Energy Company Obligation Schemes

Amanda Solloway Excerpts

Tuesday 27th June 2023 Westminster Hall

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Amanda Solloway)]

It is a great pleasure to be serve under your chairmanship, Mr Paisley. I congratulate the hon. Member for Ceredigion (Ben Lake) on securing this incredibly important debate and thank all those who have contributed. As you may know, Mr Paisley, this issue is not in my portfolio; however, I am here to represent the Government and to take away any questions that I am unable to answer today.

I welcome all Members’ contributions; they really have been incredibly helpful. I thank everyone, particularly the hon. Member for Ceredigion, for the suggestions they made throughout the debate. One of the things that we really need to apply within all of this activity is common sense, and a lot of the suggestions that I have heard today have been based on common sense.

Although they are not relevant to this debate, I will also talk about the energy costs that really play on my mind as the Minister with responsibility for consumers and affordability. Clearly, there are many schemes that I could go into, although, as I say, they are not relevant. I will just say what many hon. Members have already said, which is that we must encourage all consumers to make sure that they get all of their benefits. I thank the hon. Gentleman for raising that issue; as Members of Parliament, we should always encourage people to do that.

The energy company obligation is the Government’s most successful domestic energy efficiency scheme in Great Britain. It obliges larger energy suppliers to deliver bill savings for households by installing energy efficiency measures. Since it began in 2013, it has delivered 3.6 million measures in more than 2.4 million properties, which means that over 9% of British households have had an ECO measure installed. Low-income and vulnerable households will save over £19 billion on their bills over the lifetime of the measures that have been installed. As the hon. Gentleman may know, over 17% of households in his constituency have received ECO measures over the last decade.

ECO4 was introduced last year and runs until March 2026. It has continued to support low-income and vulnerable households while also increasing the focus on the least energy-efficient properties and on fuel poverty. To be eligible for it, households either have to be in receipt of means-tested benefits, live in social housing or be referred by their local authority or energy supplier. For the first time, part of the overall target has been met by upgrading the equivalent of 150,000 of the worst-performing homes, with those living in homes with energy performance certificate ratings of E, F or G the most likely to be in the deepest fuel poverty. Also for the first time, we set a minimum requirement for energy efficiency improvements, depending on a home’s energy efficiency rating. This means that more of the households receiving help will be brought out of fuel poverty permanently. We estimate that at current energy prices, households benefiting from ECO4 will reduce their annual energy bills by over £600 on average.

Delivery under ECO4 commenced last April, with around 130,000 measures delivered to over 43,000 low-income households. The scheme data shows a gradual increase in delivery, and recent reporting from the supply chain indicates that delivery has continued to increase through May and June.

I am sure that the hon. Member for Ceredigion will be delighted to hear that Ceredigion continues to benefit disproportionately from ECO4; over 1% of all measures installed under ECO4 have been in his constituency. This success is partly due to the explicit incentive within the scheme to treat off-grid rural homes in Wales and Scotland, and it is also thanks to the ECO Flex provision, which allows up to 50% of the overall obligation to be met by treating homes that have been referred by a local authority or a devolved Administration. Ceredigion is one of the leaders in that part of the scheme.

Nevertheless, I assure the House that we are not complacent. We continue to monitor delivery closely, working with local authorities, energy suppliers and devolved Administrations to share best practice about ECO Flex and to remove administrative barriers where possible. Ofgem has recently republished guidance that should make the ECO Flex process easier, and, as has been mentioned, we are considering how the whole scheme can be amended. We recognise that costs have increased since we developed ECO4 and that, as the hon. Gentleman explained, meeting the minimum improvement requirement in certain homes is challenging. We are considering whether changes to the policy are desirable and analysing the potential impact of such changes. For example, we will need to examine the consequences of relaxing the minimum requirement for our fuel poverty targets, given the imperative of proofing homes to band C. Making changes to ECO4 will require a public consultation and amendments to affirmative regulations, so any changes we decide to make will be well informed by external stakeholders.

On the hon. Gentleman’s point about expanding the list of technologies, the primary legislation that enables ECO4 and GBIS limits technologies to those that reduce space heating costs. While we are open to expanding the eligible technologies in the future, that would require a change in primary powers. Beyond ECO4, and in response to persistently high energy prices, we have extended the help available through a new eco energy efficiency scheme: the Great British insulation scheme, which many Members mentioned. Previously consulted on as ECO+, it will boost support for those on the lowest incomes and the most vulnerable, and extend help to a wider pool of households who are also challenged by high energy bills.

ECO4 and the Great British insulation scheme are a major expansion of the Government’s action on energy efficiency. The predecessor ECO3 scheme was worth £640 million annually, and total ECO funding has now reached £1.3 billion per year to March 2026. We estimate that by April 2026, the GB insulation scheme will have delivered about 376,000 measures to about 300,000 households, helping households to cut heating bills by an average of £300 to £400 per year.

These schemes also create continuity for the supply chain. To further facilitate supply chain growth, the Government have increased funding for training schemes, as many Members mentioned. The Department’s £9.2 million home decarbonisation skills training competition, launched in September 2022, has awarded grant funding to 19 training providers in England to deliver subsidised training in the energy efficiency, building retrofit and low-carbon heating sectors. That training will deliver an estimated 9,000 training opportunities to the building retrofit, energy efficiency and heat pump sectors through to summer 2023. That includes accredited training to qualify standard installers and retrofit co-ordinators.

Alongside the energy efficiency upgrades we are making through the Great British insulation scheme and ECO4, the Government are investing £6.6 billion over this Parliament in clean heat and energy efficiency, reducing our reliance on fossil fuel heating. In addition, £6 billion of new Government funding will be made available from 2025 to 2028. We have heard it said that consumers are at the heart of everything we do, and I give my assurance that one of the things we are doing is reaching out to stakeholders. Hon. Members have also mentioned places such as citizens advice bureaux. Clearly it is important that we talk to people about the cost of living but also what we are doing in our ongoing support.

The Government investment I have listed, as well as specific investment in building a market for green finance, means that a range of green financing options are already available from high street lenders to owner-occupiers and private landlords. They include things such as green mortgages and additional borrowing facilities, or cashback offers to homeowners undertaking energy retrofit. Some energy suppliers also offer 0% finance for certain energy efficiency products. Improving the energy efficiency of our homes is the best long-term solution to reducing energy bills and tackling fuel poverty. ECO4 and the GB insulation scheme will support that, while also helping to protect our nation’s energy and support our net zero target.

A comparative assessment of cost assumptions for the ECO4 scheme and those set out in the Great British insulation scheme consultation has also been talked about. We are monitoring ECO4 delivery against the current cost assumptions, and we will consider changes if necessary. Changing the cost assumptions may require a change to the overall energy bill reduction target, to the estimated funding, to policy details of the scheme, or a combination of all three. Such changes will require public consultation and regulatory change.

There are many more areas that I could discuss, but I will end by thanking the hon. Member for Ceredigion again for securing this important debate. I look forward to continuing to engage with him and all ECO stakeholders to ensure that the schemes continue to help fuel-poor households, support jobs and deliver value for consumers.