Why the government's ECO scheme needs to be customer-centric, flexible and fair

Keith Armstrong is SSE’s Director and Energy Services so we asked him to discuss how he sees the future of the Energy Company Obligation (ECO)

In August, we submitted our response to the Government consultation on the next phase of the Energy Company Obligation (ECO) which is due to run for one year from April 2017. Under ECO, we help the insulation industry with funding towards energy efficiency measures in consumers’ homes, to help them save money, live more comfortably and to reduce carbon emissions.  In exchange, installers provide us with evidence of the carbon savings and bill savings which are then claimed against the ECO scheme.

At SSE, we are fully committed to playing an active role in delivering the UK’s fuel poverty and energy efficiency objectives and we will continue to work hard to deliver measures which work in the best interests of customers, as we have done under previous schemes.
We recognise the importance of juggling several policy aims in designing the new ECO scheme; namely achieving the fuel poverty strategy, meeting the Conservative manifesto pledge to insulate one million homes by 2020, putting the energy efficiency supply chain on a more stable footing and ensuring customer bills remain affordable. With the changes proposed to ECO, we hope to see these objectives being achieved.

We strongly believe an energy-efficiency scheme should be customer-centric, cost effective, simple to administer and fair. It should also be focused on helping those most in need. While we understand that Government has committed to continue to fund this policy through energy bills, we still believe such a social policy should be funded progressively, through means-tested taxation, so as those most able to pay bear more of the costs and those on a lower income are protected. While the proposals stop short of this, we were pleased to see Government’s commitment to making sure ECO better targets those living in fuel poverty. We’ve long argued that ECO support should be targeted towards those in greatest need and it’s good to see Government working to achieve this.  The challenge is in balancing greater targeting with the need for the scheme to be cost-effective, so the key will be to make sure that, through greater data sharing, partnerships and flexibility, finding eligible households won’t drive up costs. Alongside the general concerns expressed in the industry about finding enough eligible  homes under the new rules, experience from earlier schemes has also shown us that delivery to those most in need becomes more effective alongside a less targeted programme.

We can see Government are looking to transition into a longer term fuel-poverty-focused supplier obligation. With the volume of changes proposed, ECO in 2017/18 will take some key steps towards achieving this. One of the things we’ve suggested to help implement the changes effectively is a transition period for solid wall insulation schemes, which can take longer to install than other measure types due to the nature of the work, and eligibility criteria. This will help to ensure there are no ‘winners and losers’ and those households where measure installations are in flight at the end of March 2017 can still reap the full benefits of ECO.  We were pleased to see proposals looking to simplify the administration of the scheme, such as deemed scoring and relaxation to reporting deadlines, as we believe this will ease delivery. We’d be happy to see regional deemed scores introduced, so the claimed savings for measures more accurately reflect the benefit achieved in different locations. The Government, through the Bonfield review, also has the opportunity to link the new policy to stronger consumer protection and industry standards through accreditation bodies.

We look forward to seeing Government’s response to this consultation, so we can start to put our plans in place to deliver a reformed ECO in the most cost-effective way possible. Having early clarity about any policy changes will help ease delivery, so that energy efficiency measures can continue to be delivered to consumers, to help them cut bills, reduce carbon emissions and live in a more comfortable home.

We will engage closely with Government in the coming year, so we can deliver a successful energy efficiency scheme to the households who need it most, and feed into the design of any future obligation.