It’s the start of a painful punchline – for home energy users that is: “DECC, David Cameron and the Big Six walk into a bar. The barman says, why the smug faces?
“The cheerful three reply in unison: ‘We’ve just announced the ECO consultation!'”
Sadly, the joke is currently on the most vulnerable.
That’s right, the long awaited consultation from DECC on the Energy Company Obligation (ECO) consultation is now underway and if the current situation doesn’t change then the most vulnerable will continue to miss out on the scheme.
That’s despite paying for it on their energy supply bills.
Proposals outlined earlier in March include extending the scheme for two years and cutting the energy suppliers’ 2015 targets by 33% for properties which need measures such as solid wall insulation.
What does this actually mean?
There’s a party going on and Ofgem aren’t invited
In theory all of these policy changes from DECC will help more people to access ECO but sadly, unless the current Ofgem processes change as well, these proposals will be pointless.
Why is that then? Well, under the previous scheme (CERT/CESP), the supply chain was incentivised to target the vulnerable first irrespective of the carbon saving made.
For example a smaller property such as a flat for a vulnerable customer would have been more valuable to an installer than a detached property from someone who was able to pay. This fixed scheme incentive meant the supply chain helped the right people, first.
This is not the case with ECO and will not change unless Ofgem joins the party.
ECO is a carbon – not a fuel poor – target
Unlike the parent schemes it replaces, CERT and CESP, ECO incentivises the supply chain on the lifetime carbon saving that can be made.
Since December, the price of carbon has dropped from a peak of £100 per tonne to as low as £25 per tonne last month.
Multiply this by the carbon saving that can be made at a property, anything smaller than a three-bed semi-detached is loss making for installers. It won’t be supported under the ECO scheme.
As illustrated in the infographic, vulnerable people living in flats, bungalows or terraced properties will be overlooked and the supply chain will have no choice but to focus on the larger detached properties.
How ECO is administered and delivered needs to be addressed. I’d like to see a cap and a floor on the carbon price introduced or for the scheme to revert back to the methodology used within CERT/CESP. This would ensure the most vulnerable people are still supported by the scheme, despite having a lower carbon saving.
So, will Ofgem be buying the next round? That remains to be seen.
Alex Tsimboykas is Director at EUM Consultants Ltd.