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Are we Warmer and Greener yet?

Are we Warmer and Greener yet?

4th May 2017

One year on, we check for progress in energy efficiency policy: recommended changes to the ECO scheme

In April 2016 the Westminster Sustainable Business Forum (WSBF) published its report entitled Warmer & Greener: A guide to the future of domestic energy efficiency policy.  Upon publication, report co-chairs Peter Aldous MP and Dr Alan Whitehead MP said: “This report provides an extremely useful guide to the future of domestic energy efficiency policy. It could not come at a better time.”

Since its publication one year ago, the Warmer & Greener report has been disseminated to relevant Parliamentarians, as well as to key stakeholders across government and industry.  The report made a number of recommendations regarding the Energy Company Obligation (ECO) energy efficiency scheme administered by Ofgem:

1.       The next phase of ECO should be based on a system of deemed scores, and the Government should aim to reduce the overall administrative burden imposed on those involved in its delivery.

2.       The next phase of ECO should be supported by a tax-payer funded fuel poverty scheme administered by local actors.

3.       The details of the next phase of ECO need to be set out as soon as possible to provide clarity to suppliers and their supply chain. The scheme should also remain consistent once it is implemented to avoid creating uncertainty.

4.       The Government needs to manage the transition to the next phase of ECO to avoid the breaks in demand which have been a feature of changeovers between past supplier obligation schemes.

On 12th July 2016 the WSBF ran a roundtable in Parliament entitled ‘Supplier Obligation Schemes & the Future of ECO’, chaired by Peter Aldous MP. It covered introducing a more simplified ECO scheme, better targeting of fuel poor and poorly insulated homes without burdening the billpayers, and reaching these homes which are often rural and off the gas grid.

Changes to the ECO scheme

On January 30th 2017, BEIS announced that, “Homes across the UK will get extra support to keep warm during the colder months thanks to reforms published today. Changes to the Energy Company Obligation (ECO) will make sure energy companies provide necessary support to people struggling to meet their heating bills. Plans to extend the scheme from April 2017 to September 2018 were also published today.”

Following the WSBF report, and the ECO consultation report, several policy changes have been announced, which started to take effect as of April 2017.

Struggling households to get free energy efficiency measures

The Government intends ECO to be a more simple and targeted scheme. The Affordable Warmth Group will be increased to around 4.7m rather than 4m (in consultation) households. This will include more households who are in fuel poverty, and those on lower incomes, who may be struggling to meet heating and other bills.

The WSBF wrote that, ‘The costs of delivering energy efficiency policies are passed on to consumers' energy bills. Therefore those consumers that have their homes improved [made more energy efficient] can benefit from an overall reduction in bills, but those who do not receive improvements experience bill increases. As the costs of delivery also increase, so do the energy bills of those who are on low incomes. There is a danger of aggravating fuel poverty through this mechanism… This inquiry found that there is therefore a strong moral case for ensuring that funds from ECO do reach low income households to mitigate the regressive nature of supplier obligations schemes’.

Warmer & Greener recommended that, ‘The Government should proceed with plans to reintroduce deemed scores and make social housing with an Energy Performance Certificate rating of E or below automatically eligible for ECO funding.’

Further, the inquiry found that ‘the Government should increase the minimum requirement for solid wall insulation expected under ECO in recognition of the potential for ECO to support joint-funded installations.’

To which the consultation responds: 'The requirement to deliver a minimum level of solid wall insulation will be increased from the proposed equivalent (in consultation) of 17,000 measures per year to 21,000 per year.'

Reaching fuel poor homes

As reported by the WSBF, homes which are more expensive and difficult to reach and treat will often be the ones with the largest fuel poverty gap. Their inquiry heard that it would be more appropriate to deliver improvements to these types of households through a scheme funded by general taxation, and delivered by agents such as local authorities. The WSBF noted that if the next phase of ECO is focused on fuel poverty and it is the predominant or sole instrument for delivering efficiency improvements to fuel poor homes, it should include safeguards to ensure energy companies deliver improvements to properties which are more expensive and difficult to reach and treat.

The WSBF said, ‘Local agents such as housing associations, GPs, community groups and, in particular, local authorities are much better placed to identify those most in need of support in their respective area than energy companies or their installers… Targets for solid wall insulation would also be necessary in recognition of the high proportion of households in solid wall properties which are in fuel poverty, and the comparatively low level of installations of this type of measure to date.’

Following this, the ECO consultation report announced that, ‘Local authorities will have a role in determining eligible homes, following the introduction of the ‘flexible eligibility’ mechanism, which suppliers can use for up to 10% of their Affordable Warmth obligation… rural delivery will be protected as 15% of Carbon Emission Reduction Obligation will be delivered in rural areas.’

The WSBF will be tracking further policy developments over the course of 2017, in the build up to our ‘Warmer & Greener – one year on conference’, which will assess progress made by policymakers on domestic energy efficiency in the past year.