Will London miss out on funding from the Energy Company Obligation?

There is a real danger that London will not receive its fair share of the forthcoming Energy Company Obligation (ECO). ECO is a Government scheme that will mandate the major energy suppliers to deliver specified carbon and fuel poverty reduction targets from homes, estimated to be worth £1.3 billion a year from 2013.

The obligation placed upon the energy companies does not require them to spend a specific amount of money – the target is prescribed purely in terms of projected cuts to carbon emissions and fuel bills. Therefore, the suppliers are incentivised to fund improvements to the homes that are cheapest to treat (within those eligible for the measures).

Because of the particular characteristics of London and its housing stock, energy efficiency improvements are more likely to be prohibitively expensive. As a representative from a major energy supplier noted at a recent Future of London seminar on delivering the Green Deal and the ECO in London, the necessary supply chain for home refurbishments doesn’t exist on a large scale within the M25.

This means that installers have to spend an inordinate amount storing or transporting their goods to properties in London, driving up their costs considerably. The congestion charge and parking costs also increase costs in comparison to works undertaken outside London.

Furthermore, London contains nearly 600,000 homes within conservation areas, where planning laws are tighter in order to protect the character of historic buildings. A proposed 75%of ECO funding will be directed at properties with solid walls. External Cladding is often the most efficient way of treating solid wall properties – in a conservation area this procedure is likely to require planning consent and far from certain to get it. At the very least this will increase the time and bureaucracy involved in treating London homes, making it more likely that the ECO money will be directed to other regions.

Why is all this important? Well, firstly the challenge of Climate Change hasn’t gone away. The body of evidence relating to the malign effect of our carbon output on the planet continues to rise, almost in proportion to the energy expended by certain UK media outlets in their attempts to refute it. A recent study of global ice coverage which achieved prominence for suggesting that glaciers in the Himalayas were melting more slowly than previous observations, also observed that the Antarctic, Greenland and Alaska had lost up to 629 billion tonnes of ice between 2003-2010, contributing to a 3.5mm annual rise in sea levels.  In January, NASA recorded that 9 of the 10 warmest years globally since 1880 occurred in the past ten years.

The UK’s historic carbon footprint is amongst the largest in the world – and emissions rose last year by 3.1%, largely as a result of increased domestic energy use.

If that clear need for action isn’t enough, the social dimension should also spur on London’s policymakers. Around 13 per cent of the capital’s households live in fuel poverty, meaning they need to spend more than 10 per cent of their income to achieve a sufficiently warm temperature.  Better insulated homes require far less energy use to retain a sufficiently warm room temperature, therefore the eliminating the Hobson’s choice of a cold home or unbearable fuel costs.

The corrosive effects of fuel poverty are spelled out by the 2010 Marmot Review, which noted the improved physical and mental wellbeing of residents living in energy efficient buildings, and the efficiencies that this brought to other areas of the public sector, including reductions in NHS costs, and days of school missed through illness.

Therefore, there is a clear benefit to London from the available ECO funding – and given that the factors shaping delivery costs relate to local government policy areas including planning, parking and support for businesses, there is much for London Boroughs to think about in terms of how they can facilitate ECO access.

Future of London’s current work programme on carbon reduction, supported by EDF Energy, will examine how Boroughs can create ‘ECO and Green Deal friendly’ conditions across their area, and the challenges and opportunities posed by doing so.  For more information on forthcoming briefings and seminars, please visit the project webpage or email luke@futureoflondon.org.uk

Luke Hildyard, FoL