call, their 'pathway to zero', so that we know that, 'For this home, it's right to do this measure now; this measure a little bit later', and so on and so on, in an organised and reliable way so that only the minimum necessary is done to the home and the costs are controlled as far as possible.

Okay, and we'll dig down a bit deeper on the data stuff in a moment, but we'll come on now to Joyce.

Good morning, everybody. We have had an optimised retrofit programme that's been ongoing. So, I just want to ask you for your views on how that optimised retrofit programme, how the learning from that, can be transferred now into the private sector and that includes also any mechanisms and capacity constraints that you might observe?

Chris, would you like to go first on this one?

The first thing about the learning is that the optimised retrofit programme is running late. It's been hit hard by general data protection regulation issues, which Welsh Government took too long to resolve and it's been hit hard by supply chain issues caused by COVID. But it is up and running and it is exemplary in many ways, particularly that it's designed to capture useful data and useful lessons. So, I think there are number of things that can be, or will be, learnt from it in due course. One is the effectiveness of different measures that apply to different kinds of property. That will help us to set more realistic and achievable targets for, let's say, the heat demand of a home. I think there is a number of behavioural learnings that are starting to come out, especially around what messaging is effective and what messaging is not. That's aimed at tenants, but I think that probably more general lessons can be learned from that. I think we will, in time, learn some cost lessons, maybe a little bit about economies of scale, though ORP is not a large-scale project in those terms, because each individual social landlord is only upgrading a fairly small number of homes. But we will learn cost lessons, I think. I think we'll learn lessons about where the supply chains are comfortable and where they have been stretched the hardest to deliver against the demands that the social landlords are putting on them. And I think we'll learn some stuff about regional differences as well. It might be in the measures that are applied to the houses, or in the attitudes of people in those regions, or in costs, or possibly in the behaviour of the supply chain. So, I think there's a lot to be learnt. It is slowly starting to be learned, but it's running late.

Right. If nobody else is going to say anything, I'm going to ask about the views on the Welsh Government's assertion that the test-and-learning approach that it has adopted—and it has adopted that—in the ORP is going to be sufficient to be the springboard to rapidly start decarbonising homes—and we are talking here about the private housing sector—by 2023, next year.

Yes. Chris.

We can forget 2023, I think, and I don't think ORP will be a springboard. I think it will be a helping hand and a pointer in the right direction. But we don’t have to wait for ORP. I think that’s been one of the problems. Perhaps Welsh Government has been thinking, 'We will wait for ORP and then we'll work out what to do'. There's so much that we could be getting on with now in parallel with ORP so that we've prepared the ground for the private sector, and the lessons can then be applied.

Donal.

Okay. So—

Donal wants to come in as well.

Sorry, I can't find where the hand is on Zoom. Just to echo what Chris said, really, let's not make the perfect the enemy of the good. I think there's a lot, certainly in the high-level target setting in the message to the nation—this is a long-term, 10, 15-year programme, so let's start communicating that. We don't have to have all of the parts fixed and ready, but let's start talking this up and actually get going with it. We don't have to have worked out everything behind the scenes before we can actually start doing stuff and changing people's lives and making things better. So, with the idea that we have to wait and see, I think we don’t have time for 'wait and see'. Let's not rush out and, obviously, do poor-quality work, but there's a lot we can be getting on with, particularly around the message, particularly around the conversation with the nation. I think that's the part that we really need to start having. And what a time to do it, with energy prices where they are. I think there's a very receptive audience now for this, so I think we should be bold and start having that conversation.

And finally, for Chris, what do you think would the impact on that progress if private landlords are not involved in ORP 3?

I think that’s a great big missed opportunity, as it was with ORP 2. For a long time, ORP 2 was planned to include private landlords, and then, for some reason, that was dropped. Welsh Government was urged to include private landlords in ORP 3 and, again, didn't. It's a big missed opportunity.

Can I just ask one final question?

Yes.

I think there's an obvious question in the room. We talk about investment in your property by private landlords and the cost of it, but considering the cost of heating at the moment and the fear that people won't put any heating on, is there not, in your view, a possibility that those properties will deteriorate, perhaps greater in value, by not having adequate heating or ventilation as a consequence of not doing something?

Yes, I think there is. I think there's a real danger that private landlords will sell up, move on, and the number of properties available for rent in Wales will diminish. So, much needs to be done, I think, to mitigate that. But Welsh Government has got a good scheme going. It's called Leasing Scheme Wales, and I've just learnt about it, but it seems to me to be imaginative and offers the potential for some real benefits. It offers financial incentives for property owners who lease their properties to the local authority for between five and 20 years, and Welsh Government will, where necessary, provide a grant to upgrade the property as well. And there's more money available if the property is empty. So, I think that's a model that, as long as it's been found to work, should be expanded to help counter the worry that private landlords will sell up and move on.

Thank you.

Excellent. Okay, thank you for that. Janet.

Thank you. What do you think are—? You were saying there's a lack of data; there seems to be a lack of awareness, I believe, of what this retrofit programme is going to cost. So, what do you think are the potential costs and realistic timescale—we've said 10 to 15 years—for undertaking whole-house assessments to inform the building renovation passport on all houses in Wales?

