In a flurry of announcements squeezed in before parliament breaks for the summer recess, the Department for Energy and Climate Change (DECC) is seeking to restore some of its battered reputation on the home energy efficiency front. This follows the Climate Change Committee’s claim that we will fall short on our carbon reduction targets, partly due to the collapse of the Energy Company Obligation (ECO) following the launch of the consultation, to which DECC’s disappointing response was published today, and the flop that is the Green Deal.
ECO – a tool-less entity
While we applaud Ed Davey in apparently holding the line against George Osborne in maintaining the 4th Carbon Budget, there is no point setting targets and developing strategies if you haven’t got the tools to actually deliver.
ECO is a case in point, which was starting to bring massive results until the rug was pulled from under it by the Government’s panicked response last December to pressure from Ed Miliband and the energy companies themselves. The revised ECO turns the ‘market’ very much in favour of the ‘buyers’ i.e. the energy companies as it significantly reduces the obligations on them, and away from the ‘sellers’ or ‘suppliers’ of carbon reduction who are ultimately residents benefitting from energy efficiency measures.
Consultation under fire
On first reading of the Government responses to the substantive questions on the consultation, it is hard to contain the feeling that the exercise of responding to it was futile. It is difficult to find outcomes that beneficiaries of ECO have influenced.
CERO has been cut by 33%. Uplift, levelisation and carry-over have softened the targets to the maximum extent put forward. This is what we feared may happen.
There were multiple ECO supply side perspectives cited in the consultation which could have influenced the rules. Yet the Government’s response time and time again is that it considered informed opinion and yet have gone in the direction in which they were minded to go. Is it that the energy efficiency industry and its customers lack a coherent and united voice? Or that DECC has a voice but no working ears on both sides of its head? Or that the deal was stitched up before going to press?
The financial realities
While DECC expresses a desire for ‘fairness’ for the energy companies, little sympathy is expressed for the energy efficiency industry, while companies and jobs go to the wall. Mistrust between parties exists due to the heavy handed behaviour of the energy companies and anecdotal claims of profiteering by installers. There is little love evident between parties.
However, as described in a previous blog, the system was designed to encourage gaming and rent-seeking behaviour. This does not exonerate individuals and organisations who have sought to exploit the rules, but games need to be well designed. And ECO 2 is not looking well designed to spread more love.
The Association for Conservation of Energy (ACE) has calculated that, despite the claims that bills would be reduced by £30-35 per annum, the swingeing cuts and fudges associated with the reduction in the carbon savings ambition should be delivering at least £42 per annum off bills, indicating there is a windfall payment to the energy companies. The subtext is that the energy companies were able to game the negotiations in order to drive down the costs of compliance below the £30-35 agreed with government, yet pass on only a proportion of the savings.
Energy companies are requested to publicly set out how they will redress this. But who is going to remember this request for voluntary action at a time of recess, reshuffles and re-electioneering? It may become a campaign issue over the next nine months. But the energy efficiency industry – in all its damaged state – will only look on with fear as the politicians do potentially yet more damage with wild manifesto promises and posturing for points, and the Big Six grit their teeth and fight back. The little people in the middle could yet again get easily crushed between warring giants.
Rebirth of energy efficiency
ECO was meant to have been built on firm cross-party support, with Government speaking as one voice on the need to make home energy efficiency a central feature of our energy strategy. Yet over the past 18 months, ECO has become a cacophony ungodly to behold. Fractures in Government, uncoordinated and sometimes incoherent views from a fragmented energy efficiency industry and energy companies seeking to get rid of a loathed obligation nearly brought the whole edifice down.
That hasn’t happened as yet. But clarity and stability are now needed as foundations upon which to build the home energy efficiency industry this country needs.