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

Written by Pedro Guertler on . Posted in Consultation Responses, Perspective

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.

Our analysis has garnered a lot of press attention, links to which can be found below.

Utility Week
Big six ‘to get £245m windfall’ from Eco changes (15.4.14)
Building.co.uk
Government’s ECO cuts ‘£250m deeper than first thought’ (16.4.14)
ENDS Report
Investor interest in ECO collapses in April (16.4.14)
Daily Telegraph
Energy companies ‘in line for £245m windfall’ from green levies deal (17.4.14)
Business Green
Are the Big Six set for £250m windfall from ECO reforms? (17.4.14)
The Times
Let households share £250m energy windfall, Big Six told (22.4.14)
Business Green
Labour slams government over Big Six’s £250m ECO windfall (23.4.14)

DCLG: Review of Property Conditions in the Private-Rented Sector

Written by Pedro Guertler on . Posted in Consultation Responses, Perspective, Private Rented Sector Campaign

Department_for_Communities_and_Local_Government

ACE and Friends of the Earth have long been concerned about the poor standards of energy efficiency (and high concentrations of fuel poor and vulnerable households) in the private rented sector (PRS). The PRS is a rapidly growing part of the housing market. Of the 22.8m households in England in 2011, 4 million were privately rented (17.5% of the housing stock). This was an increase of 1.6m in only six years – and is the highest level since the early 1990s. The Department for Communities and Local Government has issued a review of property conditions in the PRS, and invited stakeholder responses; ACE and Friends of the Earth have provided theirs together.

ECC Committee: ACE evidence submitted to Green Deal watching brief (part 2) inquiry

Written by Pedro Guertler on . Posted in Consultation Responses, Perspective

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ACE has submitted written evidence to the Energy & Climate Change Select Committee’s inquiry into the Green Deal (watching brief part 2). In May 2013, the Committee published its first watching brief report, in which it outlined its concerns about the lack of clarity regarding the outcomes that DECC expected from the Green Deal and how it would measure the its success. The Committee identified key areas in which scrutiny would be beneficial, and outlined its intention to review the performance of the Green Deal and ECO at a later date – hence Part 2 of this Green Deal watching brief inquiry.

Questions for DECC on proposals tabled 2.12.2013

Written by Andrew Warren on . Posted in Articles and Blog, Consultation Responses, Perspective

In response to recent announcements regarding changes to energy efficiency policies (including this DECC press release), ACE have asked DECC to answer the following questions:

1.  On the announcement of a “Stamp duty rebate” for home-movers who install efficiency measures:

  • Is this really a stamp duty rebate (implying a return of money at some point after purchase for homeowners who can prove they have installed measures) or is it just a cashback by another name?  What will the delivery mechanism be?
  • Does this money come out of the existing £200m cashback pot, or does it come from somewhere else?  Is this Exchequer funding?
  • It is anticipated that 60,000 homes a year will be helped.  But what if a large number of homeowners opt to have more expensive measures installed?
  • If the share of the £450m allocated to this scheme runs out prior to April 2017, does this mean that the scheme will be closed?

2.  Help for private landlords:

  • The press release talks of a “scheme to support private landlords” and promises a share (unspecified) of £450m will be available to fund this.  However, the press release goes on to say that this scheme will  consist of “funding available through the Green Deal”.  It is therefore confusing as to whether this will be Government funding channelled through the Green Deal, or else some “tweaking” of Green Deal finance, or else some extension of the LESA scheme?
  • In an article in The Sun newspaper (1st December), Nick Clegg and David Cameron refer to “cash incentives to landlords of the least energy efficient properties”; the press release meanwhile talks of “helping landlords bring their properties up to minimum standards” – the implication of both of these statements is that the funding for landlords will only be available to landlords of F and G rated properties.  Can this be clarified/confirmed?
  • In the article in The Sun, Nick Clegg and David Cameron talk about the incentive being available to landlords “when they are between tenants” – will the incentive only be available during void periods?
  • Government is claiming this will deliver 1.8Mt of carbon savings .  If it is geared to existing F and G-rated homes,  surely all these savings must already be built into Government carbon estimates from the time the Energy Bill 2011 made it mandatory to outlaw F & G rated properties.  Therefore there will be no new carbon saved – it will just be a sweetener for landlords to get them to obey the law.
  • There are 440,000 F & G rated properties in the private rental sector. The new scheme will incentivise just 45,000 of them over three years,  e.g 10% of the total.  Can this be confirmed?

3. Spending breakdown:

  •  We’re told that there will be £450m of new investment for the two new measures above.  What is the breakdown of spending as between the two measures?

4. Carbon savings and public buildings:

  • What are the carbon savings associated with each of the above, and how much additional carbon saving is assumed to come from the £90m being allocated to schools, hospitals and other public buildings? What shape is deployment of this £90m – is it a grant? Or an extension of a finance mechanism (presumably Salix)?

 

We hope DECC will soon provide clarification on these important points.