I don't want to hazard a guess at the cost because you should never talk about cost without talking about value, and we haven't worked out yet on the cost side by how much we can drive down cost by doing only the right things and by procuring at scale. I believe, by the early 2040s, we can have every home in Wales at, or as close as possible to, net zero. It has to be done in a staged way, and it starts with not very much physical work on the home, but just data collection and assessing what needs to be done to the home. But I think, 20 years, we can do the lot.

And you believe we've got the right skills? Or is there—

No, not yet because we don't know what skills are needed, and the skills won't appear until the pipeline of work is there and the small builders we're looking to do the work trust that there is a steady and growing profitable pipeline of work for them. So, we don't have the skills at the moment. We've got enough skills to get started, but we won't have the number of people engaged in retrofit yet that we will need if the programme is successful. But they will grow as people trust that the demand is growing.

And there's been a suggestion that work could be carried out at no cost to the Welsh Government or private owners. Can you explain that in more detail?

Yes. I mustn't claim credit for this; this is somebody else's idea. Welsh Government could initiate a scheme in which it invites private companies to survey homes and capture the necessary data in a standardised way that feeds back to a central database. They would not be paid for that, but their reward would be exclusive use of that data for a period of time—perhaps six or 12 months. There are analogies with fibre-optic cables. So, the companies that put fibre cables in at their own cost because they're confident they can win enough work from the homes that are now fibre-optic connected—they can sell services into those homes—and that will pay for the capital costs of putting in the fibre optics. So, it's a trade-off between doing the work with no reward, but the reward will be you learn an awful lot about a large number of homes in a particular region, which enables you then to sell services into those homes.

Huw wants to come in.

That's an interesting idea.

Sorry, Chris, Huw wants to pick up on something.

Yes, just to ask what's been the experience of other countries where they've used building passports. In terms of the speed at which they've been able to do the assessments, have they taken a decade and more to do this, or do we know there are countries where they've done this very rapidly, and at very minimal costs, in creative ways like the one you just described?

I can't answer on the speed of uptake. What I do know is that quite a few west European countries are very supportive of the idea and are trying to roll it out. But as to the rate of uptake, I don't know, I'm afraid.

Because the challenge for me seems to be, from what we've had in written evidence, and what you're saying, that this is almost like a doomsday book experience—every private property being assessed in the country. We're looking at the figures of the number of homes that is—that's massive, absolutely massive. So, bearing in mind the net-zero targets as well, I'm just trying to crunch through the practicalities of doing this whilst hitting what you've described as, by 2040, having not only done the assessments but done the retrofit as well in order to have all these properties done. Well, how do we do the first bit of the building passports? What's the achievable way of doing it, and what timescale?

Well, I think the tools are being developed in the optimised retrofit programme to speed the process of surveying a home. It's taking about three hours to capture all the necessary information at the moment, but the goal is that that should come down to about an hour. The data is fed back automatically by the internet to the central depository of ORP data. Other tools are being developed that automatically generate these pathways to zero based on the information captured in the survey.

The process of capturing the data and the process of deciding what's appropriate to do is being automated very rapidly, so that side of it is taken care of. Then it becomes a question of: do we have enough surveyors, or will we have enough surveyors, and can people be persuaded to let these people into their homes to capture information about their homes? But if you imagine the standard S-shaped curve of uptake, I don't see a problem in achieving that pretty rapidly if we put our minds to it.

Your use of the word 'doomsday' is absolutely spot on. It has a slightly gloomy overtone, but if you look at what the Normans did with, 'Right, let's work out what we've got', that's exactly what we need to replicate now.

Okay. It also shows the scale.

I'll bring Donal in in a moment. Huw, did you want to say anything else before?

No, no, that's fine.

Okay, go on, then, Donal.

Hello. Thank you.

Yes, Donal.

Yes. I just think we shouldn't be scared of this. We're a country that has done a lot of big infrastructure transformations over our history, and the idea that this is an insurmountable challenge, when we think about the benefits—. For example, we talked about the cost; the work we did with the future generations commissioner actually highlighted that we don't really know or have a good handle on the cost, but we sort of had a figure of about £14 billion. It sounds an awful lot. Think how much money we are now going to spend on natural gas between now and the 2040s. I'd warrant it's more than £14 billion by quite an amount. So, if we're throwing numbers around, we also need to think about where that money's going. It's increasingly going to the Norwegian sovereign wealth fund, and, in some sense, to other petrostates. So, I think we need to have a more mature conversation about costs.

I think we also need to have a conversation about jobs being a good thing, and this being a job-creation story, and actually if we think about things like gas safety certificates, there are armies of workers already out there going and visiting people's homes all the time, doing gas safety checks and other things, so I think this is definitely doable. It is big, but it's also a big positive story about improving people's lives, saving money and creating jobs. So, yes, it is a big challenge, but it has big benefits.

Excellent. Okay. Diolch yn fawr iawn. We'll move on, now, then, to Delyth.

