Posted by: Nick Duxbury03/05/2012
For all the attention focused on the green deal, it is easy to forget there is already millions of pounds of retrofit funding waiting in the wings. In fact, one particular £350 million pile is burning an increasingly fearful hole in energy companies’ pockets.
Right now energy companies are struggling to offload their community energy saving programme cash before December. If they fail to spend it all on retrofitting 90,000 of the most vulnerable homes then they will face fines that could be as much as 10 per cent of their global turnovers. This is a multi-billion pound hit that the big six desperately want to avoid.
Of course, it is extremely unlikely that fines would ever reach that level because the government knows that there is a reasonable chance that energy companies would end up passing the cost of penalties back to their customers, thus worsening fuel poverty. And this is probably the main reason that climate change Greg Barker has agreed to intervene. As we revealed last week, the minister is hosting meetings between energy giants and council bosses in order to marry their interests and ultimately broker CESP deals and get the cash out the door before December.
The race against the clock means that right now there are some incredible deals out there for landlords that are willing to work quickly.
To quantify this, one landlord told me yesterday that six months ago energy companies were offering to pay landlords £15 a ton for carbon savings. Now ‘you don’t have to shop around’ to get energy companies offering £48 a ton. Energy companies have gone from demanding landlords match fund CESP to the tune of 80 per cent, to now offering 100 per cent funding in the space of six months. You would probably expect me to be excited about the prospect of social housing retrofit schemes that have been gathering dust for the past two years are coming off the shelf. And I am. It’s a great opportunity for the fleet of foot to take advantage of these offers.
But, how can this approach be the right one? At the end of the day it is bill payers – i.e. nearly everyone in the country – who is getting a raw deal as a result of energy companies’ lethargic and somewhat greedy approach to meeting their supplier’s obligation to date. Schemes that get the green light now will be far smaller and less ambitious – not to mention riskier – than they would have been two years ago when energy companies were dragging their heels in an effort to off-load their delivery costs. This bodes especially badly for the newly unveiled £190 million pot of fuel poverty funding that was allocated from the £1.3 billion ECO fund last month. Like CESP, this pot is to work on an area wide basis targeting the poorest 10 per cent of households. Lessons have to be learned and learned well.
I have made a big fuss in the past about landlords having equal access to ECO and not being excluded from any aspect of it, on the basis that social tenants pay for it through their fuel bills. The same logic would suggest that only social tenants have benefited from CESP to date, and some will have got much better deals than others. Energy UK, the body that represents energy companies, says that its members have struggled to meet the ‘ambitious’ targets because it has proven especially difficult to identify the Super Priority group of households that are eligible for CESP. This largely explains why social landlords have received most of the subsidy: they know who is eligible, and can spend it at scale getting energy companies more bang for their buck.
This is understandable to some extent, but it doesn’t help the perception around Whitehall that social landlords gobble up a disproportionate amount of subsidy compared to the private rented sector so don’t need as much ECO in the green deal. Apart from the fact that this doesn’t take into account just how much of their own cash social landlords have already ploughed into these schemes, it sets a very bad precedent for the administration of ECO.
In this week’s news analysis we examine exactly what lessons need to be learned from the shortcomings of CESP to make sure they are not repeated for ECO – making it simpler and easier to access being just two.
However, this piece doesn’t attempt to answer a question that is popping up increasingly at conferences and in the national press: are energy companies going to hit their December targets? The answer is that some certainly will. Others are far from certain. Whispers around the energy sector suggest that two of the big six definitely will. Despite their complaining and lobbying for the ‘unrealistic’ CERT and CESP targets to be relaxed, there is also thought to be behind the scenes pressure from individual companies that are on-track to hit their targets to make sure that their peers are not let off the penalties if they fail to.
Of course, the much bigger and far more concerning question people should be asking is: if you can’t give energy efficiency measures away for free now, how are you going to get people to pay for it through their energy bills with the green deal? Somehow, the plain-Jane, wholly unglamorous prospect of insulation has to be made aspirational and attractive to consumers. Like double glazing – only sexier. Energy companies are more than just failing to give it away; they can’t give it away with free cash too. Some are handing out cheques for £100 to customers that sign up to CESP. This is a move that betrays just how desperate some energy companies and ultimately devalues insulation as a product. And at the moment, it isn’t really working.
From Green paper
Examining the latest developments from the world of sustainable housing.