 

Environmental Audit Committee: Inquiry into Housing Standards Review

Written by Pedro Guertler on . Posted in Articles and Blog, Consultation Responses, Perspective

parliament_logo

The Environmental Audit Committee launched an inquiry into the Government consultation on the Housing Standards Review, which proposes “to wind down the role” of the Code for Sustainable Homes. It is taking oral evidence today. ACE submitted its written evidence to the Committee last week; the main points provided in evidence are:

  • The new Part L of the Building Regulations has not gone as far as anticipated in terms of the minimum standard it sets for new housing.
  • Against this backdrop, the justifications used for proposing to get rid of Code for Sustainable Homes energy standards and falling back to Part L alone, whilst proposing to amend or remove the Planning and Energy Act in consequence, are even flimsier and more narrow-minded than they would otherwise have been.
  • The proposals, if adopted, would reduce housing quality, increase running costs for occupants, damage localism and stifle construction innovation.
  • And the proposals are made all the more remarkable for their political naivety and short-sightedness.

Download our evidence, and read Andrew Warren’s earlier article on this topic.

DECC: Consultation on Energy Savings Opportunity Scheme

Written by Andrew Warren on . Posted in Consultation Responses, Perspective

DECC

ACE has submitted a written response to the Department of Energy and Climate Change consultation on the Energy Savings Opportunity Scheme.

Article 8 of the EU Energy Efficiency Directive requires all Member States to introduce a regime of regular energy audits for ‘large enterprises’ (non-SMEs) to promote the uptake of cost-effective energy efficiency measures. These audits must be undertaken by 5 December 2015, and then every four years thereafter.

The consultation sought views on the UK’s approach to meeting this requirement through implementing a new Energy Savings Opportunity Scheme (ESOS). The Government’s ambition is to “develop a proportionate and better regulation approach, which yields real energy efficiency rewards”.

Ofgem: consultation on requirements for hard-to-treat cavities under the ECO

Written by Pedro Guertler on . Posted in Consultation Responses, Perspective

ofgem-logo

In late August 2013 Ofgem published a consultation seeking views on its proposed requirements under the Energy Companies Obligation (ECO) for demonstrating the characteristics of a hard-to-treat cavity (HTTC) wall to which insulation has been installed.

The consultation put forward proposals to address concerns that a significant number of HTTC measures installed under ECO may have been installed to cavity walls that do not meet the statutory definition of ‘hard to treat cavity’. ACE’s and others’ views, put to Ofgem, is that its proposals are very poorly thought through.

Ofgem says they received a high number of responses to the consultation, many of which (including ACE’s) suggest changes to the proposals. In order to properly review all of the responses and consider modifications to our consulted position, Ofgem no longer intend to publish the outcome of the consultation by 1 October 2013 or to implement any new requirements relating to HTTCs from 1 October 2013.

Ofgem will confirm the ‘date of effect’ for any new requirements relating to HTTCs in its response to the consultation and additional guidance on HTTCs. These documents will be published at least one month before the new requirements come into effect. The date of effect for any new requirements will be no earlier than 1 December 2013.

DG Taxation: Consultation on existing legislation on VAT reduced rates

Written by Pedro Guertler on . Posted in Consultation Responses, Perspective

European-Commission-Logo-square

ACE has submitted a written response to the European Commission, DG Taxation Consultation on “Review of existing legislation on VAT reduced rates”.

The EC’s stated aim is to create a “simpler, more efficient and more robust” VAT system in the EU, partly by removing certain reduced rates which are believed to “constitute an obstacle to the proper functioning of the internal market”.

The EC has already conducted some evaluation of the existing VAT structure, and this consultation focuses on key areas that require further consideration, including the reduced VAT rate for certain energy products.

Download ACE’s consultation response here:  Consultation Response: VAT reduced rates

BIS: Consultation on energy intensive industries in the UK

Written by Jack Carrington on . Posted in Consultation Responses, Perspective

DBIS

ACE has submitted a written response to the Department of Business, Innovation and Skills consultation on Energy intensive industries in the UK- maintaining international competitiveness.

In November 2011 the Chancellor announced that the government would implement measures to reduce the impact of policy on the costs of electricity for the most electricity-intensive industries, beginning in 2013 and worth around £250 million over the Spending Review period.

As part of this the government committed to compensate some electricity-intensive businesses to help offset the indirect cost of the Carbon Price Floor and the EU Emissions Trading System.

Government published a proposal setting out the eligibility and design of the scheme, and this consultation covers these proposals.

Read ACE’s response to the consultation here.

DECC: Consultations on the Renewable Heat Incentive

Written by Pedro Guertler on . Posted in Consultation Responses, Perspective, Uncategorized

DECC

ACE has submitted written responses to two Department for Energy and Climate Change consultations on the Renewable Heat Incentive (RHI).

The consultation on proposals for a domestic scheme sets out DECC’s proposals for longer term support to householders who install renewable heating kit such as biomass boilers, heat pumps and solar thermal into homes. The RHI for householders is aimed at any householder looking to replace their current heating with renewable heating kit or householders who have installed any such technology since 15 July 2009. It is intended that householders will get paid for each kWh of heat they would be expected produce under the current proposals.

The consultation on Renewable Heat Incentive: expanding the non-domestic scheme sets out DECC’s broad proposals to expand the existing scheme.

Read ACE’s consultation responses here:

Domestic RHI: ACE consultation response

Non-Domestic RHI: ACE consultation response