Saturday, 16 November 2013

Energy firms receive £1bn for green measures before they are carried out: the Energy Company Obligation

There have been misgivings about the government's intention to encourage businesses and households to reduce their carbon footprint.
And the figure £1bn keeps appearing:

Starting in April 2012, the Treasury plans to collect money from all businesses forced to enter its Carbon Reduction Commitment (CRC) scheme. Stephen Robertson, director-general of the British Retail Consortium, said: "We are surprised and dismayed that the £1bn per year participating businesses will put in to the Carbon Reduction Commitment scheme is no longer to be recycled to participants but is instead to be pocketed by the Exchequer."
Fury over £1bn green stealth tax in spending review - Telegraph 
CRC Energy Efficiency Scheme - Wikipedia, the free encyclopedia
Carbon reduction commitment | Guardian Sustainable Business | The Guardian

A green tax on carbon emissions could add £1 billion to the bills of domestic energy customers while making no difference to total greenhouse gas output, a report has claimed. The Institute of Public Policy Research study revealed that the government's carbon floor price initiative, which will charge companies £16 per tonne of carbon emitted from 2013, will only add to household expenditure.
energyhelpline.com - Green tax 'adds £1bn to bills'
If he wants to cut green taxes, Cameron should axe the flawed Carbon Price Floor - Telegraph
Is the carbon price floor going to push 60,000 households into fuel poverty? | Carbon Brief

The Telegraph reported yesterday on the latest twist in the debate on what to do with 'green energy taxes':

Cutting green energy levies may raise fuel bills, say MPs

The Prime Minister's drive to cut “green” levies on energy bills could actually increase costs, MPs warn

David Cameron’s push to cut “green” levies on gas and electricity bills could end up increasing energy bills, MPs have said.
David Cameron’s push to cut “green” levies, some of which go towards renewable energy sources like wind and solar power, could end up increasing energy bills, MPs have said Photo: ALAMY

By James Kirkup and Emily Gosden

David Cameron’s push to cut “green” levies on gas and electricity bills could end up increasing energy bills, MPs have said.
The Commons Energy and Climate Change Committee said that cutting support for renewable energy generation will drive away vital investment in the energy sector, pushing up prices. The committee’s warning came as officials finalised a list of options for changing levies applied to bills, with a scheme that funds home insulation among those facing cuts.
The Government says the UK energy industry needs £110 billion of new generators and transmission networks to remain functional in 2020. To encourage companies to fund that work, the Government applies levies to household energy bills to guarantee the industry a minimum price for its power.
Some of those levies go towards renewable energy sources like wind and solar power, and are unpopular with many Conservatives. Mr Cameron has promised to “roll back” green levies which he says add around £112 a year to the average household bill.
Sir Robert Smith, the Liberal Democrat chairman of the Commons committee, has written to Mr Cameron warning him that cutting the levies could actually mean higher bills. “We would urge you to be careful not to undermine the very problems the Government is trying to solve,” he said. Ending agreements to support renewable energy sources “will damage policy credibility, seriously undermine investor confidence and could increase the cost of capital for new energy investments – thus pushing up energy bills,” Sir Robert said.
George Osborne, the Chancellor, is expected to set out cuts in green levies at the Autumn Statement next month, though the final package has not yet been agreed between the Conservatives and Lib Dems.
Industry sources say the Department of Energy and Climate Change was last night due to hand Downing Street a number of options for reforming the 'Energy Company Obligation', one of the green levies that requires companies to meet targets for insulating customers' homes. One option would see a target for installing expensive measures such as solid wall insulation - which can cost £10,000 per household - cut by as much as 50pc. Critics say this part of the scheme is poor value for money, especially given the low take-up of the Green Deal loan scheme which was supposed to see households part-finance the measures. There could also be an increase in the target for cheaper measures which are targeted at the poorest homes.
Ministers are also still considering an option of extending the March 2015 deadline for completing all the targets by at least 18 months, to spread the costs of implementing the scheme. The CBI, a business lobby, has backed this option, calling for the scheme to be extended to 2017.
Ministers say the scheme should cost only about £50 per household but some suppliers argue it costs much more and have blamed it for recent bill increased. British Gas claims it now costs about £90 on a household bill.
Companies have vowed to pass on savings in costs 'pound for pound' within weeks of any green levies being cut. Several suppliers have lobbied for green levies to be removed from bills altogether and paid for through general taxation instead. However, industry sources are not optimistic this will meet Treasury approval.

Cutting green energy levies may raise fuel bills, say MPs - Telegraph

And last week, Geoffrey Lean of the Telegraph asked:

Geoffrey Lean is Britain's longest-serving environmental correspondent, having pioneered reporting on the subject almost 40 years ago.

Will moving 'green taxes' to the tax bill be a prelude to dropping them?