Diolch, Gadeirydd. Bore da. Thinking about what ways in which carrot-and-stick approaches can be used in trying to accelerate action towards decarbonisation in the sector, what effect or what impact do you think minimum energy efficiency standards have had? And, I suppose, is setting those targets achieving the—? Is it working in terms of the carrot and stick, I suppose? I'm struggling to find a more eloquent way of putting it than that, but I'm going to use the hackneyed phrase instead.

Okay. We'll start with Rhiannon on targets, then.

Thank you. They've certainly made some impact, as far as we know, but I think the issue with the MEES is that they've been difficult to enforce. There's an issue of tenants being reluctant to raise concerns because they fear rent increases or potentially being evicted from that property once the improvements are made. We've also heard from some of the public services boards that we are working with at the moment on well-being plans that local authorities feel that they don't have any levers to enforce it, that it lacks teeth, that they can't really do much about it. So, we think that the MEES standards are needed, and we think that should be a consistent standard, actually, across multiple tenures, but we're not sure that the mechanics are there to make it work fully.

Okay. Chris.

I do like the idea that, in the long term, people recognise that there is going to be a big stick. The stick could be that by the early 2030s if you haven't sufficiently upgraded your property, you won't be able to transact it in any way. You won't be able to sell it and you won't be able to rent it out. I think we all need that long-term cliff edge over which we don't want to fall—you'll pardon the mixed metaphor—to just act as a constant little nag in the back of our minds, 'Crikey, yes, I really need to do something about this.' I think that's very valuable. It's insufficient in itself. There are so many other things that do need to be done to create the circumstances in which people are able to and do decide to upgrade their homes. There's a lot to be done there, but some combination of carrots and sticks will form part of that, and a regulatory dead stop end that says, 'After this, if you haven't done x and y, then you're not allowed to do z', I think, is going to be necessary.

Okay. Thank you. [Interruption.] Yes, sorry, Delyth.

Quickly, are there any alternatives to energy performance certificates that you think would work? If we had a Wales-specific system, how would that sit alongside a UK-wide EPC monitoring system?

Can I—?

Yes, Chris, and then we'll come to Donal.

In my little advisory group we've been looking into that quite a lot and also talking to people in Scotland and Ireland who are busy investigating alternatives to the EPC. The EPC wasn't designed to help us decarbonise homes and it's not the right measure. Its focus on cost is valuable, but when it comes to decarbonising, it's not. I think probably the right measure would be something to do with the annual space heating demand of a home if certain internal conditions are met, like, to maintain 21 degrees centigrade throughout the house over a cold winter. So, I think that would be a more useful target. It might be an easier one to understand as well.

Work needs to be done to establish what those targets should be, and it could be that different kinds of construction, different forms of building, i.e. detached, semi-detached, flat, maisonette, bungalow might have different targets, but homes built with different materials might have different targets as well. I'm not certain if the targets would be absolute targets or whether they would be relative to their current performance, but it wouldn't take much study, I don't think, to come up with a sound basis for setting kilowatt hour, per square metre, per year targets for homes.

Okay. Donal.

Just to second what Chris is saying, from some work I've been involved with recently. I think that EPCs have salience and I think it's about a reform programme, rather than completely getting rid of the notion of an EPC, which is increasingly relatively well understood. So, I think the kilowatt hour point is important. We need to think what we're aiming towards. We want homes to essentially be ready to install heat pumps in large part, so the EPC needs to drive homes towards being heat pump ready, if you like, which I think is one of the terms that gets used. So, I think it's about not throwing the baby out with the bath water, but certainly, as Chris said, the EPCs were not designed for the tasks we're now setting them. But, I think the coloured system, you could change things in the background and the public would not notice, really. A, B, C, I think that's clear. I think having those types of targets is a good policy-making tool, so I think retaining that, but changing the background is probably what needs to happen.

Okay. Huw.

I just wanted to explore the response you gave to Delyth there on this issue of a hard cut-off date. If we did this in a different way—. We always seem to be running to catch up to where we want to be by 2030, and then by 2040 and 2050. If we did it the other way and said, 'Well, that's our cut-off date', at that point—back to Chris's point—no transaction, no property would be able to be rented, no sale would be able to take place on a private home after that date, but it's a seven-year run-in. Is that fair and, if so, what would be the model? That does give a very, very—. It's not a line in the sand; it's a line set in green concrete. It's a real hard line. Do you think that's reasonable and fair? Rhiannon, I wonder if I ask you: is that the way we should be looking at this, saying 'There's the line, now Government, private landlords, individual home owners can plan towards that'? The right incentives and mechanisms have to be put in place to enable it to happen, but that is it, at that point. You've got seven years to think about the fact that nothing moves in the market, at that point, unless you've done the work.

I agree that you need to have something that stimulates the market, you need something that actually gets people to start raising people's awareness around what's coming and for people to start digesting the information that they need to know and to start making some changes. But, I think in terms of a hard cut-off, it depends what that hard cut-off actually means. Is it a variation in land transaction tax, for example, where properties could still sell, but the stamp duty would be higher? So, it depends what you actually mean by that cut-off. Houses not being able to be sold could actually leave people stuck in inefficient homes, et cetera, so I think it's a model that needs to be considered, isn't it?

