The Energy and Climate Change (ECC) select committee has heard from a number of witnesses that the Energy Company Obligation (ECO) is not a fit policy for tackling fuel poverty as envisaged by the government.
The current ECO scheme comes to an end in March 2017, with a replacement initiative announced as part of George Osborne’s recent comprehensive spending review. The new version will begin in April 2017 and run for five years, in which time it will aim to improve 200,000 homes a year. It was labelled a “new cheaper domestic energy efficiency supplier obligation” in the review documents and will be responsible for “tackling the root cause of fuel poverty”.
As part of its inquiry into home energy efficiency and demand reduction, the select committee this morning took evidence from a panel of industry figures who claimed the policy itself may not be suited to this goal.
Simon Roberts, chief executive of the Centre for Sustainable Energy (CSE), said: “If the government wants to use an ECO to become a fuel poverty programme, it needs to think much more carefully about the design of it to suit that purpose.
“I think you need a fuel poverty programme [but] I don’t know if the next ECO is the best way to do that because I don’t think energy suppliers are the best people to run fuel poverty programmes.”
Instead, Roberts suggested introducing an obligation scheme that would call on energy suppliers to reduce the average electricity and gas demand of their customers, which he believed would introduce a more effective incentive to the energy market.
“We should be constructing a market for energy suppliers where they have it in their interest to invest as much as possible of their customer’s money, which is the money they have, into the cheaper energy-saving measures because then bills come down,” he said.
Nick Eyre, co-director for the UK Energy Research Centre, also commented on the issue and claimed that in its present form ECO is not suited to delivering the measures needed to tackle fuel poverty. When ECO was run in combination with the Green Deal, it was left to the now defunct scheme to deliver cheaper measures, which Eyre believes ECO is more appropriate for.
“The government intends to fund a fuel poverty programme through ECO. Supplier obligations are better suited to deliver low cost measures rather than the more expensive measures we’ll need to take people out of fuel poverty [so] I’m not sure that’s the right way forward,” he said.
“In my view we got the Green Deal and ECO the wrong way round, it would be better to get supplier obligations to do the cheaper measures.”
Funding criticism continues
The funding element of the ECO scheme was also called into question by the panel, who claimed the £640m scheme due in 2017 represented a significant step backwards in ambition for the government. Jan Rosenow of the Centre on Innovation and Energy Demand, University of Sussex, said the projected spend put the scheme back to levels seen in 2007. He also predicted it would fail to meet targets set by the Committee on Climate Change (CCC), which require a 57% reduction in emissions by 2030.
“This is not anywhere near enough that needs to be done to meet the targets that the CCC set out. The investment that is being stimulated by ECO is not sufficient to meet the targets,” he said.
The funding issue was also raised by Simon Roberts, who claimed the low level available could potentially push more people in to fuel poverty. ECO requires suppliers to carry out energy-saving measures in their customers’ homes, with easily installed measures often delivered first. Due to the reduced spend on the upcoming replacement scheme – down from Rosenow’s estimate of £800m per year – Roberts said there could be significantly less cash in the pot for those currently set to benefit. He concluded: “As we get to more expensive measures, fewer and fewer people get the benefits and everyone else pays the cost, and that puts more people in fuel poverty.”
The government has long argued that the move to reduce supplier obligations has been motivated by its pledge to lower consumer energy bills, with the ECO replacement scheme projected to save £30 on annual household expenditure. However, the figures were recently questioned by the Association for the Conservation of Energy who claimed these figures had been ‘dressed up’.
