Energy chief criticises "high cost" of ECO

The head of Centrica wants to meet MPs to discuss the cost-effectiveness of the Energy Companies Obligation (ECO) in meeting carbon reduction goals

According to Sam Laidlaw, chief executive of Centrica which owns British Gas, the ECO is “significantly” more expensive than the CERT and CESP schemes which it replaced in January and costs are likely to continue to rise.

In announcing a 9% increase in the company’s half-yearly profits to £356 million, Laidlaw revealed that the ECO, which requires large energy suppliers to cut carbon emissions by installing energy-efficiency measures in customers’ properties, had cost British Gas £100 million in its first six months.

“The cost of per tonne of carbon abatement [through the ECO] is now in the order of £100–£120 per tonne [and] it is becoming much more expensive as we get to harder to treat properties,” he said.

“We will be aiming to sit down with the government as soon as possible to have an audit on the ECO spend so far this year to actually determine whether, given the very high cost of abatement, this is the best way of achieving our environmental targets.”

He also argued that Decc’s projections for reductions in energy demand by the end of the decade were “optimistic” and warned that with much of the low-hanging fruit picked the trajectory of energy efficiency will “inevitably” slow down.

Laidlaw hinted that with the roll out of smart meters across the UK that Centrica was considering how to introduce incentives for consumers to shift their energy use to off-peak hours. He confirmed that the firm was expanding its “free energy Saturday” tariff offered the North East of the US to Texas, and said that it was thinking “very carefully” about how to launch it in the UK.

Quizzed on the messages a “free energy” tariff sent to the public about energy consumption, Laidlaw said it hadn’t resulted in “massively higher” use.

“The people who are taking advantage of [the tariff] are basically switching [when they use power],” he said. “And by reducing the peaking in power generation it significantly improves the carbon footprint of power generation, because it is the peak generators that tend to be the high carbon emitters. If you can remove some of those peaks you are cutting emissions.”

Laidlaw also confirmed that Centrica will be awaiting news on government support for offshore wind under the electricity market reform before deciding on whether to build its planned 580MW Race Bank wind farm off the Norfolk coast.