Contractor Casualties in Bitter ECO Energy War

This latest article by TIM WEBB – ENERGY EDITOR – THE TIMES NEWSPAPER, outlines business casualties following Government cuts to ECO funding (Energy Companies Obligation). The cuts are ultimately designed to reduce the much resented Government imposed funding that the Big Six energy providers are forced to pay in order to deliver energy saving measures in homes suffering from fuel poverty. In return for these cuts, the energy companies have promised to reduce energy bills for hard hit customers.

The article outlines how companies both large and small who previously invested in training and infrastructure so that they may be able to deliver ECO funded installations, are now paying the price in this bitter energy war with many being forced out of business.

For those who may not be familiar with the scheme.

ECO is made up of three parts, all aimed at helping people in certain circumstances save more energy, and money;

• Home Heating Cost Reduction Obligation (HHCRO) – Also known as Affordable Warmth, designed to make heating your home more affordable. Measures available include cavity wall insulation, loft insulation, boiler replacements, central heating.You will need to be on qualifying benefits and either own or rent privately.
• Carbon Emissions Reduction Obligation (CERO) – Mainly for harder to heat properties such as BISF houses. Properties must have solid wall or hard to treat cavity insulation installed. Social housing, privately owned or rented properties may receive funding.
• Carbon Savings Communities Obligation (CSCO) – Specifically for areas that need energy efficiency improvements the most. Registered Social Landlords in eligible postcode areas can make energy saving improvements at no cost to their tenants. Improvements include solid wall, cavity wall and loft insulation. Funding may also be available for privately owned or rented properties in these areas.

Main Article

Home insulation was the unlikely spark that ignited a bitter battle between the big energy companies and the Government over soaring household bills, a clash of titans that led, ultimately, to ministers agreeing to reduce industry targets to insulate homes in return for knocking £50 off bills. Caught in the crossfire, however, were the small businesses that install that insulation.

Inevitably, there have been casualties. The impact of the cuts to the Energy Company Obligation scheme has been devastating as work dries up. According to the Association for the Conservation of Energy, almost half the 40,700 jobs that the Government estimated the sector would support this year have been lost or not created in the first place.

Gary Coverdale was made redundant last month as operations manager of Home Energy Advice Team, a Newcastle-based contractor, along with five engineers. “We have been left high and dry by David Cameron, simply down to energy companies holding favour,” he said. “We just want to go to work. The whole industry is now in free-fall due to the changes the Government has made.”

The main cuts to ECO are for solid wall insulation, the most difficult and expensive measure, costing about £9,000. Originally, the industry was supposed to carry out about 80,000 jobs a year, but this has been slashed to 25,000. Further concessions to industry mean that the real figure will be closer to half that figure.

Encouraged by the Government, the insulation industry spent two years gearing up to deal with the complex bureaucracy of ECO and installing solid wall insulation that previous schemes had neglected.

One Nottinghamshire-based insulation contractor gave twenty newly recruited trainees and apprentices six months of training, only to find that dozens of contracts secured with councils and housing associations had been scrapped as energy companies pulled funding.

It expects the number of solid wall insulation jobs that it will carry out under ECO to collapse from about fifty per week to fewer than five when the cuts finally kick in from April. Having expanded its workforce, the company now fears it will have to cut back.

Much of the insulation industry is made up of local companies that range from family-run man-with a-van operations to those with 20 teams.

Neil Marshall, of the National Insulation Association, complained that the Government had still not confirmed how the revised ECO scheme would work, although a consultation into the changes was published last week. The industry has also been hit badly by the tiny take-up of a separate government energy efficiency scheme called the Green Deal. Under it, households take out loans to pay for insulation- but despite being lauded by ministers as Britain’s biggest home improvement programme since the Second World War, only 746 have had work completed since the launch just over a year ago.

Potential applicants say that the scheme is too complex and bureaucratic, complaints that are echoed by the industry. The Government requires companies to go through a long accreditation process before they can take part in the scheme. The aim was to deter “cowboy” builders, but it has also driven away genuine firms.

Steve Leach is a director of MCG, a Surrey-based contractor that fits thermal lining on inside walls dubbed “magic wallpaper”. Despite fitting the product countless times for the past two decades under previous government schemes, he still needs to spend thousands of pounds having it tested in the laboratory.

“It seems ludicrous that we have to spend a vast sum of money that an SME coming out of recession has not got,” Mr Leach said. After two years trying to navigate the costly bureaucratic hurdles, his company has still not carried out a single job under the Green Deal or ECO.

Along with many other smaller contractors, he has decided not to bother and to approach his customers directly.

“We are taking a step back from government schemes. SMEs are being priced out of the sector.” he said.