Out in the cold

This week the Energy Bill received royal assent. That is an important milestone; the green deal has taken another important step towards becoming a reality in a year’s time. What still needs to be done is considerable and for a different blog post.

However, the significance of this is that on 27th of this month, assuming there are no delays, the Department of Energy and Climate Change will release a consultation document outlining more detail on the green deal and also on the structure of the Energy Company Obligation, more commonly known as ECO.

This is effectively a levy on all our fuel bills that is collected by energy companies and used to tackle fuel poverty and improve energy efficiency. Right now it is still being designed by DECC and will replace existing suppliers obligations such as carbon emissions reduction target – CERT - and community energy saving programme – CESP.

ECO is a deal breaker for the social housing sector – especially as far as the green deal goes. Without considerable ECO funding, landlords will simply not be able to meet the ‘golden rule’ which the green deal is based on in which savings on energy bills must exceed the costs of the works. Research from Affinity Sutton’s FutureFit programme and BioRegional’s Pay As You Save pilot show that social landlords need more, rather than less, ECO if they are to make the green deal work because social homes are already more energy efficient than the private sector thanks to the decent homes programme and CESP and CERT works. As many in the sector would say, the so-called ‘low hanging fruit’ has already been picked – so the savings needed to meet the golden rule in social housing is harder to achieve.

Inside Housing has revealed not only what ECO is set to look like, but also that social landlords are set to be excluded from some of it.

The government is planning to split ECO into two pots; one for hard to treat homes, and another to tackle fuel poverty. The government is planning not to allow social landlords to access this latter pot, which is to be called ‘affordable warmth’ – despite there being 17 per cent of the 4 million fuel poor in England living in social housing.

So how bad is this news? Until we know how big ECO will be and what the split between the two pots is likely to be, it is going to be very difficult to quantify the impact on landlords.

WWF reckons that ECO needs to be between £3 billion and £5 billion to make the green deal work – but also fear the eventual sum is likely to be between £1 billion and £2 billion. In terms of the split, sources suggest that the affordable warmth element of ECO will be much smaller than the hard-to-treat element, so perhaps, from a green deal perspective, being excluded from this pot won’t hinder landlords too badly.

That said, from a fuel poverty perspective, this must be a huge blow. For many social landlords, their main motivation for undertaking energy efficiency measures is to reduce fuel poverty. Given it is a major part of their social purpose, it could be considered quite short sighted to exclude them from funding on the basis they have already done good work. While it is easy to understand the government’s thinking that they can get more bang for their buck by tackling the private sector, it is also worth looking behind the fuel poverty figures. Just because social tenants homes are generally have better average SAP ratings than those in the private sector, doesn’t mean they necessarily require less help. Social homes, contain some of the most vulnerable people on low incomes – many of whom are elderly, unemployed or requiring care. This means they also spend much more time in their homes than in other sectors.

A household is considered fuel poor if it spend more than 10 per cent of its household income on fuel bills. Within this, there are various measurements that can be used. The current method is modelled on consumption in specific property types. While there are strengths to this approach, there are also drawbacks insofar as it ignores a lot of the human variables – some of which would find social tenants are much more heavily impacted by fuel poverty than the current statistics might suggest. Groups like the National Housing Federation are interrogating the government’s figures and methodology as well as lobbying for equal access to ECO on the basis that all groups pay for it – so it is unfair if they don’t see the benefits.

Adding weight to this concern, on Wednesday Professor John Hills announced the interim findings of his independent review on fuel poverty and in it, warned that if ECO is not distributed fairly, it could exacerbate fuel poverty for the lowest income homes. Echoing the concerns of the NHF, he said lower income households needed higher levels of ECO funding and pointed out that for low income families, the green deal would not provide any short term relief from fuel poverty.

Professor Hills also said more needed to be done to tackle fuel poverty and suggested other means of measuring it: ‘The way we have measured fuel poverty painted a false picture about how well we were addressing it,’ he said - adding ‘things are hardly on track for the problem to be eradicated in just a few years’.

He also delivered a stark warning about what is at stake here. His report, which was commissioned by DECC, found that 2,700 people die every year in England and Wales as a result of fuel poverty – more than in road accidents. Time then, for the sector to buckle up, because as energy bills continue to soar along with inflation at the same time as unemployment rises, without full and fair access to ECO, many of these victims will undoubtedly be social tenants.