The government has just announced a series of measures that it claims will reduce the average energy bill by £50, without slashing the Energy Companies Obligation (ECO) which adds about £47 to every energy bill.
While we're glad that they haven't done away with ECO there's a disappointing amount of watering down that comes as part of this policy change and we think that the government should have stuck to its guns, and if anything strengthened its policy, and made it easier to access. If it were showing strong leadership it would argue the case and explain the long term benefits.
The UK has the oldest, draughtiest, coldest housing stock in Europe. The reason it's expensive to heat is that a lot of heat leaks out and is wasted. The only effective way of bringing down energy bills in the long term is to reduce the need for heat. Cutting green levies is short term political expediency and reduces the long term benefit for many.
Headlining the changes is a rebate (money from general taxation) to give a rebate of an average £12 on domestic electricity bills for two years. That takes us up to the general election giving the impression that it's more about politics than policy.
In the same time period it proposes to reduce the cost of ECO by cutting the part of it that provides support for solid wall insulation and hard to treat cavity walls by 33 per cent bringing average reductions to bills of £30-35.
While we are pleased to see that the elements of the Energy Companies Obligation aimed at low income and vulnerable households have been maintained, it is disappointing that the Carbon Emissions Reduction Obligation is being reduced. People are already finding it very difficult to get ECO for solid wall insulation, and we believe that help needs to be strengthened, rather than reduced.
Just as the feed-in tariff has helped the solar industry to develop and grow – with more people installing solar panels and massive price reductions as a result – we believe that the solid wall industry needs similar support to grow. This should encourage innovation and economies of scale so that it eventually becomes affordable without subsidy.
The government is also watering down other parts of the energy companies obligation aimed at people in fuel poverty and vulnerable communities, allowing the energy suppliers to insulate easy-to-treat cavity walls and lofts as part of their ECO targets. They are already only focusing on the easiest and cheapest measures, leaving people in expensive to heat off-gas properties without support. There is already help for householders to install loft and cavity wall insulation under the Green Deal, so it makes most sense if the ECO money is spent on the more difficult measures.
The good news is that the feed-in tariff, renewables obligation and contracts for difference remain unchanged. There are also some other welcome initiatives. In future, people could get up to £1,000 from the government to spend on energy saving measures when they buy a new home. This is traditionally a time when people make home improvements and could include energy saving improvements without extra disruption. Up to £4,000 will be available for particularly expensive measures.
The government is also introducing a scheme to support private landlords which aims to improve around 15,000 of the least energy efficient rental properties a year for three years. £90m will be spent over three years improving the energy efficiency of schools hospitals and other public sector buildings. Funds available to local authorities to support street by street programmes for hard to treat homes will increase from £20m to £80m.
Changes are also afoot to streamline and improve the green deal.
More information about ECO and the green deal on YouGen