Energy firms are getting off scot-free under ECO reforms

Energy companies are set to be offered further incentives and weakened insulation targets to dissuade them from downing tools after government changes to national energy efficiency schemes.

Government officials feared that chancellor George Osborne’s decision, to water down by 35% the carbon saving element of the Energy Companies Obligation (ECO) scheme to insulate homes, would result in the “Big Six” energy companies simply halting work, until the changes were confirmed. Even in draft form these may not be known until April 2014, and may not be formally confirmed until the autumn.

To avoid the subsequent loss of jobs and drop in emissions savings, the Department of Energy and Climate Change (DECC) is considering offering suppliers a ‘”carbon score multiplier” for those measures that are delivered by March 31 2014, thus reducing the levels of investment required. By March, companies will be more than halfway through the first stage ECO scheme, which runs from January 2013 to March 2015. Consequently on a pro rata basis around 55% of each obligation should have been completed.

Practically half what had been required will have been officially delivered without putting in any measures

Energy efficiency industry sources predict that the government will grant an multiplier of 1.75 for measures installed in homes above just 25%, rather than 55%, of the company’s target - and to double the weighting value for installations above 35% of the ECO target.

These proposals will be revealed in a consultation due next month so that Osborne’s changes to ECO, including the 34% drop in the Carbon Emissions Reduction Obligation (CERO) aspect, can be enacted at the beginning of April.

The government is effectively eviscerating the ECO, by weakening the overall amount energy companies have to achieve, and then in addition by allowing companies to carry over a certain amount of work from previous energy efficiency schemes, the Carbon Emission Reduction Target (CERT) and Community Energy Saving Programme (CESP), towards their overall ECO goal. Energy regulator Ofgem has yet to confirm how much can be carried over, but it is expected it will be worth 15% of the work expected under the original ECO.

The result is that since December there will have been the initial 34% drop in ECO CERO. With the 15% “carry over” from previous schemes, the effect is that practically half what had been required will have been officially delivered without putting in any measures.

And now the government is proposing these additional uplifts. That means a very significant part of the target is being achieved, without requiring the Big Six energy companies to undertake any work at all. And without any improvements being made in any British homes.

Andrew Warren is director of the Association for the Conservation of Energy