It's a hell of a stick, I think, is what we're saying. [Laughter.] Okay, fine. Anything further, Delyth, on that? No, okay, thank you. And so, we've touched on behaviour incentives, I think, haven't we? Janet, do you want to pick up on one area of questioning in there?

No, no, just—. I'm not dragging the committee back, but a lot of houses have been fitted with smart meters. Do you feel that the Welsh Government could in some way use that data as some kind of yard measure?

Yes, Chris.

It's essential that Welsh Government has access to that data, and Welsh Government does not have access to the data because of the rules under which the smart meter system was set up. My committee's been urging Welsh Government for years to get together with the Department for Business, Energy and Industrial Strategy and persuade it to allow the data communications company that controls that data to release it to trusted individuals under the right protocols, so that we have the data that we need, that Welsh Government has the data that it really does need, to monitor progress. If we can't use the smart meter data, we don't know where we are; any estimate of greenhouse gas emissions from the residential sector is just a guess.

Okay. A few comments from Donal, and then we'll move on.

Just to say it is really essential and it feeds into the previous discussion about passports and the planning. We need to have a good data basis for understanding what we need to do to homes, and actually, what energy they're using. So, all of these things converge, I think, on also how do EPCs look in the future, increasingly making them reflective of actually what a building is doing, and having the smart meter data feeding into that is a really low-cost way of doing that, really.

So, all of these threads need to start to be brought together by Government, I think, and held in a central place. There are data protection issues, I think, but they are resolvable and they're not really being resolved at the moment, it seems. It really could do with someone looking at it, I think.

Yes. Certainly, there's a lot of data there that could be used in many ways. Okay, thank you. Janet.

Thanks. And do you think the Welsh Government has sufficiently promoted uptake of the UK Government's energy company obligation funding, and the boiler upgrade scheme?

Donal, do you want to take this one first, and then I'll come to Chris?

I only have anecdotal evidence of this, and I wonder if Chris has seen any data, but there is some suggestion that because of the separate Warm Homes programme, Wales has not capitalised on its share of ECO funding. And, I think, looking at the Warm Homes programme and energy efficiency funding in general, there is a sort of fragmentation going on. There are different pots of money serving different purposes and, actually, there's a lack of bringing these funding sources together in an integrated way to solve problems for people. There tends to be a kind of scattergun approach, so I do think more work could definitely be done on drawing—. ECO funding has gone up—it's gone up again in the mini budget, believe it or not—so there is money out there, and I think it could be being paired with existing Warm Homes funding programmes better than it has been.

Chris.

There is now an all-Wales building stock model, which is a digital twin of every single building in Wales, which includes every home in Wales. Welsh Government has the ability to access that model and use it to help energy companies, to encourage energy companies to spend ECO money in a targeted way, so that they can be brought into an area and say, 'Look at these properties; these properties meet the criteria that you need to satisfy when spending ECO money.' So, Welsh Government, I think, can do more to attract ECO funding into Wales, and it has the means to do so.

Okay.

Do you want to say anything?

Just to add that, with the ECO scheme, there is an opportunity for local authorities to be more closely involved, and that's something that we could look at more closely, I think.

Yes, and we'll come on to local authorities, all being well timewise. Jenny.

Can I just pick up on a point that Chris made: this getting the companies to target their ECO funding? So, would you include no-fines properties, where there's no cavity insulation, as an area that we ought to be directing ECO funding at?

Jenny, I don't know whether 'no fines' is a sufficient criterion for attracting ECO money. I do know they leak heat like billy-o, because I worked on a scheme recently to upgrade some no-fines homes just outside Swansea, so I think, broadly, the answer would be 'yes', though I don't know if no fines particularly qualify for ECO funding. But, given that they are poorly insulated, leaky, damp homes, one would hope they would.

Thank you for that. I just want to move on to heat pumps, because we're taking evidence from Nesta later on this morning. They are particularly keen on promoting heat pumps and even to install heat pumps—clearly, they're saying in those that are well insulated, but they are almost going overboard to say, 'Let's install the heat pumps regardless of the other costs.' So, I just wondered—they're quoting £10,500 from the microgeneration certification scheme for the installation of heat pumps, but I don't see any analysis of what it costs to completely change the radiators or the heating dispersal within the home or any of the other issues that go with that. So, Chris, do you want to go first?

Andy Regan of Nesta gave a talk recently to the group that I chair, and I've also read the piece that he wrote for the Institute of Welsh Affairs. I think, actually, theirs is a slightly more nuanced approach than the headlines. They want to increase heat pump uptake, and they think the easiest and best homes to do that in are those that are well-insulated private homes. So, I think what they're saying is, 'Let's get things started by targeting homes where a heat pump is likely to be successful with no other measures,' and those 'no other measures' may well include not having to upgrade the pipework and the radiators, because the home is sufficiently well insulated—it is, in Donal's phrase, 'heat pump-ready'.

Okay, but installing heat pumps in new properties is a breeze compared with retrofitting. Surely, the issue is, once you've got your heat pump working, how do you then transmit it unless you completely change the ways in which you get that heat pump operating in different parts of the house?

