Government’s impact assessment on its proposed changes to Energy Companies Obligation shows spending will be slashed by £900m, costing 14,000 jobs
The government has admitted that its proposed cuts to one of its flagship retrofit schemes will mean 14,000 less jobs will be created in the energy efficiency sector as spending is slashed by nearly £1bn.
The government announced a series of changes to the Energy Companies Obligation (ECO) in the autumn statement in December as part of a drive to cut levies on energy bills it said were driving up prices.
Under the changes (see box below), the carbon reduction target energy firms are required to meet under the scheme was slashed by 33%, while the timetable was extended by two years to 2017, effectively halving the impact of the scheme, meaning there will be less investment in energy efficiency over the short term.
Last week energy secretary Ed Davey announced a consultation on the changes at the Ecobuild event in London, which he said were aimed at ensuring ECO “delivers in the most cost effective manner possible”.
But a Department of Energy and Climate Change (DECC) an impact assessment on the proposed changes, published alongside the consultation, reveals the cuts will see 14,000 less jobs created in the energy efficiency sector over the next three years.
It predicted that without the cuts the scheme would support up to 50,000 jobs through to 2017, but with the implementation of the proposed changes this would fall to 36,000.
The impact assessment showed 11,000 less jobs would be created in the supply chain; 2,000 less installer jobs would be created; and 1,000 less Green Deal assessor jobs would be created as a result of the changes.
It also showed the scheme, in its current form, would cost £2.75bn between January 2013 and the end of March 2017, but that this would fall to £1.85bn if the cuts are introduced - a decline in spending on energy efficiency measures of £900m.
The impact assessment also showed that the number of hard to treat cavity wall installations between January 2013 and March 2017 would more than halve as a result of the changes and the number of solid wall installations would fall by 11% to 121,000 over the period.
Sustainability consultant David Strong said: “The impact assessment will have been massaged to give the best possible position and it’s still pretty damning.”
He added that the energy companies that have pushed for the changes “have the government on the run”.
Steven Heath, external affairs director at Knauf Insulation, said the cuts were a “step backwards”.
“It’s a clear negative signal to industry that the government commitment is now, in essence, 14,000 jobs less than in December 2013,” he said.
Heath added that the industry jobs were not just “for the sake of it”, but were directly focused on enabling to government to meet its own carbon commitments.
Pedro Guertler, head of research at the Association for the Conservation of Energy, which has campaigned against the cuts, said the fall in jobs was “not good”.
“The changes don’t bode well for investment in energy efficiency, especially not foreign investment,” he said.
Guertler said other countries would now be more attractive investment opportunities for multi-national companies.
Labour’s shadow energy minister Jonathan Reynolds said: “These figures aren’t surprising, but they are extremely disappointing none the less.”
“By giving in to the demands of the big energy companies the government have left consumers out in the cold and put thousands of jobs at risk.”
“We know that changes needed to be made to ECO in order to make sure that the money is well spent and goes to those who need it, but the only people who will benefit from the government’s changes are the big energy companies.”
A DECC spokesperson said: “We are making it simpler and cheaper for people to take control of their energy bills, stay warm and improve their homes.”
Key government ECO proposals
- Provide energy companies who have delivered over 35% of the current Carbon Emissions Reduction Obligation part of the scheme to receive 1.75 times the carbon credits for all work over the 35% threshold.
- Greater level of carry-over credits from previous insulation schemes CERT and CESP.
- To include easy to treat cavity walls, loft insulation and district heating systems to count towards carbon credits under the scheme from 1 April 2014.
- Introduce a minimum requirement of 100,000 solid wall installations that must be completed by 31 March 2017.
- Cut CERO target for March 2015 by 33%.
- Confirm new ECO targets for March 2017 at the same pro-rata rate as those for to March 2015 under the changes.
- To enable firms to fall short of their 2015 CERO target but then deliver 1.1 times that shortfall in the period to the end of March 2017.