Start Here
Your Information is Safe and Secure Privacy Policy

Energy Company Obligation

Why Introduce yet another Energy Efficiency Initiative?

The introduction of the government's Green Deal initiative was intended to provide funding for the upgrading of the UK's most compromised housing stock at no upfront costs to the householder. The Golden Rule attached to the Green Deal was that the expenses connected to the energy saving improvements must not exceed the potential savings on fuel bills which the householder could expect to make. The introduction of the Energy Company Obligation (ECO) is intended to be used to meet the needs of those unable to meet the Golden Rule criteria and for individuals in low income households who require additional funding to implement their energy saving measures. The ECO initiative will also be available in conjunction with the Winter Fuel Payment and the Severe Weather Allowance to assist those households assessed as being in fuel poverty to heat their homes to an adequate level. A recent report featured in Hills Review stated that "...the targeting of energy efficiency policies are the key to effectively tackling fuel poverty".

Through these new ECO implementations, the government intends that by 2015, 270,000 vulnerable, low income households are to receive an annual amount of £350 million for the provision of insulation and heating costs in their homes. An additional £190 million will be allocated to social housing and property in economically deprived areas for energy saving measures such as cavity wall and loft insulation.

Will the ECO Initiative help the most Disadvantaged?

Chris Goodall is a well known author who has a particular interest in green issues and the global environmental challenges facing the world's governments. Writing for The Guardian Environment Network's 'Carbon Commentary' in January of 2012, he voice his profound concerns about the true value of the governments new ECO scheme. He stated that the £1.3billion funding which was announced by the DECC (Department for the Environment and Climate Change) would not achieve parity with those measures already in place for the provision of energy saving measures for low income households. The current CERT (Carbon Emissions Reduction Target) initiative already obliges energy companies to provide £2.4 billion for such home improvements, with 40% being allocated to the most vulnerable and economically challenged. Allowing for the inevitable rising costs, the proposed ECO initiative will deliver less than half of that amount. The government also supports funding under the Warm Front scheme, which has a £100 million budget to install home insulation for the UK's most needy householders. This scheme will end at the close of 2012.

Mr Goodall continued by quoting statistics which showed that 5 million UK homeowners have to spend in excess of 10% of their income on energy bills. This would qualify them for being officially classified as living in fuel poverty. With the ECO funding supporting the equivalent of £75 annually per 'fuel poor' household, an estimated 450,000 homes will be removed from fuel poverty status by 2022. This figure will amount to less than 10% of those households living in need. Mr Goodall concluded that the coalition government's assertion that the aim of the ECO scheme is to lift the most disadvantaged and vulnerable out of fuel poverty is hardly proved by their own statistics.

Has the Government got the Energy Company Obligation Right?

The leading independent consulting company, Encraft have a specialist interest in the Microgeneration industry and, in November 2011, wrote a statement on their blog detailing their thoughts on the proposed ECO and Green Deal schemes. They expressed the opinion that, in order for the government to stimulate real interest in these initiatives, they should make the provision of service implementation accessible to all sizes of businesses. Currently, the entire £1.3 billion annual funding is under the exclusive control of the six leading utility companies. By putting the initiative as much under customer control as feasibly possible, the scheme will gain motivation as it becomes market driven by a certain amount of self interest and a determination to get a good deal. Encraft cited the success of both the FIT (Feed-in Tariff) scheme and the RHI (Renewable Heat Incentive) which allowed the consumer to select the option which worked most effectively for them and then assume responsibility for their decision.

The somewhat controversial view expressed by Encraft is that because the government regards the ECO and Green Deal initiatives as, in some way, 'charitable' or 'funding good works', they will encourage those householders targeted by the schemes to view themselves as recipients of benefits or handouts. This perception will therefore lead to the most in need waiting to be given funding and support, rather than proactively seeking a solution for themselves.

The vision of Encraft for the future of the ECO scheme is that a change of emphasis could open up the marketplace to many SMEs (small and medium enterprises) all competing to sell their range of innovative Microgeneration solutions to a small army of informed, enthusiastic and empowered householders.