Sometimes you do need to change the pipework and the radiators, because they're not big enough for the lower temperature heat that comes out of the heat pump, but in many cases people do find that the existing radiator network is sufficient and that's likely to be the case more often in well-insulated homes. Does that answer your question?

To some extent, because, obviously, what I've heard elsewhere when looking into this is that if you don't have the insulation then it leads to disaster, because electricity bills just go through the roof, because you're just heating the birds—

It's about poor design, actually, when you do that. As Chris was saying, your heat emitters are insufficiently large, so the heat pump has to work too hard and ends up ramping up to too high a temperature and you lose all of your coefficient of performance, which is the efficiency of the heat pump. So, I think that £10,000 figure you quoted would have had some heat emitter upgrades built into it, I would imagine. It also depends whether there's a hot water cylinder. Because heat pumps don't produce immediate hot water, you normally need some form of storage. So, there are quite a few variables there, and it does lead to a subset of homes that are more suitable for a low-cost heat pump install, and, if we want to grow a market and drive costs down, it does make sense that we do focus on those homes that are more suitable now whilst we get the learning in place, whilst we get the supply chain in place, so we can actually drive install costs down and learn more about—you know, build the market, and, hopefully, start building them in the UK and, indeed, in Wales.

Okay. Huw wants to come in. I don't want us to go too far down the heat pump rabbit hole, but Huw.

It's just because this has been identified as the low-hanging fruit, could you just briefly describe the type of property that you're talking about? Are we talking about relatively recently built, reasonably well-insulated properties that have been built in the last 10, 15 years that we would describe as quite modern homes, comfortable homes, but they're currently being heated by gas? Those are the types of ones we're talking about as the low-hanging fruit.

They could be; it depends on how well they've been built. I think the first thing is to survey the home and work out just how much heat it is already losing. Being built recently is not necessarily a guarantee that the home has been built well and is not leaking heat. So, some kind of thermographic survey is probably going to be appropriate just to check that it has been built well. But, having said that, modern standards of construction, modern building regulations, do require higher standards of insulation than older ones, so, quite probably, it will be the newer homes.

That's helpful, because the low-hanging fruit—we're not quite clear yet where those low-hanging fruit are, which comes back to the data thing.

Okay, thank you, Huw. Jenny.

Okay, so just broadening out the issue a bit further, which is, really: what do you want to see in the new Warm Homes programme, when we get it? Who would like to go first? Shall I start with Rhiannon, as you've not spoken recently?

We'd certainly like to see an increased investment in that. We don't think the funding levels are quite there with that yet.

Money is one thing, I'm keen to understand what you want to see in it in terms of the approach, the strategy. What's the strategy that should be in the Warm Homes programme, the one we don't have at the moment?

I think it needs to have a clear goal of what it's trying to achieve. I think it's been a bit of a grey area with the Warm Homes programme, where it's been trying to tackle fuel poverty and decarbonisation in tandem. So, it potentially hasn't done either of those particularly well.

Okay. We've already got the Audit Wales report, which is pretty critical. I'm really keen to understand what you think needs to be in the new Warm Homes programme.

That's not something we've done any analysis on.

Okay, fine. Chris or Donal.

Donal, I think, wants to come in.

Donal.

As you mentioned the Audit Wales programme, we know that in large parts it's funded lots of boilers, gas boilers. Obviously, a new gas boiler versus an old gas boiler is going to save people money, but you are locking in increasingly high-carbon infrastructure over a longer period of time. I think a shift away from boiler installs, which are easy to do and easy to sell, towards more fabric-based measures, more energy efficiency measures, which will be longer lived and compatible with decarb. So, I think that's one.

I think another one is around how the scheme is delivered and potentially more working with community organisations to better embed the programme with local people, particularly people who are perhaps not—people from minority groups who are financially less well served by these types of programmes. So, working with faith organisations and other community organisations to actually get uptake and tackle fuel poverty on the ground in a holistic way—I think more of that is always better versus a top-down programme that's hard to access for people. So, more work in the community, I would say.

Thank you. Chris.

I'd like to see Warm Homes designed as a pathfinder or a precursor or an early part of an all-Wales strategy for decarbonising housing. There'll be no particular technical group requirements of it that I have, I think, other than it captures outcomes—it doesn't just measure money spent and number of homes that things were done to, but it also measures the before and after energy performance of those homes and it goes through the entire process of survey, assess, building renovation passport, pathway to zero, delivery, monitoring, so that we actually learn the maximum that we can learn from it and we learn how to do that better, which will inform the programme as it grows and becomes an all-Wales programme.

We've built quite a lot of innovative housing funded by Welsh Government in the last six to eight years, are you saying that that work hasn't already been done on analysing the performance of these innovative homes?

It has. The Active Building Centre Research Programme down at Swansea is capturing data from the innovative housing programme and reporting that back to Welsh Government, but that's new homes. Warm Homes, I think, as I understand it, will largely be applied to existing properties, and we can't have enough data about how existing properties are built and how well they perform and how well different measures that we might introduce into them perform.

Okay, but that's what the optimised retrofit programme is supposed to be doing, isn't it? We keep on being told that we're waiting for the outcomes of that before we can move forward on the next iteration.

