The cost of energy in the UK is once again a hot topic. During the party conference season, Nicola Sturgeon, the first minister of Scotland, announced that the Scottish government will set up a publicly owned, not for profit energy company. Labour’s Jeremy Corbyn restated his wish to nationalise utility companies to “stop the public being ripped off”. And the Conservative prime minister Theresa May promised to fix the “broken” energy market, in part by imposing a cap on some domestic energy prices.
The UK government swiftly followed this season of rhetoric with two supporting policy announcements. It has drawn up draft legislation to set an energy price cap, although this may take until the winter of 2018/19 to be enacted. Second, it has published a clean growth strategy, which promises “cleaner air, lower energy bills, greater economic security and a natural environment protected and enhanced for the future”.
It’s not easy to address the social, environmental and economic dimensions of domestic energy in one go, as these different goals interact with each other. For example, a price cap clearly makes energy more affordable, but it doesn’t reduce the amount of energy needed or used. While the sheer price of energy is problematic for many people, so too is inefficient housing which increases bills and associated greenhouse gas emissions.
The clean growth strategy addresses this by reconfirming a commitment to require large energy companies to install efficiency measures such as insulation and heating systems. This scheme, the energy company obligation (ECO), now has £3.6 billion in funding through to 2028. It aims to help 2.5m fuel-poor households. Alongside stricter regulations within the private rented sector, the ECO is intended to upgrade all fuel-poor homes to a decent standard by 2030.
But it’s worth putting the rhetoric and promises of these policy announcements into context. Help for people in fuel poverty has decreased since 2010, largely due to the coalition government abandoning publicly funded schemes in England in favour of privately funded energy supplier obligations like ECO. Though social and environmental policies do add to fuel bills, policymakers assume that this increase is more than offset by people using less energy thanks to efficiency savings.
In our research we are currently looking at whether ECO is an effective way to address affordability and energy efficiency in vulnerable people’s homes. England is the only one of the four UK nations that relies solely on this market-driven scheme, so it’s important to evaluate its impact. We recently highlighted a number of potential problems, and solutions. To begin with, only certain people are eligible. Proxies such as welfare benefits, demographics and postcodes are used, but they can arbitrarily exclude households on the margins of these measures who may indeed be vulnerable.
People also struggle to upgrade their homes if the work does not enable a certain amount of carbon savings at a certain price. In other words, private companies are likely to prioritise meeting their statutory obligations rather than findings and helping the most vulnerable households. Even for those that do secure funding, it’s at best a long and complicated process. Some upgrades are never completed because installers are not equipped to manage the needs of people with, for example, disabilities or mental health conditions.
What is clear from our comparative research of the UK nations is that state funded schemes, such as nest in Wales and home energy efficiency programmes in Scotland, are better able to target, and respond to the needs of, vulnerable households. Market driven schemes are different as they will, by definition, seek out the most cost effective work. But this ceases to be an asset once the low-hanging fruit has all been picked, and those with the greatest need (and potentially higher costs) are left subsidising other people’s housing upgrades.
An energy price cap will certainly provide some initial relief. But unless it is continually ratcheted down or extended to more customers it will not provide long-term savings or wider benefits. Increasing investment in energy efficiency ticks more social and environmental boxes, but the regressive approach to funding such a scheme in England means it will continue prioritising cost-effective carbon savings over helping those most in need.