Yet another surcharge on your energy bill

The Green Deal has begun.  It is a self-funding initiative to encourage householders and business owners to fit energy efficiency measures and reduce bills.  The Deal’s “Golden Rule” is that the cost of any measures should always be less than the monetary savings they bring.  The scheme has had a tenuous start – allegedly the first 3 months of the scheme saw only 5 applications nationally.

Many households simply cannot afford the capital outlay necessary for improvements.  In addition, certain houses (mainly older solid-wall properties) would benefit greatly from insulation but these “hard to treat” buildings are expensive to insulate.  By failing the “Golden Rule” they become wholly or partially ineligible for the Green Deal.  A subsidy scheme called the Energy Companies Obligation Order (ECO) has been created to assist these sectors.

Phase 1 of ECO began on 5 December 2012.  It places a legal obligation on major energy companies to subsidise the installation of insulation/economy measures for certain low income or vulnerable households.  ECO has three main strands:

a)      60% will be spent on the Carbon Emissions Reduction Obligation, intended for remedies that fail the Green Deal “Golden Rule” such as solid wall insulation or hard-to-treat cavity wall insulation.

b)      15% will be spent on the Carbon Saving Community Obligation, to subsidise insulation measures for domestic energy users in low income areas.  Measures include wall/loft insulation, double glazing and boiler replacement.

c)       25% will be spent on the Home Heating Cost Reduction Obligation, to assist low income and vulnerable households to economically heat their homes (mainly social housing sector).  Any measure is potentially eligible provided it cuts heating bills.

ECO will add an estimated £1.3 bln per year to consumer’s energy bills.  Eligibility is complex and depends on location, individual financial circumstances and an EPC survey.  Information on how to apply can be found here.

Yet another surcharge on your energy bill