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Energy saving sector must speak out about proposed changes to ECO

Posted by Alastair Mumford on 15 January 2014 at 8:47 am

Government proposals to change the Energy Companies Obligation (ECO) have created substantial uncertainty within the solid wall insulation (SWI) market and highlight the need for companies in the sector to make their voices heard.  With funding set to drop from April 2014, job cuts are predicted and existing ECO contracts are being put on hold whil new, shorter-term contracts are agreed. The consultation period is an important opportunity for the sector to make its case for continued support and secure funding consistency. 

Regen SW is supporting the SWI sector via the EU-funded Ready for Retrofit programme. It has heard from one business that it is cutting its workforce by around 200, a 50% drop. The sector had been looking at a share of £1.3 billion each year for three years and the Green Deal to stimulate work, but the latter has yet to bear fruit.

Industry is set for a chaotic few months. Discussions with the Department of Energy and Climate Change (DECC) suggest the consultation period will be early in 2014 and policy will be implemented by the winter.  However, changes will be retrospective and so will effectively start in April 2014 according to a DECC (at the National Insulation Association conference last month).

This means unless final decisions are made at the end of March, ECO may become stuck in a policy vacuum with the additional uncertainty.  April 2014 looks set to be a pivotal month for the sector and we expect ECO to be a hot topic at our annual exhibition, Renewable Energy Marketplace, on the 8 April 2014.

Solid wall insulation has been affected more than any other energy efficiency measure. It is proposed that energy companies must complete 25,000 SWI installations per year in future. This compares with 80,000 installations in 2012. ECO would be extended until 2017, effectively halving yearly spend on energy efficiency, with the budget for SWI cut by an additional third.  Other measures are not marked for an additional cut.

The SWI sector faces a very uncertain funding environment. Energy companies, behind on their ECO targets, are busy trying to secure SWI contracts ahead of April 2014. Green Deal Providers (GDP) and brokers are offering between £70 and £130 per tonne of carbon for SWI and hard-to-treat cavity contracts. Contracts need to be completed by the end of March due to the expectation that changes are likely to be retrospective.

However, we also hear that ECO agreements are being put on hold so that new, potentially lower rates can be found after April. Inside Housing reported that the Carbon Saving Alliance, a consortium of social landlords accessing £500 million of funding, is uncertain of its future, as are many other social landlord ECO agreements across the country. However, one south west social landlord that has lined up an energy company to provide vital ECO funding if their primary funder pulls out.  

There are some opportunities in the proposals. Government aims to generate £90 million to spend on energy efficiency measures in public sector buildings. This may generate substantial contracts.

It is important the energy efficiency sector responds to the consultation. We welcome some of the new funding measures, but it makes no sense to cut overall funding for measures that reduce energy bills. Regen SW is working with businesses to engage local MPs on this point.  With the ‘noise’ around energy bills at its loudest, there has never been a more important time for the industry to come together and get its message across. Regen SW and the Ready for Retrofit programme will work to help this happen.

More about ECO on YouGen

The YouGen guide to the Energy Companies Obligation (ECO)

The YouGen guide to insulation

Government waters down green levy (ECO)

Photo: Ready for Retrofit

About the author:

Alastair is a business support manager on the Ready for Retrofit programme, growing the south west’s retrofit energy efficiency and microgeneration sector.

If you have a question about anything in the above blog, please ask it in the comments section below.

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