Following last month’s budget, the headlines have been dominated by tax and spending measures. Those outside the industry may have missed the news that the mechanism funding the UK’s largest fuel poverty support scheme has been scrapped. This signals a big change for the retrofit industry across the UK – and an opportunity for the upcoming Warm Homes Plan to set out a transformative vision for the future of energy efficiency schemes.
Since its introduction in 2013, the Energy Company Obligation (ECO) spent over £13bn and upgraded almost 2.6 million homes. The scheme was funded directly by consumers through energy bills, adding roughly £60 a year to the average household bill.
The case for reform of ECO was difficult to ignore – a recent National Audit Office report highlighted systemic failures in its design, which led to widespread failure of solid wall insulation measures, leaving many households exposed to damp and mould. Add this to the long-standing concerns about administration costs, eligibility and quality assurance and these problems made it an easy target for a Chancellor keen to reduce people’s energy bills.
The announcement came alongside an extra £1.5 billion in funding for the Warm Homes Plan, taking the total spending commitment across the parliament to £14.7 billion. While a welcome boost, this is significantly less than ECO would have been expected to spend over the same period, and so far, no details have been shared on how it will be spent.
While the demise of the ECO levy has the potential to disrupt supply chains through the reduction in funding and uncertainty over its replacement, it also creates a moment of opportunity. The government should seize this and bring forward a transformative new vision for retrofit programmes, putting people at their heart.
Last month, we published a report setting out a vision for the next phase of energy efficiency programmes, setting out three key principles:
Retrofitting houses is intrinsically rooted in place. From the buildings themselves to the workforce required to do the work, the dynamics can be different between areas. Therefore, national retrofit policy should be delivered through place-based partnerships, with local areas given flexibility to decide the form of strategic relationships most suitable for them.
To enable this, the government should establish a stable, 10-year programme and provide local government with funding to build partnerships. This will allow them to direct investment aligned with local priorities and strategies, such as Local Area Energy Plans, and maximise the benefits for local economic growth.
Residents need to be at the heart of any programme delivering change to people’s homes. Improving consumer trust and quality assurance should be the top priority. Households should have a single point of contact throughout the upgrade journey, independent of the installer.
This should be supported by truly independent quality assurance and performance assessment of the measures installed. As we advocated in our 2023 report on reform of Energy Performance Certificates, this should be supported by digital building logbooks (or passports) which record the improvements made and enable secure data sharing between residents and installers.
Improving the energy performance of homes can bring wide ranging benefits that reach far beyond the energy system, particularly for health and wellbeing. The scheme should be designed to maximise these benefits.
To do this, it should adopt a flexible framework to deliver the combination of retrofit measures most appropriate to the needs of the property and the household. The Warm Homes Plan should fund research exploring how retrofit can achieve the best outcomes for low income and vulnerable households, for example exploring the impact of low-carbon technologies on customers who have pre-payment meters.
The scheme should prioritise the low income and vulnerable households most at risk of acute health problems from living in a cold home. Energy Systems Catapult’s Warm Home Prescription service has trialled ways of working with the NHS to identify people with relevant health conditions and help them achieve a warm home. This approach could be scaled as a delivery mechanism for the Warm Homes Plan.
The Warm Homes Plan was a key part of the Labour Party’s manifesto and, after several delays, is expected to be published later this month. An updated Fuel Poverty Strategy is expected at a similar time. Together, these present an opportunity to set out a new way of approaching the challenges of energy access and home decarbonisation.
The Catapult will continue to work with DESNZ and others in the industry to shape the next phase of energy efficiency schemes and ensure that they deliver the best possible outcomes for households. If you would like to discuss collaborating on future work, contact: fairfutures@es.catapult.org.uk
Find out more about how Energy Systems Catapult can help you and your teams
Find out more about how Energy Systems Catapult can help you and your teams