Government delay to home insulation scheme could cost 56,000 homes £600 each

The recent Queen’s Speech revealed the Government’s intentions to lay an Energy Bill and tackle the cost of living crisis. However, it has been uncovered that the Government has still not yet laid the legislation required for the fourth iteration of the Energy Company Obligation scheme (‘ECO4’), despite warnings in March [1] about impending delays.

Nearly two months on from the supposed start date, the delay in drafting the legislation within Government continues. Now, a potential six-month interruption, where the legislation is not introduced until after Parliament’s summer recess [2], has driven the number of homes that may miss out on bill savings up to 56,250, according to new analysis by the Energy and Climate Intelligence Unit.

The Energy Company Obligation (ECO) is a long-running, successful energy efficiency scheme that started in 2013, but since 2018 has been focussed on fuel poor households. It has installed over 3.5 million measures into 2.4 million properties, [3] giving an average saving of £580 per home under this year’s high gas prices [4]. Therefore the total bill savings that could be missed out on is over £32.6 million this year alone.

Commenting on the analysis, Jess Ralston,SeniorAnalystat the Energy and Climate Intelligence Unit, said:“With this further delay to the highly successful ECO insulation scheme and Treasury having blocked additional help for homes leaking heat, voters struggling to pay the bills, many of them in swing seats, will be wondering when help is coming.

“The recent energy security strategy with its focus on North Sea drilling will not bring down bills now, but there are plenty of roofs that still need insulating.”

Earlier this year, a Minister for the Department for Business, Energy and Industrial Strategy (BEIS) confirmed that Her Majesty’s Treasury blocked a proposed increase to ECO funding [5] in response to the cost-of-living crisis.

The start of the scheme on 1^st April 2022 should have coincided with the increase in the energy price cap, which will add nearly £700 on bills from April, driven by the very high gas price which is expected to persist for a decade, and in October the energy price cap is expected to rise to around £2,800 [6]. ECO4 is expected to install 800,000 energy efficiency measures, such as loft and cavity wall insulation, into 450,000 homes over 4 years [7].

Fuel poverty in the UK is set to rise, with 2 million more people expected to fall into fuel poverty this year, up to a total of 6.5 million [8]. Previous analysis has shown that 37 of 40 most marginal constituency in the 2019 General Election have below average levels of homes that meet Energy Performance Certificate Band C, the Government’s target for 2035, and 28 of 40 have above average rates of fuel poverty [9]. Government data shows there are 5 million homes without cavity wall insulation in England and 8 million homes without the recommended level of loft insulation [10].

Commenting on the findings, Chris Skidmore, MP for Kingswood, said: “The public are understandably concerned about the rising cost of energy bills and the Government’s British Energy Security Strategy is a great long-term plan for creating home grown clean, green secure and affordable energy.

“But we need to see support for those least well off and insulate people from the principal driver of the cost-of-living crisis; that being the price of gas. The fastest and simplest way to tackle the cost of living crisis is to invest in insulation which has the potential to save between £150 - 400 off energy bills - not just a one off saving but an investment to permanently bring down bills year after year.

“We need to get going now and fix the roof whilst the sun is shining in time for winter. There are plenty of homes still missing the basics of loft insulation. The bold energy efficiency commitments we made in the manifesto are needed now more than ever. ECO is a great scheme that works. Let’s get this going.”

ENDS

Notes to editors:

[1] The Times: “Thousands to miss efficiency upgrades after ‘unacceptable’ Whitehall delays” https://www.thetimes.co.uk/article/energy-crisis-thousands-to-miss-efficiency-upgrades-after-unacceptable-whitehall-delays-fftpxg9h8

[2] The ECO4 legislation will still need to be passed by both the House of Commons and House of Lords, and then implemented following a short period of adjustment for companies involved in delivering the scheme. This means that the scheme may not start before September 2022, 6 months after energy under the price cap rose to their highest level in years.

[3] BEIS Headline Energy Efficiency Statistics: https://www.gov.uk/government/statistics/household-energy-efficiency-statistics-headline-release-february-2022

[4] ECO installs insulation into low-income households, which would benefit from £290 of bill savings during times of ‘normal’ gas prices. But due to volatility in fossil fuel markets before the war in Ukraine, and now following the invasion, gas prices have doubled meaning that the average savings per home treated will also double to £580 per year.

[5] Lord Callahan, BEIS Minister in Lords, 7April: “With regard to insulation schemes, we are spending something like £6.6 billion over the term of this Parliament on insulation schemes. It would have been good to have gone further, but the Treasury would not support it.” https://hansard.parliament.uk/Lords/2022-04-07/debates/867F354D-34D2-4384-85B5-063A75DB389E/EnergySecurityStrategy

[6] Energy bills likely to rise by £800 in October, says Ofgem chief: https://www.theguardian.com/business/2022/may/24/energy-bills-likely-to-rise-by-800-in-october-says-ofgem-chief

[7] The Energy Company Obligation obligates energy suppliers to find and install a certain number of measures into homes that are eligible for energy efficiency retrofits. Overall, energy savings are estimated to be 221,800 GWh, and lifetime bill savings of measures installed under ECO to Dec 2021 are £26.76bn. ECO is paid for out of the ‘green levies’ on energy bills, and its budget is due to expand from £600m to £1bn per year until 2026. It is delivered by energy retailers working with insulation businesses. BEIS ECO4 Impact Assessment: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1065825/eco4-final-ia.pdf

[8] National Energy Action. https://www.nea.org.uk/energy-crisis/#

[9] ECIU analysis. https://eciu.net/analysis/reports/2022/levelling-up-or-letting-down

[10] English Housing Survey. https://www.gov.uk/government/collections/english-housing-survey

For more information:

George Smeeton, Head of Communications, ECIU, Tel: 07894 571 153, email: george.smeeton@eciu.net

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