British Gas: Government CERT targets unrealistic
British Gas has warned the government that energy companies will not meet suppliers’ obligation targets – meaning they could be fined up to 10 per cent of its global turnover by watchdog, Ofgem.
In its response to the consultation on the government’s flagship retrofit scheme, the green deal, the energy giant is recommending the government carries forward millions of pounds of undelivered spending into the first period of the £1.3 billion energy company obligation subsidy funding.
It claims that the Carbon Emissions Reduction Target targets and Community Energy Saving Programme obligations were ‘unrealistic’ and called for a renegotiation.
The company argues that this will mitigate an expected slump in the loft and cavity insulation market when the green deal takes off.
Suppliers have struggled to spend the £2.4 billion CERT and £350million CESP cash levied by energy companies from their customers’ fuel bills to spend on energy efficiency works ahead of the 31 December deadline.
Under the CERT energy companies must pay for loft and cavity wall insulation – 40 per cent of which should go to vulnerable or low income households, many of which are in social housing – and meet a legally binding target of cutting carbon by 293 million lifetime tonnes by December.
British Gas said: ‘We consider that industry CERT extension targets and CESP obligations were set at unrealistic levels and could not, and will not, be met by suppliers by the 31st December 2012 deadline. A managed transition to the green deal and ECO is now a crucial challenge and should include a carry-forward of undelivered CERT and CESP activity into the first ECO period.’
It added that without changes to the deadline for delivering current programmes, there would be a ‘significant and costly investment in the insulation workforce and supply chains, followed by a significant decrease’ as the new scheme starts and demand reduces.
‘The insulation industry capacity is currently around 1.2 million installs a year. Over 2 million installs will need to be delivered in 2012 if the CERT target is to be met in full, capacity which will then be almost completely redundant under current plans. We do not consider that to be either efficient or feasible.’
It also warned that ECO will make up around five per cent of the average domestic dual fuel energy bill – ‘around the level of the price decreases companies like British Gas have recently delivered for electricity customers’ – and that the same carbon savings could be delivered with a smaller ECO.
Despite this, the company called for a greater proportion of the ECO cash to be spent on fuel poverty, and opposed having 50 per cent distributed through a brokerage system.
Figures published by the Department of Energy and Climate Change in September last year showed that energy companies were in danger of missing their CERT target.
Energy secretary Chris Huhne warned at the time that the rate at which projects are being completed needed to increase to 200,000 a month if the big six were to meet their targets.
To meet the target of allocating 15 per cent of CERT funding to the fuel poor energy companies were told they needed to increase the rate of installation from 5,000 to 18,000 a month.