Last week, the government’s review of the Energy Companies Obligation saw key insulation targets cut by a third after less than two years in play.
The sudden closure of the Green Deal Home Improvement Fund two days later, following a surge in applications, meant the government’s limited compensation for these cuts was exhausted after just six weeks.
This has direct implications for the domestic energy efficiency market and fuel poverty, but also for the UK’s energy obligations at large.
Earlier this month, the Committee on Climate Change warned that the UK is on course to miss its 2025 carbon emissions targets by a substantial distance, with an anticipated reduction of 21 to 23 per cent compared to the 31 per cent it set out to achieve.
“Reducing emissions by 80 per cent before 2050… is starting to look like a pipe dream”
If this is the case, then reducing emissions by 80 per cent before 2050 – a legal requirement for the government – is starting to look like a pipe dream.
The Department of Energy and Climate Change has proposed new measures to keep these targets in sight. A tightening of Minimum Energy Performance Standards will require fuel poor homes to reach a Band C energy efficiency rating by 2030, with intermediate targets of a Band E standard by 2020 and Band D by 2025.
However, the obligation to upgrade as many homes as “reasonably practicable” feels like a throwback to the get-out clause used against the 2016 fuel poverty target contained in the Warm Homes and Energy Conservation Act.
Moreover, there is no clarity over who will shoulder the cost of achieving the new MEPS, while the staggered approach to attaining Band C standard could leave thousands of residents burdened with high energy bills well into the next decade.
This haphazard approach to policymaking is leaving vulnerable residents out in the cold on how to combat fuel poverty, but it’s negatively affecting the market too.
The changes to ECO encourage energy companies to take a shortcut by targeting cheaper, easier-to-deliver insulation (such as loft and cavity wall) provided by a more developed part of the industry.
This disadvantages challenging stock and squeezes demand for insulation for hard-to-treat properties. It becomes difficult to take advantage of economies of scale, recruit and train staff and develop expertise in the supply chain.
“ECO has been disappointing as a tool for market transformation to a greener economy”
Overall, ECO has been disappointing as a tool for market transformation to a greener economy.
The flood of applications which led to the abrupt closure of the Green Deal Home Improvement Fund last week demonstrated the clear demand for efficiency improvements.
DECC must now review this unprecedented spike and ensure any inappropriate applications are not validated. While Ofgem and the energy companies have historically managed this process, neither have the obligation to do so in this instance – DECC will therefore need to step up and take clear action.
Fundamentally, the government must stop changing direction and implement policies that drive long-term change, make a real impact on carbon targets and don’t hurt an industry that can help achieve these aims.
Simon Green is head of sustainability at asset and energy support services group at Lakehouse