No doubt it seemed a good idea at the time: certainly I can remember it being presented as a stroke of genius when Gordon Brown's government came up with the idea of adding the so-called green taxes to energy bills. Making energy more expensive, averred advocates of the cunning plan, would mean that people would use less of it, thus doing even more to save energy and protect the planet. Some also invoked the long-established "polluter pays principle", whereby those that create damage should finance measures to abate it. And there was the handy side effect that increasing bills helped keep down politically sensitive rates of income tax.
All this, some argued at the time, was profoundly wrong. The people who paid, after all, were not the energy companies, but their benighted customers. And the poor paid proportionately far more as a result of this profoundly regressive measure – both because they have to devote a much higher proportion of their incomes to buying energy, and because they tend to live in draughtier, worse-insulated homes. And whereas using less energy, for most people, should involved taking sensible measures to reduce waste, for the needy it normally means going cold.
The strategy also gave unscrupulous energy companies cover for hiking their prices. They have long sought largely to blame the "green taxes", even though rising fuel costs have been three to five times more important, and though the Government-imposed charges add a relatively small amount, £112, to the average £1,255 bill (with just £37 of that due to direct subsidies to renewable energy). That excuse is finally now beginning to wear thin, and it never fooled the public, three quarters of whom told a poll they did not believe it. But many Tory MPs, some ministers and a raft of commentators do seem to have been taken in, thus providing cover for the ramping of bills.
Now, it appears, the Chancellor is planning to move the bulk of the charges from energy bills general taxation. That would be much fairer, shifting the greatest weight of the burden to those best able to handle it, since tax rates rise progressively with income. But there is one snag: it will make them much more vulnerable to the Chancellor's whim. Any chancellor might eye them up as a place to make cuts – and this one, with his zeal for austerity and his apparent dislike of environmentalism, would seem particularly likely to do so.
That would be tragic, especially for the poor for most of the money goes to fund social, rather than strictly green, measures aimed at helping them pay their energy bills. Having lost out through a cynical manoeuvre by the last government, they could end up suffering again from similar heartlessness from this one.

Will moving 'green taxes' to the tax bill be a prelude to dropping them? – Telegraph Blogs

An article in today's Guardian points to the £1bn which energy providers have not been spending:

Energy firms receive £1bn for green measures before they are carried out

Big six are behind target on measures such as paying for insulation, but are continuing to add cost to bills
Woman with gas heater
Under the Energy Companies Obligation, firms pay for solid and cavity wall insulation for some properties. Photograph: Christopher Furlong/Getty Images
The big six energy companies have come under fire again as it was revealed they have taken £1bn from their customers while completing a fraction of the thousands of green and social measures they are required to carry out.
Figures from the regulator Ofgem showed that the companies had achieved as little as 3% of the measures to be carried out under one section of the Energy Companies Obligation (ECO), by which they are supposed to pay for solid and cavity wall insulation, particularly for people on low incomes or with hard-to-insulate properties. Companies had achieved 16% of what they needed to do to help rural areas and put in district heating systems, and 25% of the target on measures that reduce the overall cost of home heating for low-income and vulnerable households, including new boilers.
These figures come as the scheme is more than halfway through, as the full complement of measures must be installed by March 2015. Energy companies want the government to extend the deadline, because on current rates they cannot meet it. But while the companies have made slow progress on their targets, they have carried on adding a charge for ECO to customer bills. This has netted them about £1bn so far, according to separate research by the Local Government Association. By the end of the current ECO period, in March 2015, the energy companies will have collected £1.625bn towards ECO, according to the LGA.
The LGA also calculates that of the £2.1bn that should have been delivered by now in savings on bills to fuel-poor consumers through the insulation measures, only about £1bn of savings are being made. This is leaving tens of thousands of fuel-poor households with cold houses this winter.
Andrew Warren, director of the Association for the Conservation of Energy, said: "They have collected £1bn and spent a small proportion of it. This is cynical price-gouging by the big energy companies. We are discussing social obligations here, not a green tax. These companies are blaming ECO for rising energy bills, but they haven't been carrying out [the number of installations needed]."
The ECO has become the focus of the debate over energy bills, as one of the targets for David Cameron's pledge to "roll back" some of the additions to bills that pay for green and energy efficiency measures. Several energy companies have suggested transferring the ECO, which is currently paid for by them through extra charges to bills, to be paid for from general taxation. But the Treasury is reluctant to find the £1.3bn necessary to fund the scheme, so it could be scaled back or its future thrown into doubt.
Mike Jones, chairman of the LGA's environment and housing board, said: "The ECO is there to give vulnerable people warmer homes which cost less to heat. The energy companies have collected more than £1bn from our fuel bills and we don't think the measures are being rolled out fast enough."
Warren pointed out that the Treasury already gains billions from another so-called green tax, the carbon floor price, by which businesses pay a guaranteed price for their carbon emissions. The floor price has been criticised, however, for not saving carbon because the overall carbon cap is set not by the UK but under the European emissions trading scheme.
Warren said it was wrong to attack measures aimed at helping consumers, particularly those on low incomes. He said: "The big companies are telling lies and lies. These guys are playing games with people's lives, because that's what cold homes mean."
Ofgem will not break down the performance on ECO by individual company until later this year, but in a previous breakdown based on figures this summer, Centrica had achieved less than a tenth of its targets, while Eon was out in front with about three-quarters of its installations achieved.
Angela Knight, chief executive of Energy UK, which represents energy companies, said the charges to cover the ECO had been added to bills in advance in order to avoid "a big bounce" in bills at a future date. She added there had been a slow start to the ECO as there was a hiatus between the end of the old scheme and the start of ECO, and that many companies might have entered into agreement with subcontractors to carry out the work. "Unfortunately, there is no easy option," she said. "You can bounce bills around or you can try to spread the price more evenly. Companies have to spread this over the period."
She said Energy UK did not take a view on whether ECO should be paid for from general taxation, as that was a matter for politicians to decide.
But Warren said the large difference between the best and worst performers suggested these were not the only explanations: "If Eon can do it, why can't the others? EDF have been trying to blackmail the government."
Don Lieper, director of new business at Eon, said: "We take this very seriously – it is a legal requirement. We are very proud of what we have done – it hasn't been easy, but we have been helping vulnerable customers." By the end of August, the company had spent £130m of the projected £400m it expects to spend on ECO.
Npower said it was moving faster on ECO and would be able to report better progress soon. Scottish Power said it had now signed contracts with installers for 70% of its target. Scottish and Southern Energy said: "These Ofgem figures are two months behind the current position. Since then, SSE has significantly ramped up the number of measures completed and we are confident we will achieve delivery by the end of March 2015."

