The government has been accused of dressing up the figures surrounding its plans for a replacement to the Energy Company Obligation (ECO) after it emerged the current scheme could cost less than the new proposal.
The new policy was announced yesterday as part of George Osborne’s Spending Review and is set to be introduced in April 2017 when the current ECO scheme comes to an end. It is to run for five years at a cost of £640 million per year, rising with inflation (CPI) and will target 200,000 homes a year. In the Spending Review documents, the Treasury says this represents the bulk of the government’s package of measures to be implemented to reduce the projected cost of green policies on the average annual household energy bill by £30 from 2017.
However, figures from the Association for the Conservation of Energy (ACE) have suggested the new scheme is working off projected savings from the first year of the ECO scheme when it was at its most expensive. In the first calendar year of ECO in 2013, 450,000 homes were treated at a cost of £1.4 billion. This cost has dropped year on year, down to £1 billion in 2014 when 636,000 homes were treated and just £300 million in the 2015 period to June. Assuming the scheme costs a total of £600 million for the calendar year, the cost of ECO on consumer energy bills is £24 for the year.
For the Treasury to have projected a saving of £30, Pedro Guertler, head of research at ACE, claims ECO’s first year must have been used to forecast the benefits of the new scheme.
“When [the government] said the new scheme would save £30 off everyone’s bills compared to the old one, it can’t. If we assume this year it will cost £600 million, the scheme costs about £24 for the full year. You can’t take £30 off £24 and still have a £640 million a year scheme so what they’ve done is taken the first year of ECO in 2015 and compared that with what the new five year scheme will cost,” he said.
“It’s not actually a new saving; they’ve already made the saving of £30. The new scheme is going to cost about the same every year for five years as the current scheme is costing this year so they’ve dressed up the figures.”
There is also some concern over the number of homes that are likely to be treated by the new policy. According to figures from the Department of Energy and Climate Change (DECC), 1,591,822 measures were installed under ECO to the end of September 2015. Around 250,000 homes had been treated in 2015 by the end of September, while the new scheme will only target 200,000 homes a year from 2017 onwards.
With a scheme worth £640 million a year, each home will be eligible for an average of £3,200. But the government has said the new scheme would primarily target the most fuel poor homes which are largely hard to treat properties in need of more extensive measures, such as solid wall insulation. It is therefore expected that the money allocated to each home will be used to pay for less rigorous measures, although without further detail from DECC there remains uncertainty over what measures will be applied.
Guertler added: “Even in a low level year like this year, it’s quite a lot more households than the future scheme is expected to do, but the money is about the same.”
The new ECO replacement will form part of the government’s efforts to combat fuel poverty, and help work towards a target of bringing as many fuel poor homes in England as is reasonably practicable to EPC Band E by 2020. It is also intended to help DECC achieve its target of improving one million homes over the course of the current parliament.
Both the Department of Energy and Climate Change and HM Treasury had yet to respond to requests for comment on this article at the time of publication.