You're quite right, ORP is about that, but just in the social housing sector. We need to capture data across all tenures every time there is public money spent on doing something to one of those homes—in fact, every time private money is spent as well, which comes back to the point about accessing smart meter data.

Okay, but in the context of the highest energy prices we've ever experienced, we, at the moment, do not have a programme. So, what can we do very quickly to rectify this situation?

Rectifying the high energy prices is a really hard one. I looked at a report just this morning that Bloomberg produced on the likely windfall profits of the energy companies over the next few years in the UK, and it was £170 billion. That's in windfall profits. So, one of the things I think Welsh Government and the other devolved administrations could and should do is to continue to lobby Westminster to get at least a fraction of that clawed back and poured into the homes of the poorest in the country. Welsh Government cannot afford to do all this by itself, it absolutely needs money from elsewhere, and that means looking to Westminster. And if that windfall money is there, somehow we have to get hold of it.

There are other things that can be done in the private rented sector, for example enhanced capital allowances for private landlords, so they can offset the cost of energy efficiency upgrades against future years' tax bills. But none of that really tackles the immediate, immediate problem of this winter, and the only answer to that that I can see is throwing money at it, and Welsh Government has a very limited supply of that, so it has to look outside.

Okay. Thank you for that. I think Janet was going to pick up on these very issues.

Yes. Janet, do you want to pick up on some of the finance issues?

I've done No. 14, so it's Jenny, Jenny, Jenny now.

Well, we've touched on the finance, haven't we, now, in some of these answers.

I'm on 18.

Yes, go on, then.

Okay. What role do you feel the Development Bank of Wales has in helping to fund—you know, developing the resources to fund this decarbonisation retrofit?

Donal.

I'll just pick up on this point, because it's something we wrote about in our report that we led with the Future Generations Commissioner for Wales and the New Economics Foundation last year, specifically focusing, I suppose, more on the private able-to-pay end of the market, people who can potentially take on a bit of debt and link it to their property to pay for majors—I'm not talking about the acute fuel poor who I think need public money, almost certainly. So, just to make that division clear. In other countries, Germany, which is a very big economy, their main energy efficiency finance programme is run by their development bank, which was set up after the war as part of the Marshall plan. So, a bank who acts in the public interest, who can potentially provide concessional, low-cost, low-interest loans, would be potentially an obvious place to start and trial a new property-linked finance-type mechanism.

We had discussions with the development bank about them doing that, and they were also in discussions with Welsh Government last year about a property assessed clean energy type model that is repaid on some of kind of property tax. I think this does need to be trialled again, but it is only going to work in concert with some of the other steps we've talked about—regulation and all the other things that need to happen. So, I do think that needs to be trialled. I do think there's probably more appetite for it now. So, they are a potential actor.

In Scotland, this is run by the Energy Saving Trust—their low-interest loan scheme is run by the Energy Saving Trust. In England, even, or in the UK at large, they were talking about the new national infrastructure bank—Rishi Sunak was talking about using that as a potential lending vehicle before he, obviously, left. So, these discussions are occurring in multiple areas, and I do think that, potentially, banks are a good candidate. If not, then we need another actor, I think, to lead on this.

Thank you.

Joyce wants to just pick up on something.

Just a very quick question. We all know that, when banks are involved in loaning money, they want to see a return—they want to see the value of that return. Are any lenders at the moment seeing a positive value in return for a property in terms of its energy efficiency and its saleability, because that's the bottom line here, for that investment?

Donal.

There is some evidence that suggests that higher EPC properties are already attracting a sale premium, are worth more. Conversely, actually, the logic for a lender is, actually, 'If you have lower energy bills, you're a lower risk to me as a lender, so I actually might offer you a slightly lower interest rate, because your outgoings are less.' So, we are starting to see the market respond to this and respond to the value of energy-efficient property, but it's slow going, I would say. There isn't cold, hard evidence of this right now. I think it will increasingly become so, with the crisis that we're in, that efficient properties will be increasingly be viewed as more valuable.

In terms of a return on investment, there was a huge return on investment in energy efficiency in a way there has never been. For measures like solid wall insulation, pay-back periods have dropped by a third, I think, or even half, in the last year or so with what's happened. So, there has never been a stronger financial case for this in terms of lending and returns.

Thank you. Chris, you wanted to come in on this as well, did you?

Please, if I may, just to support or add to Donal. I believe mortgage lenders are now required to report on the average energy efficiency of the properties in their loan books. So, there is pressure on them, I think, possibly reputational at first but maybe getting fiercer later, to help their customers, particularly their customers who have the lowest rated homes, to improve that so that they improve the average energy performance certificate of the whole loan book.

Okay, thank you. Rhiannon, obviously, the future generations commissioner's work focused quite a bit on the funding stuff. What would you want to add, really, because I'm just thinking somebody—it might have been you—mentioned in passing the land transaction tax, which is something that's already within the powers of Welsh Government in terms of effecting or using that to effect some change. Do you want to add anything to that?

