ECO scheme to increase by 56%

The Energy Company Obligation (ECO) scheme will increase in value to £1 billion a year from 2022, the government’s latest fuel poverty strategy for England has revealed.

The Sustainable warmth: protecting vulnerable households in England report published by the Department for Business, Energy and Industrial Strategy (BEIS) focusses heavily on aligning tackling fuel poverty and the need to decarbonise.

The report outlines plans for the Energy Company Obligation (ECO) scheme to grow from £640 million to £1 billion per year for its next stage. ECO is an obligation on larger energy suppliers to provide energy efficiency and heating measures for fuel poor households across Great Britain. Since the programme began in 2013, 2.8 million measures have been installed in more than 2.1 million homes

The next iteration of the scheme, which will run from 2022 to 2026, will be designed to align with other domestic energy efficiency policies in social housing and the private rented sector.

New metrics

Another key element is the updated metric for measuring fuel poverty, Low Income Low Energy Efficiency (LILEE), which finds a household to be fuel poor if it:

• Has a residual income below the poverty line (after accounting for required fuel costs) and
• Lives in a home that has an energy efficiency rating below Band C

This is a departure from the current relative Low Income High Costs (LIHC) measure which BEIS says will simplify how fuel poverty is measured, making it easier for local organisations to identify households in fuel poverty and easier for the public to track progress towards the statutory fuel poverty target.

The vast majority of households that are fuel poor under the LIHC measure are also considered fuel poor under LILEE (88 per cent, or 2.1 million households). Approximately 300,000 households living in Band C properties will no longer be considered fuel poor under the LILEE measure; however, this update will not affect eligibility for current policies.

The statutory target to ensure that as many fuel poor homes as is reasonably practicable achieve a minimum energy efficiency rating of Band C by 2030 will remain, as will the interim milestone of as many fuel poor homes as is reasonably practicable to Band D by 2025.

Progress meanwhile has been made towards the 2020 milestone of getting as many as is practicable to Band E. According to the latest statistics, by 2018 92.6 per cent of fuel poor households were living in a property with a fuel poverty energy efficiency rating of Band E or above. This means that around 180,000 fuel poor homes remained rated F or G in 2018.

Funding

Elsewhere the government reiterates its commitments to invest a further £60 million to retrofit social housing and £150 million invested in the Home Upgrade Grant, contributing to its manifesto commitment of £2.5 billion to the grant during the current parliament.

It also reiterates plans to invest in energy efficiency of households through the £2 billion Green Homes Grant, including up to £10,000 per low-income household, extend the warm home discount to 2026 and drive more than £10 billion of investment in energy efficiency through regulatory obligations in the private rented sector.

When asked recently whether any of the hundreds of millions of pounds that is yet to be spent in this year’s tranche of the programme will be rolled over to the next financial year, energy minister Anne-Marie Trevelyan said the original funding for the scheme was announced as a “short-term stimulus, for use in the 2020/21 financial year only”.

Principles

Guiding the government’s decisions are a set of four principles; worst first (where the poorest performing homes are prioritised for upgrades), cost effectiveness, vulnerability and sustainability.

The sustainability principle underlines the government’s commitment to aligning its fuel poverty strategy with net zero.

“We want the next generation of fuel poverty policies to focus on upgrading homes with energy efficiency and to ramp up the deployment of low carbon heating solutions throughout the 2020s. We do not see a role for new, first time fossil fuel central heating, as a long-term sustainable solution for tackling fuel poverty”, the report says.

Adam Scorer, chief executive of the fuel poverty charity National Energy Action, said the report was “overdue” but still “very welcome”.

Scorer said progress to meet the statutory target and the near-term milestones has been “flatlining” and that the sector needed “vital clarity” about how the government intends to meet its legal targets.

He added: “This strategy helps and will support a range of public and private organisations to plan effectively and collaborate to help end fuel poverty. Critically, the strategy confirms that government is committed to the scale of resources we need to start to meet the challenge of ending fuel poverty.

“The opportunities and challenges that have emerged around the Green Homes Grant programme show just how much we need a long-term strategic approach to delivering affordable, warm homes.

“To make urgent progress we also need affordable, warm homes to become a real public health priority, greater price protection for low-income energy consumers, continuation of the universal credit uplift and urgent provision to help households move out of problem debt.

“The strategy also shows how action for affordable, warm homes can be fixed into the net zero challenge. In particular, Home Upgrade Grants could be hugely important for households in off-grid communities who tend to fall through every gap in provision and may now have low carbon solutions available to them.”

Matthew Cole, chair of the Fuel Bank Foundation, said: “In the midst of the pandemic it’s more important than ever to have this strategy to provide detail and confirmation of some of the steps we must take to lift households from fuel poverty.

“To achieve our net zero ambitions we need everybody across the country to be engaged. But it is so hard to engage in the future if you are in a cold home today. Having confirmation of some of the support mechanisms  that will exist over coming years allows others to plan and to plot the role they can play in tackling this critical issue.”