When Labour leader Ed Miliband announced at the party's conference last month that, if elected to government, he would freeze consumer energy prices for two years, it sent shock waves through the UK's energy industry.
Miliband received rapturous applause from the party faithful in the hall, but the response was sharply divided outside of the conference. Some consumer and fuel-poverty campaigners welcomed the proposals as a way to relieve hard-pressed households that have seen bills soar, but many in the industry warned it could stifle investment and blackouts could result.
Miliband's announcement and the response to it illustrate two key things about energy policy today: that it has taken centre stage in politics as rising bills have hurt consumers and that government interference in energy markets is controversial.
Businesses complain that tinkering with policy, never mind radical departures from it, creates uncertainty and makes it hard to make investment decisions – witness the debacle over the feed-in tariffs for solar power. But politicians are under pressure from all quarters; not just from the industry, but also from consumers, energy-intensive businesses, and environmental and poverty campaigners.
After the bill-freezing announcement, Labour turned to the government's flagship policies: the green deal and the energy company obligation (Eco), by which money is siphoned off from the "big six" suppliers and targeted at home-energy improvements for people on low incomes.
The latest data, published on 19 September, showed only 384 people had signed up to the green deal, making it unlikely the target of 10,000 by year-end would be met. Luciana Berger, Labour's shadow energy minister, said the figures showed the scheme was "struggling to get off the ground".
Eco was also failing, she claimed, because – under the rules – about 60% of the money may end up with households that can already afford to adequately heat their homes.
Five days after its conference, Labour announced its alternatives: if the party takes power in 2015, it will scrap the green deal and Eco. A new Energy Save scheme would replace the green deal, offering lower interest rates than the loans currently on offer for home improvements. However, Berger has not yet said how low this rate will be or how the financing will be managed.
Instead of Eco, the £1.3bn from energy companies would be poured into a new scheme in which local authorities play the key role, on the basis that they have a better understanding of the improvements needed for low-income and hard-to-reach households in their areas.
But like Miliband's policy to freeze bills, these proposed changes have worried some in the industry, who fear uncertainty over the green deal and Eco will make investment difficult. For consumers, there is little incentive to take on disruptive, long-term home improvements now if there might be a better deal coming along in 18 months. It is also not clear whether people taking out loans now will be able to move to a lower interest rate if Labour takes power.
Alex Tsimboykas, director of energy consultants EUM, which carries out home surveys, sums up the dilemma for the insulation industry: "Eco and the green deal need an overhaul. The current Eco scheme is not supporting the most vulnerable people. But starting from scratch could delay the delivery of measures even more."
Paul King, chief executive of the UK Green Building Council, added: "Talk about replacing [the green deal] causes further confusion and lack of confidence in the construction sector." He also said low-interest loans would not be enough on their own to increase the take-up of insulation to the levels needed.
Berger moved to calm fears by insisting that she would work closely with industry: "Ensuring a smooth transition will be our number one priority."
However, Greg Barker, the Conservative minister for climate change, said changes to the green deal were not needed: he was still confident it would be a success and that there were "encouraging" signs.
He argued that the most recent figures are probably skewed because fewer people want to buy insulation in the summer. The green deal also suffered a few setbacks early on because the launch was delayed and companies faced difficulties getting the IT, legal contracts for consumers and financing watertight before taking their packages to market.
However, the next six months will be key. "With UK households wasting £1.8bn a year due to the lack of insulation, it's scandalous that only 12 households have had energy-saving measures carried out under the green deal," said Andrew Pendleton, head of campaigns at Friends of the Earth. "A massive drive to stop our homes leaking energy is the only way to ensure we end fuel poverty."
While Labour can craft eye-catching energy policy in opposition, Liberal Democrats face a trickier choice. Even if they would like to, they cannot disown the coalition policy, but their stance on energy could become yet another concern to their environmentally conscious base. The party's strategists have been notably quiet.
Many in the industry are nervous, but few are prepared to openly criticise politicians before the results of the scheme have become clearer. However, the fear is that – if the green deal fails – they will be back to square one, having wasted a lot of money.
If the green deal does not show substantial improvements in take-up by next summer, the Conservatives will be under pressure to find ways to fix the scheme or replace it. At that point, we will be just a year from the next general election. The energy industry – and consumers worried about how to heat their homes – will have to wait for the voters to choose before they have any real certainty on the future of insulation.
