Government admits proposed changes to Energy Companies Obligation will slash energy efficiency spending by £900m and create 14,000 fewer jobs
The government has admitted that its proposed cuts to one of its flagship retrofit schemes will mean 14,000 fewer 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, which ministers said were driving up prices.
Under the changes, the carbon reduction target energy firms are required to meet through the scheme was slashed by 33%, while the timetable was extended by two years to 2017, effectively halving the impact of the scheme and meaning there will be less investment in energy efficiency in 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) impact assessment on the proposed changes, published alongside the consultation, reveals the cuts will lead to 14,000 fewer jobs being 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 proposed changes this would fall to 36,000.
The impact assessment showed 11,000 fewer jobs would be created in the supply chain; 2,000 fewer installer jobs would be created; and 1,000 fewer 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 drop in spending on energy efficiency measures of £900m.
The impact assessment also showed 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 - both external and internal – would fall by 11% to 121,000 over the period (see graph).
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,” he said.
Heath added that the industry jobs were not just “for the sake of it”, but were directly focused on enabling the government to meet its own carbon reduction 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 multinational 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 changes to ECO in consultation
- Extend ECO by two years to 2017 - effectively halving the scheme’s impact
- Cut current Carbon Emissions Reduction Obligation (CERO) target for March 2015 by 33%
- Introduce a minimum requirement of 100,000 solid wall installations that must be completed by 31 March 2017
- Allow easy-to-treat cavity walls, loft insulation and district heating systems to count towards carbon credits under the scheme
- Greater level of carry-over credits from previous schemes CERT and CESP
- New ECO targets for March 2017 to be set at the same pro-rata rate as those for to March 2015