The Future of the ECO: a £245m windfall for energy suppliers?

Written by Pedro Guertler on . Posted in ACE Research

DECC

Today, we submitted our response to DECC’s consultation on the future of the Energy Company Obligation (ECO). This is the consultation which seeks to rubber-stamp cuts to the ECO, pledged in the run-up to last year’s Autumn Statement, amounting to £30-35 off the average energy bill. We, and many others, have consistently argued that cutting Britain’s only national energy efficiency programme – designed to reduce household energy bills and carbon emissions in the long term – to achieve a modest one-off energy bill reduction is completely perverse.

But our analysis with the Energy Saving Trust, the Centre for Sustainable Energy and the Cavity Insulation Guarantee Agency finds that the cuts amount to more: nearly £42 per household – yet energy suppliers are only handing back around £32.50, on average, to each household. This represents an aggregate windfall to energy companies of £245 million this financial year.

The cost of this windfall if the consultation’s proposals are implemented? Virtually no homes to be improved under the Energy Company Obligation this year. A terrible deal for consumers. A kick to the supply chain while it’s down. The loss of credibility for a Government which did not stand its ground in the first place, and is now about to line the energy companies pockets. We’re certain it does not want to do that.

We’ll rehearse the arguments about why the cuts were a terrible idea in the first place – even if they had turned out not to be excessive. The result is:

  • A very modest one-year rebate to households, easily swallowed up by a future round of gas and electricity price increases…
  • …at the expense of permanent energy bill reductions for at least 264,000 households in this year alone (compared to business as usual);
  • A regressive ‘double-dividend’ for those 50% of British households who have to date received energy efficiency improvements, and higher bills for longer for everyone else;
  • A terrible precedent of announcing pre-determined chops and changes to a programme:
    • Less than one year in;
    • Just as it was beginning to settle and run smoothly;
    • Absent any comprehensive, transparent data on what it actually costs (official data suggest it was roughly as much as anticipated).
  • An ever-widening gap between the carbon savings required from the residential sector under the Climate Change Act, and the carbon savings that will be delivered:
    • We recognise that new public money is being made available over the next three years to maintain overall carbon neutrality – but with the use thereof not being consulted upon as well, this ECO consultation is effectively being conducted in the dark.
  • Rag-doll treatment of the energy efficiency supply chain, which: took heavy losses following the awful transition from CERT and CESP to ECO and Green Deal; made very difficult decisions to successfully restructure, invest in and adapt to in the new delivery landscape; only to have this painfully recovered confidence even more thoroughly undermined – with attendant negative effects on investment and employment.
  • Powerfully undermined Government credibility – some energy companies are now calling for the whole of the ECO to be scrapped. The precedent set by the Autumn Statement suggests that it is very possible they will have their way. Despite fully understanding the purpose and benefits of energy efficiency programmes, there has been no backbone and no firmness of principle on the Government’s part.

Burning Cash Day: 14th February

Written by Sarah Royston on . Posted in ACE Research, Projects

(c)jonchallicom

In the context of a growing political debate regarding the best way to cut energy bills, this briefing shows that a family could be wasting around 41% of their gas every year if they live in a typical fuel poor home, due to a low standard of energy efficiency. They could save 41% of their gas costs each year by installing energy efficiency measures. There are over 6.7 million homes in England (one in three) which have very poor levels of energy efficiency, representing an E, F or G rating on an Energy Performance Certificate. In England, 1.41 million fuel poor homes (more than half) fall into this category.

If a family turn their heating on at the start of October, then that 41% saving is the equivalent of all their gas costs from the 14th of February until the next October. If they installed efficiency measures, it would be like having free heating and hot water from the 14th of February onwards. We could say that everything they spend on gas after that date is wasted money – so the 14th of February is ‘Burning Cash Day’.

The savings from energy efficiency vary between different homes, so every home has its own Burning Cash Day. Even in a home which has an average level of energy efficiency (including at least some loft and cavity wall insulation) the family could still save 25% of their gas bill, through additional measures. This means that Burning Cash Day for this typical home is the 22nd of March.

The Energy Bill Revolution campaign is calling for major Government investment to provide energy efficiency measures for free for people in fuel poverty, and to provide subsidies for everyone else. It is proposed that this is paid for by recycling revenues from two carbon taxes that are paid by consumers – the European Emissions Trading Scheme and the Carbon Price Floor. Over the next 15 years the Government will raise an average of £4 billion every year in carbon taxes; this is enough revenue to insulate to a high degree an average of 600,000 fuel poor homes every year. In time, every household could benefit, and see major reductions in their energy bills.

Fuel Poverty: 2014 update

Written by Pedro Guertler on . Posted in ACE Research, Projects

gas

In early 2013, ACE Research and the Energy Bill Revolution published a fact-file on families and fuel poverty. This new briefing serves to update last year’s headline figures for the number of households, people, families, and children in fuel poverty to 2014. It does so for the UK, as well as for the devolved nations where appropriate.

There are now two high-level fuel poverty definitions in use in the UK. The original definition, that of a household having to spend over 10% of its disposable income to pay for adequate energy services, has (with minor variations) been retained in Northern Ireland, Scotland and Wales. Although the Department of Energy and Climate Change still report fuel poverty in England against this definition, it has now formally adopted a new definition of fuel poverty in England, based on the recommendations of the Hills Review into the measurement of fuel poverty.

