Government confirms plan to dilute ECO scheme

The government has confirmed it will double the timetable for the Energy Companies Obligation - effectively halving the impact of the energy efficiency scheme - as part of a drive to cut the cost of fuel bills for consumers.

The announcement this morning, which came as part of a package measures aimed at cutting energy bills by an average of £50 per year per household, also includes £540m in new investment in energy efficiency.

The move sees the ECO scheme, which targets low income households in need of insulation and is paid for through a levy on energy bills, extended to run over four years instead of two, with the scheme extended through to March 2017.

This means energy companies will have four years to deliver the expected level of insulation work through the programme, rather than two, meaning there will be less investment in the short term.

DECC also confirmed that the government would reduce the Carbon Emissions Reduction Obligation element of ECO by 33% for the period to 2015, and set a target for the period to 2017 reflecting this same level of activity.

The Association for the Conservation of Energy has warned that diluting the amount of activity required through ECO for energy companies to meet their targets in this way would lead to 13,000 job losses across the insulation industry.

In other measures, the government said it would introduce incentives for people to improve the energy efficiency of their home, with a discount of up to £1000 - equivalent to half the average stamp duty on a home - for new home buyers to spend on energy efficiency improvements, with up to £4000 available for more expensive measures.

The Department of Energy and Climate Change (DECC) said the scheme would be available to all people moving house including those who don’t pay stamp duty, helping around 60,000 homes a year, over three years.

DECC said the Government would also introduce a scheme to support private landlords in improving the energy efficiency of their properties, which will improve around 15,000 of the least energy efficient rental properties each year for three years.

DECC said taken together, the homebuyers and private rental schemes wouldbe worth £450m over three years.

The department added that a further £90m would be spent over three years improving the energy efficiency of schools, hospitals and other public sector buildings.

The government will also increase the funds available to local authorities this year through Green Deal Communities from £20m million to £80m million, to help support “street-by-street programmes for hard-to-treat homes in a cost-effective way”.

DECC said levies providing support for existing low carbon energy projects will not change, such as the Renewables Obligation (RO), Contracts for Difference (CfDs) and feed in tariffs (FITs).

Energy and Climate Change Secretary Edward Davey said: “Energy bills are a big concern for many people, which is why we’ve been working to reform the energy market, increase competition and make it easier for people to shop around and switch supplier.

“Today’s announcement confirms a serious, workable package which would save households around £50 on average.

“Today’s package also ensures that energy companies are not off the hook. They will keep up their efforts to help people in fuel poverty cut their bills by making sure their homes leak less heat, and they will have to be more transparent about what they’re spending on social and environmental measures.

“Next year, our competition test will forensically examine what more we can do to get prices down through ferocious competition.”

The UK Green Building Council (UKGBC) said the changes to ECO meant the number of solid wall insulation installations energy suppliers are required to make under ECO will also be reduced to 100,000 over the new four year period (25,000 per year).

In 2012 alone, industry installed 80,000 solid wall insulation measures.

Paul King, UKGBC chief executive said: “Make no mistake, this is bad news for people who cannot afford to heat their homes, especially if they live in solid walled properties, and bad news for thousands of construction industry workers who may well be joining the dole queue this Christmas.

“It remains perverse that the prime minister is attempting to reduce energy bills by slashing the very scheme that is designed to bring them down for good.

“We have to recognise that some in the coalition have fought hard for a package of incentives to sweeten the pill.

“Encouraging households to take up energy efficiency measures when moving into a property through a ‘Stamp Duty rebate’ is something we have repeatedly called for.”