Eco cut makes goal impossible, argues Greg McCracken
Spiralling energy costs and surging public anger have culminated in the UK government’s recent announcement to cut energy bills by an average of £50 a year through reductions on the levies placed upon energy companies.
The Energy Company Obligation (Eco) required suppliers to deliver efficiency measures to domestic users. While suppliers claimed these levies caused high energy bills, Eco was, in fact, intended to support households – including pensioners – most at risk of fuel poverty. By calling the suppliers’ bluff, Prime Minister David Cameron has on the one hand appealed to voters with a negligible annual cut in energy bills while, on the other hand, damaging already faltering efforts to tackle fuel poverty – a problem affecting nearly half of all Scottish single pensioner households and more than a third of pensioner couple households.
A look across the North Sea reveals the flaw in the UK government’s approach. During winters typically colder than ours, Swedish households usually pay higher prices for each energy unit than the UK – yet their “excess winter death” rate is 23 per cent lower than ours. The difference is that British homes lose around three times more heat than Swedish homes.
At a time when we should be intensifying efforts to super-insulate our homes, the coalition has effectively called time on UK-wide energy efficiency activities over the next three to four years. Legislation enacting these changes still needs to be debated and the delay until that comes into force will likely sap the little existing momentum around these programmes, potentially seeing them wind down in anticipation of the changes.
While, in theory, companies will continue to face targets around Eco, in reality, few incentives remain to install measures in the run-up to 2015. Furthermore, with suppliers able to offset shortfalls in installation targets against post-2017 outcomes, the impact of the coalition’s reduction on household energy efficiency measures is likely to prove far bigger in practice.
The removal of funding for Eco means less money will now be available for more complex measures such as solid-wall insulation. The Scottish Government has been well ahead of the UK coalition in respect of “easy” wins on energy efficiency, such as cavity wall and loft insulation. Achieving further carbon reduction will be increasingly difficult, as these will mostly involve more complex measures (or installing “basic” measures in more challenging properties like tower blocks or tenements). While energy companies will still be bound by less demanding carbon reduction targets, their reduced funding may tempt them to concentrate on areas where these simple measures will provide better returns. We can expect to see them shift focus to England, where far more homes lack cavity-wall or loft insulation.
So where does this leave Scotland? With the Scottish Government committed to ending fuel poverty by 2016, pressure to uplift investment in energy efficiency will increase. With funding beyond tight, it may be time to admit the 2016 target will be missed and, instead, call on the Scottish Government to rethink its strategy and introduce a new programme to deliver the best returns based on the more limited funding now available.
Even a less ambitious strategy will present significant challenges. Those properties most amenable to energy efficiency treatment tend to be urban or suburban, so focusing on them to cut fuel poverty rates more rapidly could mean insulation measures in rural Scotland peter out. The levers available for transforming the energy efficiency of the housing stock are also inadequate, with local authorities underspending their allocations of the Scottish Government’s Home Energy Efficiency Programme to the tune of £5 million.
Not to mention the difficulty of rolling out a nationwide installation programme without enough suitably qualified tradespeople to meet demand.
The UK government could utilise the £4 billion raised from carbon taxes on business to make homes super-energy efficient – taking 90 per cent of homes out of fuel poverty. However, with the UK government committed to regressive measures like penalising those most at risk of fuel poverty, the big question is whether we should seek to realise change through devolving energy policy to Holyrood. With this in mind we can at least hope the wider debate on independence pushes the issue up all parties’ agendas.
• Greg McCracken is policy Officer with Age Scotland www.agescotland.org.uk