The Government decided to go ahead with doubling the Energy Company Obligation (ECO), the supplier-funded energy efficiency scheme, according to analysis published by the Energy and Climate Intelligence Unit (ECIU) on 5 October 20221. The doubling was a proposal developed by the energy industry1. The ECIU, an independent research body, published the detail as part of its assessment of heating costs under the Energy Price Guarantee and the October 2022 price cap1.
The ECIU found that the cost of gas for homes rated band F on the Energy Performance Certificate (EPC) scale will be on average £1,000 a year more than homes at the Government's target of EPC band C1. Of that gap, these households pay over £550 on their bills and the Government around £450 through the price freeze1. Taking gas and electricity together, the worst rated homes cost around £1,750 more than band C homes: £950 on household bills and £800 from the Government1.
Total energy costs for band F homes are set to be almost £5,500 over the next 12 months, four times the level in summer 2021 before the gas crisis1. These households, which the ECIU says tend to be on lower incomes, face bills of £3,000, above the £2,500 for typical households under the price freeze, and Government support for them will cost over £2,400 a year, £800 more than if they had been upgraded to band C1. Average band D homes face bills of £370 more than if upgraded to band C, with the Government paying £310 more, a total extra cost of £680 for the year1.
The ECIU's figures for annual dual fuel costs and the gap against band C are set out below1.
| EPC band | Dual fuel cost (£/yr) | Extra cost vs band C from Oct 2022 (£/yr) |
|---|---|---|
| C | 3,726 | - |
| D | 4,407 | 680 |
| E | 4,976 | 1,249 |
| F | 5,492 | 1,765 |
Simon Cran-McGreehin, Head of Analysis at ECIU, said:
"With the Energy Price Guarantee set to last for at least two years, unless these homes get some badly needed insulation in the next few months, both bill payers and taxpayers will be on the hook for a lot of expensive, wasted gas."
The ECIU also said the Government's increase to the ECO scheme came a full 12 months into the crisis, and that had support for insulation been maintained after 2012, 10 million homes could have been upgraded by now, cutting their gas use by 15 to 20 per cent and overall gas demand from homes by 10 per cent1. It said previous analysis showed schemes such as ECO contributed to savings of £1.2bn per year under prices in summer 20221. A survey by Gemserv found 80 per cent of installers said they had capacity to take on 25 to 50 per cent more work, and 96 per cent expected job creation from an enlarged ECO Plus scheme1.
Why it matters for households
The gap between a band F home and a band C home is not only a bill difference. Under the price freeze, the household pays part of it and the taxpayer pays the rest, so the cost of a poorly insulated home is split between the occupant and public spending1. For a household, the practical link between the fabric of the home and its running cost is direct: the ECIU's figures show band F homes facing £3,000 bills against £2,500 for typical households1. The Energy Company Obligation is the main route by which supplier funding reaches insulation and heating measures in homes, and its doubling changes how much work the scheme can support. The current scheme rules sit under ECO4, and the wider landscape of grants and schemes determines which measures a home can access. Because ECO is funded through energy suppliers and delivered by installers, households dealing with installers may encounter energy grant scams, and the TrustMark scheme is the Government-endorsed quality route for retrofit work. Policy of this kind is made by the department now known as DESNZ, and the process by which such proposals are consulted on and decided is set out in energy consultations.
What happens next
The ECIU states that the Energy Price Guarantee is set to last for at least two years1. No further dated steps for the doubling of the ECO scheme are given in the material published on 5 October 20221.