Our recent study reveals that despite being one of the key tools to combat fuel poverty, the Energy Company Obligation (ECO) isn’t reaching the people who need it most. This situation makes even more critical a pending government decision on how to pay for the programme – whether, after a ‘temporary’ respite since March 2022, funding will again be through household energy bills. If this occurs, some of the people hit hardest by fuel poverty will again be contributing to the costs of a programme that doesn’t serve them well.
The ECO, introduced in 2012, is a scheme meant to push energy companies to make homes more energy-efficient. For most of its operation, funding came from everyone’s energy bills. This was ended ‘temporarily’ by the short-lived Truss administration in 2022 but the government is still to indicate whether this change will be retained. Over the years, there have been doubts about how well it targets those households facing fuel poverty.
Surprisingly, very little investigation has been done to see if it’s working for those who need it most, and that’s where our research comes in. We checked if the ECO programme, up until 2020, was mostly helping local areas that consistently had the highest need over the past decade. Unfortunately, what we found is that the people who suffered the most from fuel poverty, and who paid into the programme through their bills up to 2022, weren’t the ones benefiting the most.
In England, the fight against fuel poverty relies heavily on the success of the ECO programme. Alongside the Warm Homes Discount, it has been at the forefront of the UK government’s strategy to combat fuel poverty for the last ten years. With the end of the emergency measures in response to the energy crisis, the ECO programme will be a central player again. Because it has to date been funded through regular people’s energy bills, including those who are struggling to pay them, it is absolutely crucial to make sure it is helping the right people.
Our research involved looking at different areas in the UK and how they have been dealing with fuel poverty over the years. We put these areas into five groups based on the severity of their energy poverty.
To figure out which areas have been struggling with persistent fuel poverty, we collected government estimates for fuel poverty in 317 local authority areas from 2012 to 2020. This involved some government metric changes, but we based our assessment on the government’s own understanding of fuel poverty. We ranked these areas each year based on the proportion of households facing fuel poverty, dividing them into ten groups, from the lowest proportion to the highest. Critically, the places with the worst energy poverty didn’t receive the most support from the ECO programme.
To get a better understanding of how these areas fared over time, we tracked their performance by creating a trajectory for each area based on their ten-year rankings. We then used cluster analysis to group areas with similar trajectories, and we identified five clusters. These clusters represent different patterns of fuel poverty estimates in England, from “Sustained Energy Affluence” to “Entrenched Energy Deprivation.” Interestingly, most areas in higher deciles of fuel poverty at the start of the period remained in those categories at the end.
To assess how well the ECO programme targets areas with persistent fuel poverty, we looked at the distribution of domestic energy efficiency installations supported by the program from 2015 to 2020 across these five clusters. Our analysis shows that the ECO programme has had mixed results in targeting energy efficiency support according to the areas’ needs. Notably, the cluster with the most persistent fuel poverty, as per government estimates, received only the third-highest average number of total ECO installations. This cluster, known as “Entrenched Energy Deprivation,” saw 71 installations per thousand households. The highest number of installations went to the “Fluctuating Energy Deprivation” cluster, which had the second-highest persistence of fuel poverty, while the “Changeable Middle” cluster received the second-highest number of installations.
In a nutshell, our research indicates that the ECO programme in the UK doesn’t effectively target the areas that have been dealing with persistent fuel poverty.
This has significant implications for government policy. First, it is crucial government indicates quickly that the funding of ECO will not return to household energy bills. If this does happen, some of the most fuel poor households in the UK will be paying for a scheme from which they get no help.
More generally, to address the issue of fuel poverty, we suggest more effective methods of support for those who need it most. One promising approach involves using spatial and temporal mapping of persistent fuel poverty, as identified in our research, to allocate new resources. These resources could take the form of tax-funded grants administered by local authorities to promote energy efficiency improvements in the home, building on and expanding the Local Authority Delivery and Home Upgrade Grant scheme.
Instead of competitive distribution among authorities, we propose strategically allocating these resources based on areas experiencing persistent fuel poverty.
The original paper is published in Energy Research & Social Science is freely available through Open Access.