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Average energy efficiency spending falls to new low among consumers

Energy efficiency consumers are tightening their spending plans according to a new survey which found that median expenditure on a project had reached its lowest point in almost four years.

The latest Energy Efficiency Trends Survey from Bloomberg New Energy Finance and EEVS, which surveyed 32 consumer organisations across a wide range of sectors, found an average spend of around £47,000 per project.

The latest result suggests the long-term trend for lower capital-cost projects has continued, with median spending now at its lowest point since the survey began in 2012. This marks a huge fall from the peak in consumer spending in Q3 2014 of £180,000 and is reflected by the changes in average payback periods.

Trends in capital costs, Q3 2012 – Q1 2016. Source: EEVS, BNEF.

Trends in capital costs, Q3 2012 – Q1 2016. Source: EEVS, BNEF.

According to the survey, consumers are expecting projects to pay back their cost around three years after completion as consumers tighten their payback expectations for the third consecutive quarter.

This trend is reflected in the kinds of products being used, with high efficiency lighting included within almost 80% of energy saving projects. Lighting controls remained in second but some way behind while solar PV only featured in around just over 20% of projects during the first quarter of 2016.

This is a somewhat significant fall since Q4 2015 and reflects the impact of changes to government support for solar following cuts to the feed-in tariff.

The top technologies taken up by consumers in the Q1 during their energy efficiency projects. Source: EEVS, BNEF.

The top technologies taken up by consumers in the Q1 during their energy efficiency projects. Source: EEVS, BNEF.

The survey also suggests the shrinking size of payback periods is linked to the sources of finance, with the vast majority of consumers reverting back to core in-house capital in Q1 as opposed to third-party finance or a combination.

The downward trends in spending are likely to cause concern for suppliers of energy efficiency products, who were also surveyed as part of the report.

Ian Jeffries, director at EEVS, said: “Clearly it’s been a very difficult quarter for suppliers of energy efficiency services. Consumers appear to have tightened their belts of late and not only has this meant declining orders, but those orders made were materially smaller than before.

“Customers are also demanding shorter paybacks from their investments, which must be adding further pressure on the bottom line for many suppliers. The exception to this rule was high efficiency lighting, however, which appears to continue on its upward trajectory regardless.”

While declining national orders and customer demand were certainly found to be concerns for industry, confidence in the energy efficiency market sunk to an all-time low driven by a lack of support in government policy.

The report found that supply-side industry confidence for energy efficiency dipped into the red for the first time in the survey’s 15 volumes.

The market monitor - combining trends in supplier order books, staffing levels, sale prices and government action gathered from the 28 supplier respondents - continued its downward trajectory since Q4 2014 and fell to -4 points despite modest rises in staffing and sales.

Confidence in the government’s management of energy efficiency policy was a defining issue in this view after it was found to have fallen by 85 points since Q4 2015.

With trends in national orders expected to rise alongside sales prices and staffing, this lack of faith in government policy is expected to continue to build downward momentum and affect overall confidence levels among suppliers.