The numbers we're talking about are huge, aren't they? Home retrofit has been valued at something between £17,000 and £60,000, hasn't it, depending on the homes? That's a huge investment for people. So, I think people are going to need a mix of funding, probably blended funding between grants and loans, and then whatever other levers Welsh Government has at its disposal, such as land transaction tax, can be used as a further lever to support that market stimulation to happen.

Okay. Donal and Chris, briefly, and then we'll come to Huw, I think.

I'll try and be brief, but, yes, I think that the land value tax one is a really good moment. When homes are changing hands, people are already investing, already doing work ripping out kitchens, bathrooms, et cetera. There is increasing focus on this. There's a chap called David Adams, who I suggest you maybe bring in in front of your committee, who's working with the UK Green Building Council on the details of this, actually at England level—sorry, at UK level—but the fact that this is in the gift of Welsh Government would seem a really good opportunity of doing something and actually moving the needle. So, I'd look long and hard at that.

Yes. Chris, you're nodding.

Yes. I know David Adams has been in touch with the Welsh Government about this, so I'm hopeful that Welsh Government will be brave and dip a toe in the water and try it out. We've passed the point at which we can study things indefinitely until we get it perfect; I think we just have to be brave and try things, and be ready to pull the plug if they don't work.

Can I add one more thing to what Donal said? He mentioned the German development bank. One of the things that they did that I think the Development Bank of Wales could copy or reproduce here is that the bank in Germany has made the process of applying for an energy-efficiency loan standard across Germany, very easy to do and very fast, and it's tied it into a quality regime that ensures that the money is only available when the design has been properly done and the installation has been validated. I think that's something that the development bank ought to be doing for Wales.

Absolutely. Okay, thank you so much for that. Huw.

Only one question, I think, Chair. Chris, if I could ask you, the Minister's referred to us before the decarbonisation implementation group, which you are chairing. I was just wondering if you could give us an update on that, because we understand it was looking at developing a potential offer or product targeted at owner-occupiers. How is that going? Have you reported back to Ministers yet?

I'm sorry to say you've been misinformed. We aren't working on an offer to Ministers. We've kept on working remotely through lockdown, so we've been studying, reporting and recommending to Welsh Government, but Welsh Government have found it hard to respond and act because all its attention was on COVID, and now an awful lot of its attention is on Ukraine. It's only just coming out of that and is re-engaging with us in an effective way. I don't know what the offer was that you've been told about.

Okay. So, going forward, what are your aims with that group and what should we be expecting as a committee to hear from the outcomes of the deliberations you're now going to do?

I discussed the future of the group with the Minister, actually, last week. She wants it to continue; she does value the advice we give. I think we need to strengthen our membership to reflect that the big task ahead is now privately owned homes; the focus was very much on socially owned homes in the early days. I think two other bodies or two other lines of action are needed, and it's probably not for this group to do. I think Welsh Government needs much better feedback on what's working and what's not working, and what's happening and what's not happening. In fact, there could be a body that does that. It gets feedback on carbon emissions late and inaccurately in the current feedback loops, and it needs something that would access the smart meters, for example, and give it much more granular, much more timely information. And I think it needs a group, some kind of arm's-length body, perhaps, which would do things that Welsh Government needs doing but it's not well set up to do itself. And in discussions with her last week, she did say that it was looking at two such arm's-length bodies—one to focus on energy supply, I think, and the other one to look at housing. But the remits for those groups are still under discussion, so I'm not quite sure what they're going to do. But there are a lot of tasks that need to be done that an arm's-length body could more effectively do than Welsh Government itself could do, I think.

Okay. Thank you, Chris. I'm referring back to the letter that we had from the Minister here, which is very clear, but, clearly, things have moved on there, because, within that letter we've got:

'The group is tasked with developing a potential "offer" or product targeted at owner occupiers and the group due to report back to officials shortly.'

I think that was from March 2022, but, clearly, things have moved on. That isn't the case.

Yes. I don't know quite what she means by 'offer'.

Don't worry, we'll take it up with the Minister.

Yes. Donal, you want to come in?

Chris, maybe we can take it offline. My only thought is is this something the Green Finance Institute is working on vis-à-vis PACE—that they're now actually developing stuff with some lenders around that idea? I just wondered if that was it.

It could be.

Okay. We'll need to find that out, I think, ourselves. And just for Members' information and panelists' information, David Adams is appearing before us next week—given that he was mentioned earlier. Fine. We've got less than 10 minutes left. We've just a couple of more areas we need to cover, and I think I'll come to Janet next, on the private rented sector.

Yes—how they can be incentivised. We've talked about the carrot and we've talked about the stick, but I would imagine that private landlords, the private rented sector, there is an interest in them having their properties energy efficient, because tenants won't stay in them; they'll leave. I know there's a shortage of housing, and that's another issue. But how can we incentivise private landlords to invest in these decarbonisation schemes?

Donal.

