October will see the start of latest phase of the Energy Company Obligation (Eco) – the national energy efficiency scheme, running until 2022. But what happens after that?
The current challenge
Around 1 in 10 households in England live in fuel poverty, unable to keep their homes warm without being pushed below the poverty line.
At Citizens Advice, we regularly see the effect of fuel poverty on our clients’ wellbeing. Often this is people with health conditions made worse by cold homes.
Improving energy efficiency is often the best way to help these households. It can typically save these households hundreds of pounds each year. In England, the government has a fuel poverty target: to ensure the homes of all fuel-poor households reach a certain standard by 2030.
Eco has done a lot to improve Britain’s energy efficiency, but it was not designed as a mechanism to tackle the fuel poverty target.
That’s why we commissioned IPPR to research how Eco is performing, and how it should change in future to help consumers who need it the most.
Effective targeting
It’s widely accepted that currently Eco does not effectively target households in fuel poverty. This stems from its delivery model, where energy suppliers deliver the scheme to meet targets.
Suppliers understandably want to minimise the time and cost of searching for specific households. They argue that Eco should cover as wide a group of households as possible, making it easier to find those who are eligible.
In the new Eco, government has expanded the definition of low income and vulnerable consumers to make it easier for suppliers to find households they can help. This reduces the effect of another change intended to the scheme on fuel poor households.
This model means that the already limited energy efficiency support isn’t necessarily going to the people who need it most: those in fuel poverty. Currently, only around 30% of those eligible for Eco are in fuel poverty.
The scheme has already been cut by over 40% since 2013. Poor targeting further hinders progress towards the fuel poverty target. According to IPPR, relying on the current take-up rate of Eco would result in meeting England’s fuel poverty targets over 60 years late.
Meeting households’ needs
There are reasons those in the deepest need may be most likely to miss out. They are more likely to have multiple needs that make them expensive to help. They are less able to contribute towards the cost of installations, something suppliers can require.
Households can also be put off by the uncertain and complex customer proposition. It can be hard to find the help on offer and it can change with little warning. This uncertainty can put off people who need help, advisors and other parties who would otherwise get involved in the scheme e.g.
A future scheme should give a clear guarantee of support to households that need it most. This means households which:
● include someone vulnerable to the cold (an elderly person, a young child or someone with a long-term health condition)
● have a low income
● are in in the least efficient homes (Band E-G)
Going beyond Eco
Many of the problems with Eco are baked into the supplier-led model. Addressing them properly means moving to a different approach.
Currently the Scottish and Welsh governments fund schemes alongside Eco to help households in most need – the people suppliers can’t or won’t help. Introducing something similar in England would guarantee help for struggling households and put us on better path to meeting the fuel poverty target.
Beyond 2022, meeting the fuel poverty target will increasingly demand helping hard-to-reach customers and installing complex measures like solid wall insulation.
Local authorities may be better placed to do this. They are closer to understanding which households need help, they already have a role in deciding eligibility for Eco, through Flexible Eligibility, and they can also help coordinate the street-by-street approach often required to deliver solid-wall insulation.
Improving homes aligns well with councils’ other aims, in health and regeneration: many councils run referral services for those vulnerable to the health effects of a cold home.
There are challenges with a local authority-led scheme – we know that councils have stretched and uneven resourcing. But the benefits of local authority involvement could outweigh this, given the impact that warm homes have on other objectives.
Other bodies, like energy networks, could also play a leading role. Energy efficiency aligns well with network companies’ incentive to reduce demand on their network. They also have a geographic remit. Both mean they could play a more active role in improving household energy efficiency in their area.
Inevitably, this will all mean that more funding is needed. We spend 4 times as much on schemes helping households pay their bills every winter as we do improving the efficiency of homes. A better resourced and better designed scheme could also draw in greater funding from partners like the NHS.
Eco has made significant improvements to the energy performance of homes. The government needs to take decisions now to make sure the scheme delivers for consumers in future.
The new phase of the Energy Company Obligation starts today (1 October).