Eco extension could cut costs by 40 per cent

An 18-month extension to the Energy Company Obligation (Eco) could reduce annual costs to the industry and consumers by 40 per cent, according to analysis seen by Utility Week.

The cost of the programme could fall to £800million per year with an 18 month extension, compared to the government’s estimated £1.3 billion per year if the programme ended as scheduled in March 2015.

Using the cost estimate produced by Nera, in a report commissioned by Energy UK, of £2.4 billion per year for Eco, the cost would fall to £1.4 billion per year with the extended deadline in place.

This could result in an estimated reduction of £21 to £38 in the average energy consumer’s annual bill.

DECC said this week that it would consult on the future of ECO early next year, though it has no current plans to extend it.

Angela Knight, chief executive of Energy UK, told Utility Week: “If there are ways in which one is able to address Eco over a period of time that still gets the work done but prevents some of the cost ramping taking place, I certainly think that would be beneficial as far as the bill is concerned, and it does not walk away from the commitment to improve our housing stock.”

Reg Platt, senior research fellow at think tank IPPR, said extending Eco “is potentially the easiest response” by the government to Labour’s promised price freeze.

He warned it would be a relatively difficult process, adding: “it’s not just flicking a policy switch” because legislation would have to be changed, while suppliers who have made good progress under Eco would be in “uproar”.

Jan Rosenow, a senior consultant at Ricardo AEA, said extending Eco would bring costs down immediately, but consumers would end up paying more as they would lose out on the energy efficiency benefits.

“It is a political judgement call,” he added.

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