This briefing provides estimates for the level of fuel poverty (under the original definition) at the start of 2014 for the UK and its nations. In addition, it provides an estimate for fuel poverty under the new definition in England. The following factors make a 2014 update on last year’s estimates pertinent:

  • Energy suppliers announced significant price rises at the end of 2013. Some of these price rises have been claimed by suppliers to be smaller than they otherwise would have been, as they have pre-empted Government reductions to ‘green levies’. Government proposals for reducing levies were made subsequent to the price rises at the end of 2013;
  • The rate at which energy bill-reducing measures are being delivered slowed down considerably in 2013 compared to previous years;
  • And average real earnings have remained largely flat

Energy prices, energy performance of housing and incomes are the three factors that together determine the level, depth, and nature of fuel poverty, whichever definition is used. The estimates in this briefing compare the state of fuel poverty now to that of 12 months ago, and to 2011, the year for which the latest official estimates of fuel poverty are available.

Financing energy efficiency in buildings: an international review of best practice and innovation

Written by Pedro Guertler on . Posted in ACE Research, Projects

wec

ACE Research, in partnership with Joanne Wade, was commissioned by the European Council for an Energy Efficient Economy (eceee) and the French Environment and Energy Management Agency (ADEME) to identify and review a wide range of energy efficiency finance schemes from around the world for the World Energy Council (WEC). The research is part of a suite which informed 2013′s World Energy Congress in Daegu, South Korea, this October.

By clicking on ‘Continue reading’, you can see an overview of what we addressed in the review. And here you can download a summary report with recommendations and detailed full report including national case studies.

Explore how predicted carbon savings are evolving

Written by Pedro Guertler on . Posted in ACE Research, Projects

uepcomparisonscreenshot

Every year in September/October, the Department of Energy and Climate Change issues its latest CO2 emissions projections. Presently, these project emissions forward to 2030. This tool compares the savings projected to come from policies which reduce CO2 emissions in the electricity generation sector, as well as policies which reduce emissions in the end-use sectors (agriculture and waste; commercial and public services; industry; residential; transport). Please note that this tool is not intended for use on its own. It should be used in conjunction with the reports and annexes published alonside each year’s UEP that is compared in this tool (2011, 2012 and 2013). Links to these resources are provided in the downloadable tool, including instructions on how to use it. What this tool enables you to do swiftly is to pinpoint differences between UEPs and more easily find the assumptions underlying any changes in the accompanying UEP resources.

ACE Research papers well-received at Europe’s largest energy efficiency conference

Written by Pedro Guertler on . Posted in ACE Research, Projects

eceee2013

ACE Research presented two papers at the European Council for an Energy Efficient Economy‘s biennial Summer Study a fortnight ago. One investigates the energy efficiency implications of an ageing population in the context of constricted housing supply. The other examines the history of the Green Deal’s development to date. Continue reading to find the abstracts, along with links to the full papers and their presentations.

Somewhere between a ‘Comedy of errors’ and ‘As you like it’? A brief history of Britain’s ‘Green Deal’ so far (paper; presentation)

The Green Deal finance mechanism is designed to enable households and small businesses to install energy efficiency improvements at no up-front cost. The capital is granted so long as the repayments (for which the utility bill payer, not the building owner, is liable) do not exceed the value of the predicted energy savings. Completely new to any European country, it has been described as a “no-brainer”, a “game-changer”, a “massive economic and job opportunity which could help Britain’s economy turn the corner” and “the biggest home energy efficiency drive since the Second World War” (Secretary of State Chris Huhne, 2010–2011; Minister of State Greg Barker, 2011).

The Green Deal was launched on October 1, 2012 – and despite it being the Government’s flagship green policy, the responsible Department of Energy and Climate Change did not even issue a press release on that day. What happened? This small incident is just the tip of an iceberg of a sometimes tumultuous but always fascinating process of policy development. From its inception as a political manifesto commitment in early 2010, the Green Deal’s evolution has seen ministers announcing very high ambitions, contrasted with official predictions of very low take-up; press coverage ranging from good to bad to ugly; and stakeholders (often simultaneously) alienated and more heavily engaged than ever before: all framed by the still considerable uncertainty about this new policy mechanism.

The dichotomies alluded to above provide the focal point and aim for this paper: to convey a multi-faceted history of the still young Green Deal. This paper reviews its intellectual, political, cultural (media), and stakeholder (involvement) history – by drawing on policy papers, speeches, press articles, meeting notes and stakeholders themselves – to paint a vivid picture of policy development in practice and draw out conclusions for policy-makers and others who might consider embarking into similarly uncharted policy waters.

Housing crisis: efficiency opportunity (paper; presentation)

This paper explores the housing crisis currently faced by the UK; housing space has become increasingly unaffordable for many households, with the shortage of supply being exacerbated by a recent decline in the number of new properties being built. The paper looks in detail at the potential to increase housing space in the market by encouraging downsizing amongst retired households. Firstly the current housing situation in the UK is considered and the trends in demographics and the housing choices of older people are considered to determine the influence this has had on the current situation. The paper looks at current trends in downsizing and assesses the potential for older people to move to a smaller property dependent on age and economic grouping.

By moving different occupants from one property to another, overall energy consumption across the housing stock may be influenced as well as the rate of energy efficiency retrofit. Downsizing will also release housing space into the market, reducing the amount of new housing space that needs to be built. A broad analysis of these effects is conducted to assess the energy efficiency implication downsizing may have.

Finally the paper reviews the policies that currently exist in the UK to improve housing conditions for our ageing population and sensitively encourage more households to downsize. Additional policy options are considered and opportunities for energy efficiency policy to work alongside social and housing policy are identified.