Concerns over a possible cut to Government funding of energy efficiency support have, for now, been averted following the September mini-budget – the first in Kwasi Kwarteng’s new role as Chancellor.
Hidden away in the “Growth Plan 2022” was an announcement to step up energy efficiency support through an expansion of the current Energy Company Obligation (ECO) scheme to the tune of an additional £1bn spread over the next three years from April 2023 and designed to benefit the most vulnerable by way of improvements to the least energy efficient homes in lower council tax bands.
In addition the Government announced that it will “imminently open applications for up to £2.1 billion over the next two years to support local authorities, housing associations, schools and hospitals invest in energy efficiency and renewable heating.”
Good news on the face of it!
INCA lobbying partners over at the Energy Efficiency Infrastructure Group were quick to provide clarity on the budget statement as follows:
The new obligation will be made up of two parts. At least half the expansion will maintain the current focus on low-income households, with increased focus on referral routes to reduce search costs, while relaxing requirements to allow installations of low-cost single measures (e.g. loft and cavity wall insulation and heating controls). This will remain fully funded for households. The second part will broaden support, and will look to provide up to around £1500 discount on energy efficiency improvements for the least efficient homes in lower council tax bands. As with previous schemes, the government will work with the Scottish Government on arrangements in Scotland.
The expansion of the scheme is expected to cost around £1bn over three years, and will be additional to current funding. We have tried hard to balance the political ambition to support households to improve their energy efficiency and lower bills as soon as possible, with the need to consider supply chain capacity and consumer uptake.
The new obligation will be funded in the same way as the current ECO, with Ofgem determining the appropriate allowance in the price cap for suppliers to recover their costs. However, the Government will maintain the same fixed unit price of energy under the Energy Price Guarantee, meaning any increase over the next two years will be funded through this scheme – alongside other ‘green levies’. The future of policy costs from 2024 (when the EPG Is currently due to end) needs to be considered in the round, including full consideration of the impact of consumers. However, by setting a 3 year obligation, we wanted to give certainty to the sector now to scale up and deliver over the three years.
BEIS will be publishing a consultation setting out further details, in the coming months, led by Olivia Haslam’s team. As with previous schemes BEIS will look to fully engage ahead of publishing the consultation (INCA will, of course, fully support this policy development and help where applicable, in the objective to rapidly to deliver the scheme by April).
In addition to this, the existing funding for energy efficiency will continue, with the next £2.1bn round (including social housing, HUG and PSDS) due to open in early October.
Whilst INCA obviously welcome the news we will collectively (alongside our partners from across the wider energy efficiency industry) continue our efforts to widen the financial support in respect of energy efficiency home improvement measures with a particular emphasis on the ECO+ initiative that will open up support to the vast “able to pay” market.
The full details of the Growth Plan 2022 and all supporting documentation can be found on the Government website: https://www.gov.uk/government/topical-events/the-growth-plan