I think it's the carrots, sticks and tambourines thing, isn't it? I do think we need regulation. I do think landlords need to have their feet held to the fire, eventually. But there are things we can do to help them. Chris mentioned the enhanced capital allowances scheme. There was previously the landlords energy saving allowance, which was a tax rebate that landlords would get—about £1,500 for upgrading a property, which would help with the cost. It wouldn't meet, probably, all of the cost if you were going to something like EPC C. I think landlords need their own dedicated support as well, about where to find contractors, what measures are appropriate. And I think it speaks to this next point about the role of local authorities and one-stop shops to provide that conduit, that information, that procurement support, that quality assurance, to actually get the work done to a high standard. So, I do think we should be critical friends to landlords, but I do think you do need—. There are some very substandard private rented sector properties. The enforcement around EPC E is very weak—lots of gaps in the data. Speaking to various local authorities, they don't have the resources or even the data sets really to enforce a lot of this. Certainly in England, I think landlords can opt out of being in the EPC database—that's fairly perverse. So, there are a lot of things there that need to be fixed, I think, to get the existing minimum energy efficiency standards working and enforced, and then to actually start to ramp that up through the 2020s, with the other bits of support, potentially also a line of credit that we discussed as well.

Thank you. I'm just thinking—I just thought of this now—Rent Smart Wales engages a lot with landlords. Is there a part for Rent Smart Wales to play there? Because they've got the register—. Well, bear in mind, there are people who still avoid being registered, and I have tenants coming to see me, and when we look into it, the landlord is not registered. But, for where they are registered—[Interruption.] What?

Carry on, Janet, carry on.

Where they are registered, could Rent Smart Wales not be, in some way, doing more to capture data?

They already do play a role. We ran a workshop with Rent Smart Wales and a couple of local authorities with the Chartered Institute of Housing—

A couple.

—a couple of months ago. There is already some of this happening but it needs a bit more resource. I think her name is Barbara—I forget her name. The amount of resource is extremely small. She thought £500,000 would be sufficient actually to just improve that resource in enforcement. She's often working with environmental health and trading standards people in the local authorities to help enforce this, but a bit more money, a bit more of an idea of best practice would go a long way in this, and I do think there is a role for them. In a way, Wales is fortunate to have that intermediary, whereas in England there is no such licensing or intermediary, so I do think, yes, you're right, there is definitely a greater role for Rent Smart Wales in that.

Okay, thank you. So, just to conclude this session then, Huw.

Yes, indeed, very briefly, but just to say, and it's on my record of interests as well—I don't declare it routinely, because it's there on my record—I also am a private landlord. I have an inherited property, so it's a property that I own and rent from, but I'm a registered social landlord. In Wales, it's a legal requirement now to be registered. So, if anybody isn't, then we would certainly be saying to them, 'You should not be renting a property.' Crikey. Indeed.

In terms of local authorities, I just wanted to ask you about the role of local authorities in helping deliver retrofit programmes, and maybe you want to touch on minimum energy efficiency standards as well in the private rented sector—their role in enforcing, but also raising awareness of the landlord's responsibilities.

I'll go and then I'll give way. I think that local authorities are the natural actor in this space to be the central co-ordinating, trusted body. The problem is resources. We've had a decade of austerity and a third real-terms cut in local authority budgets, and many of them just don't have the people really to deliver and enforce much of this. So, if we do think that local authorities are the right people to push this agenda in local areas or be the co-ordinating actor, they will need new resources to fulfil that role, and new skills and to attract talent to do that. Because laying more sacks onto the donkey right now is not going to produce the right outcome with where things are at the moment. So, I think there is that kind of tension between them being the logical actor and actually where they are in the resource terms at the moment and expecting too much of local authorities, as things stand.

Thank you.

Chris.

I completely support what Donal says. I think a number of local authorities are financially and in resource terms on their knees at the moment. So, they would need sufficient help, but they are absolutely the natural actor. I listed for myself yesterday what they could do: local area energy plans—Scotland leads on that, and I think they could learn those lessons from Scotland and apply them in Wales; local planning rules about what is and what isn't allowed, particularly in conservation areas, which, unless we deal with them, are going to be a major blocker to decarbonising our cities—I think those have to be locally determined and that locally acceptable solutions have to be found, but local authorities would have a big role to play in that; building control could be grown back up to have a major role in quality control—inspecting the installations; and larger local authorities could perhaps issue local decarbonisation bonds to start crowdfunding some local work. And I've seen the submission that the UK Green Building Council made to this committee and I think a number of the initiatives that they are doing could well be applied in Wales, if the local authorities had the resources to take part in that. So, there's a huge amount they could be doing and I think they should be doing, but they're not resourced to do it at the moment.

Thanks. I think there were murmurs of agreement around the committee here from all perspectives then on increasing the resource into local authorities, but, of course, we're doing it at the same time as we're expecting not to have any uplift in line with the rising costs that are facing local authorities and potentially to have further efficiency savings/cuts in public services across the UK. This does not bode well for the role of local authorities.

It does not—agreed.

Yes, okay.

Okay, on that note, may I thank all three of you for your evidence? We've covered quite a bit of ground in a very brief period, but it's certainly been an excellent start to this piece of work that we're undertaking as a committee. You will receive a copy of the transcript to check it for accuracy. With those few words, may I thank all three of you for your attendance?

We will now take a break as a committee and, so, I'll adjourn the meeting and we will reconvene a few minutes before 11:00 so that we can start at 11:00 on the dot. Thank you very much.