Industry outlines ECO extension blueprint

The capacity of the energy efficiency supply chain could be more than doubled within a year, according to a new report from Energy UK that fleshes out EDF’s proposal to extend the ECO (Energy Companies Obligation) scheme.

In the report, which was published on Wednesday (21 September) ahead of chancellor of the exchequer Kwasi Kwarteng’s expected mini-budget later this week, the industry body outlined how the mooted ECO+ scheme could work.

It said the scheme’s budget must be “ambitious” to help achieve the 1 million annual retrofits that the Climate Change Committee has estimated will be needed by 2030 in order to meet the UK’s decarbonisation targets.

However, the report said the capacity of the existing energy efficiency installation supply chain is “limited”, which means the number of homes upgraded in the scheme’s first year will be “considerably smaller” than the volume that could be improved once it has been up and running for five.

Scaling up the budget to £1 billion per annum, which matches the existing ECO4 scheme’s spending envelope, would offer the supply chain the time it needs to grow and train installers, according to the report.

Installers surveyed by Gemserv on behalf of EDF, Eon, Ovo Energy and Scottish Power, said they could increase their capacity by up to 66% after six months and 120% after one year if a £1 billion scheme was to be brought forward with long-term funding commitments.

It is “essential” that the scheme size ramps up at a pace that allows sufficient time for the supply chain to invest in training and recruitment, as well as to ensure new entrants meet the requirements of the PAS 2035 accreditation framework for installers, the report said.

Eligibility for support via ECO+, which unlike the existing ECO scheme would be government subsidised, should be limited to households living in properties in the lower council tax bands A to D.

The bulk of those benefiting from ECO+ would pay for a share of works carried out via the scheme, but Energy UK recommended that a proportion of the total budget could be ringfenced for low-income households to receive fully subsidised energy efficiency measures.

The report suggested that suppliers participating in the scheme could be required to deliver a certain proportion of total interventions to these low-income households.

Energy UK also proposed that only suppliers, which are participating in the existing ECO4 scheme, should be able to access government funding through ECO+ in order to help manage the supply chain and ensure that both schemes are delivered within budget.

Louise Shooter, policy manager at Energy UK, said: “Improving the energy efficiency of British homes must be part of our long-term plan to tackle the rising cost-of-living, strengthen the UK’s energy security and boost growth and jobs. Over 80% of UK homes are heated with gas, and the UK has some of the draughtiest housing stock in Europe. With energy bills set to rise further from October, substantial savings can be made by improving the fabric of our buildings around the UK.

“We also see this as an opportunity to stimulate market growth, by developing green finance products and unlocking the significant investment that will be needed to decarbonise Britain’s homes.”

The publication of the Energy UK report followed that of a new study by the Institute for Public Policy Research think tank, which said that retrofitting the UK’s housing stock has become a “critical lever in securing economic security” in the “current dire economic context”.

It said that in addition to cutting household energy bills by up to £430 per annum, the government could make an ambitious retrofit programme a “cornerstone” of its levelling up strategy.