The government’s Green Deal has been hogging the limelight, but just as important is the recent consultation on the Energy Company Obligation (ECO). Is this scheme really going to help people in fuel poverty?
ECO is the government’s new plan on how to spend money taken from our energy bills to make our homes more energy efficient, reduce carbon dioxide emissions and help people out of fuel poverty.
Noble goals. But we need to remember that this scheme will cost us £1.3bn every year. And even this is an estimate, with the government reckoning that the cost could be anywhere from £0.3bn to £3bn.
This isn’t a new idea. ECO replaces the current Carbon Emissions Reduction Target (CERT) in December. Under CERT, energy companies have to offer us free or heavily-subsidised loft and cavity wall insulation, and then get the costs back from energy bills.
So why should we care changing to ECO?
Well, first up, we’re all paying for ECO out of our bills. So we need to be sure that this money will help as many people as possible who are struggling to pay their energy bills.
And there’s the snag. CERT has helped a lot of households to get insulated – tackling 2 million lofts and 1.5 million cavity walled homes in the last three years. But ECO looks like it will help far fewer, with just 1.7 million cavity walls insulated up to 2022.
This is partly because the government wants ECO to help houses to get solid wall insulation. This is insulation for older houses and can either be internal (i.e. on walls in rooms) or external (on outside walls). The costs could range from £3,000 to a whopping £13,000 or even more.
The government argues that three-quarters of the £1.3bn raised each year should be set aside to help the solid wall insulation market to grow. The idea is that you finance part of the costs through a Green Deal loan and get the rest from ECO.
But hang on a minute – isn’t the Green Deal meant to be a commercial, market-based product? Should it really be on the receiving end of a significant subsidy from energy bill payers?
Eco needs to be fair
If you live in a house with cavity walls, would you mind paying an additional £50 a year on your energy bills to help others to benefit from a loan for expensive solid wall insulation? And is it right that only a quarter of the £1.3bn raised should go towards helping people in fuel poverty with heating and insulation costs?
To me, that sounds like the wrong way round. Energy price rises have hit the lowest-paid hardest, with government estimates of around 5.5m people in fuel poverty. To give just a quarter of this funding to such a huge societal problem hardly seems right. The government needs to be clear on – and spell out – the impact of this policy on fuel poverty.
And can it be right that such a huge sum from our bills should be directed at expensive solid wall insulation to meet environmental targets? With so many houses still failing to insulate their lofts and cavity walls, wouldn’t the money be better spent on this? The government’s own advisory body, the Committee on Climate Change, certainly thinks so.
These policies are still in development so it would be unfair to write them off. But making our homes more energy efficient is a vital part of helping all of us to cope with big energy price rises. So the government has got to get its plans right and make them fair.