4th December 2013
The Government has announced a series of measures designed to reduce consumers’ energy bills, following the Prime Minister’s statement that he would “roll back green charges” (or “get rid of all the green crap” according to one newspaper) which form part of energy bills. Part of these measures include streamlining the Green Deal and some important changes to ECO.
On 24 October 2013 David Cameron surprised many, including his front bench colleagues, when he announced in Prime Minister’s Questions that he would look to “roll back green charges” in order to reduce the upward pressure on domestic energy bills. The Sun subsequently reported that the Prime Minister had instructed aides to “get rid of all the green crap” from energy bills – a statement that was denied by Number 10 officials.
Many of the so-called green levies are funded via consumers’ bills rather than from general taxation. With many of the large energy suppliers having announced 8 or 9 per cent. bill increases and blaming a proportion of the rise on Government policies and green levies, from a political point of view the Government were left with no option but to act.
On 2 December 2013, the Government announced a series of measures that would take around £50 off the average annual energy bill. With a £12 rebate due to moving the funding of Warm Home Discount from bills to general taxation, the majority of the savings came from changes to the Energy Company Obligation (ECO) scheme (which is designed to improve energy efficiency in domestic properties across Great Britain) – see below for more details of these changes. At the same time, the Government announced a number of changes to the much maligned Green Deal, aimed at improving take up of the scheme as well as deflecting concern that the changes to ECO were undermining progress on energy efficiency.
The Government was at pains to stress that, with the changes, its overall approach is carbon neutral. It announced new measures aimed at boosting energy efficiency even further by introducing new schemes for home-movers, landlords and public sector buildings, worth £540 million over three years:
In addition, the Government announced an increase in the funds available to local authorities this year through Green Deal Communities from £20 million to £80 million, to help support ‘street-by-street’ programmes for hard-to-treat homes.
A range of changes to ECO were announced, including:
In addition, further changes are to be consulted upon next year, including energy companies being able to ‘bank’ any over-delivery against previous schemes and the current round of ECO against their 2015 and 2017 targets, and incentives for quick delivery with energy companies that fall short of their new 2015 delivery targets having their 2017 target increased by the same multiple.
The changes to the Green Deal announced by the Department of Energy and Climate Change (DECC) include:
Some of these practical changes will happen in January 2014. Others are planned for the first half of 2014 as DECC seeks Parliamentary approval to amendments to legislation and works with industry to change the systems through which Green Deal operates.
DECC also announced that it is considering looking at how the ‘golden rule’ controls what can be borrowed under the Green Deal and what adjustments to the rule might make sense for consumers.
While many are concerned that the overall effect of the changes will reduce energy efficiency improvements in the UK, and others are sceptical as to whether all of the anticipated savings will actually be passed on to consumers, the changes do offer a number of opportunities.
Local authorities are potentially the biggest winners of the reforms to ECO, with an extra £60 million for the Green Deal Communities scheme and the possibility of having heat networks funded (at least in part) via ECO. With easy to treat cavity walls and lofts now being permitted under ECO, this also opens up the opportunity for local authorities to put together bigger ‘packages’ of work that will be attractive to energy suppliers to fund as part of ECO, delivering improvements in local housing stock and reducing fuel poverty, as well as kick-starting district heating projects that may otherwise have struggled to get off the ground.
Many see the changes to Green Deal as tinkering round the edges, and only time will tell if the scheme will see the level of uptake that was originally promised but has so far failed to materialise.
For more information on the Green Deal and ECO, please contact the team.