Energy firms receive £1bn for green measures before they are carried out | Environment | The Guardian

Green Deal loans reviewed: The Green Deal explainedThe Energy Company Obligation (ECO)

Nuclear power plant
The Energy Company Obligation means energy efficiency grants for some

What is the Energy Company Obligation (ECO)? 

ECO works alongside the government's Green Deal to help people install energy-efficiency measures to their home. Under this scheme the big energy suppliers are legally obliged to help the following with energy-efficiency measures:
  • low income and vulnerable households 
  • homes that may not benefit from savings from the Green Deal
  • homes in low income areas 

Government Schemes

ECO is the government's umbrella term for its programme to make houses in the UK more energy efficient, it covers the affordable warmth obligation, the carbon saving obligation and the carbon saving communities obligation. The scheme replaced Carbon Emission Reduction Target (Cert) and Community Energy Saving Programme (CESP) that ended in December 2012. 
As part of ECO, the government estimates that £1.3 billion per year worth of energy efficiency and heating measures will be delivered across Great Britain. 

ECO and the Green Deal

Money from ECO may be available to subsidise your Green Deal. ECO funding is available for relatively expensive energy-efficient measures where the savings on your electricity bill may not be greater than the cost of the installation. For instance, solid wall insulation, internal wall insulation and 'hard to treat' cavity wall insulation are all eligible for extra ECO money to pay for its installation as part of the Green Deal. 
It is quite complicated to work out if you are eligible for ECO funding - it depends on what measures your house needs, where you live and if you are receive any benefits. Your Green Deal provider should advise you if you are eligible for ECO money, you can also contact the Energy Saving Trust for more details.
The Energy Company Obligation (ECO) - The Green Deal explained - Green Deal loans reviewed reviews - Creating an energy saving home - Which? Energy

Decarbonisation Measures in Proposed UK Electricity Market Reform
From Wikipedia, the free encyclopedia

The UK is committed to legally binding greenhouse gas emissions reduction targets of 34% by 2020 and 80% by 2050, compared to 1990 levels, as set out in the Climate Change Act 2008.[1]Decarbonisation of electricity generation will form a major part of this reduction and is essential before other sectors of the economy can be successfully decarbonised.[2]

The Government’s proposals for electricity market reform, published in a White Paper in July 2011, included three initiatives to encourage decarbonisation of electricity generation in the UK: A Carbon Price Floor to complement the European Union Emissions Trading Scheme (EU ETS); Feed-in tariffs which will eventually replace the Renewables Obligation; and an Emissions Performance Standard to restrict future use of the most carbon intensive forms of generation.[2]

In implementing these proposals, the Government aims to attract investment in low-carbon generation, deliver security of supply through an appropriate mix of electricity sources and ensure a minimum amount of impact on consumer bills; all this at a time when security of supply is threatened by scheduled closures of existing plants and both the demand for, and subsequently the price of, electricity is increasing.[2]


Proposals for Decarbonisation
The Government published Planning Our Electric Future: A White Paper for Secure, Affordable and Low-Carbon Electricity in July 2011.[2] The paper contained three proposals designed to encourage decarbonisation of the UK electricity sector, the rationale behind the introduction and potential impacts of a Carbon Price Floor, Feed-in tariffs and an Emissions Performance Standard are discussed in turn below.

Decarbonisation Measures in Proposed UK Electricity Market Reform - Wikipedia, the free encyclopedia

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