My Lords, one of my department’s key priorities is reducing carbon emissions from energy-inefficient homes and reducing the number of households in fuel poverty. The Green Deal programme and the energy company obligation are designed to meet these joint objectives and give consumers access to a range of funding streams for energy-saving improvements in their homes.
The Green Deal is an innovative financing mechanism that enables consumers to pay for the cost of energy efficiency improvements over time through savings in their energy bill. Since the Green Deal legislative framework came into force in October, we have seen more than 270 separate installer organisations register to deliver Green Deal measures and more than 140 expressions of interest from potential Green Deal providers, with 13 already authorised.
The energy company obligation, which is worth an estimated £1.3 billion per year, will work with the Green Deal and require energy suppliers to support those living in harder-to-treat properties and assist low income households, helping them to heat and
insulate their homes. We estimate that the ECO subsidy will support the installation of more than 1 million insulation measures by March 2015, which will drive the uptake and development of solid wall insulation technologies. We have ensured that at least 40% of ECO support will be targeted at low-income households, and that support is worth around £540 million per year. It will assist around 230,000 low-income households each year and will make a huge difference to the lives of those who need it most.
I am grateful to the Committee for allowing us to debate these statutory instruments together. I will briefly describe the purpose of each of them. First, the Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) (Amendment) Regulations 2012 essentially relates to the energy performance of buildings regulations, which cover energy performance certificates, and are already a common feature of the property landscape. It is important that the Government amend the regulations relating to EPCs by 28 January 2013, which is when the Green Deal plans can begin to be made, to ensure that the EPC framework can be used to disclose the key terms of the Green Deal plan to subsequent bill payers when, for example, a property is sold or let out. This will be an essential element of our approach to consumer protection under the Green Deal.
Our initial legal view was that Regulation 42 of the Green Deal regulations did not need to be in force before we amended the EPC regulations. However, this is highly complex legal territory and, having given further consideration to the issue and in order to avoid any doubt, we have concluded that the amendment that we are considering today should be brought into force before 28 January 2013. In fact, it will come into force on the day after it is signed by the Secretary of State, following its approval by Parliament. This means that we can create a clear window of time within which the separate changes to the EPC regulations can be made. As the amendment that has been made is simply a change of date, I propose not to take up much of the Committee’s time on this instrument in these remarks.
The draft Electricity and Gas (Energy Companies Obligation) Order 2012, known as ECO, places three obligations on energy suppliers that have more than 250,000 domestic electricity and/or gas customers and have supplied more than the specified level of energy in a relevant period. The obligations are a carbon saving obligation, a carbon saving community obligation and a home-heating, cost-reduction obligation.
The ECO order was successfully debated in this House before the Summer Recess. It is brought back now for consideration in light of the technical amendments that we have identified as essential to its effective operation. These technical amendments centre on an “in-use factor”, which is used to reduce the amount of energy that a particular energy efficiency measure is calculated to save, compared to its theoretical assessment. The inclusion of an in-use factor will reflect that measure’s likely actual performance when in situ in a property. The previous ECO order did not incorporate the provisions necessary to ensure that in-use factors were applied, which created a degree of uncertainty for obligated parties. I apologise to the Committee
that we did not identify this technical inconsistency earlier. However, as soon as we did we took the necessary steps to correct the position. My department immediately launched a short consultation to address the anomaly and provide greater clarity.
The overwhelming majority of respondents—about 80%—agreed with the three proposed amendments on which we consulted. The following revisions have therefore been made to the draft ECO order that we are considering today. In-use factors have been included for the scoring measures installed under the carbon emissions reduction obligation and the carbon-saving community obligation, and a schedule of fixed in-use factors for specific measures has been added. The draft order now provides for ECO-eligible measures installed from 1 October 2012 to count towards a supplier’s eventual ECO obligation.
We have made a number of other small amendments to the ECO order. These are not changes of policy but will provide greater clarity for energy suppliers and Ofgem in administering the scheme, to ensure that ECO delivers the policy objectives that were set out in the Government’s consultation response and impact assessment. The changes make explicit that ECO affordable warmth assistance should be targeted at individuals living in private-tenure properties and will provide clarity on the treatment of excess actions carried forward from the current CERT and CESP schemes. They also make it clear that the supplier can be credited for both space-heating savings and hot-water savings in a case where a measure delivers both—for example, a boiler or central heating system.
The regulations will help to improve the energy efficiency of homes across Great Britain, reduce our carbon emissions and, crucially, help households to manage their energy bills. I commend the regulations and order to the Committee.