Energy Company Obligation - Regensw
RFR11
Energy Company Obligation The Energy Company Obligation (ECO) will take over from the existing obligations for energy suppliers: the Carbon Emissions Reduction Target (CERT) and the Community Energy Saving Programme (CESP). These existing obligations are due to end in December 2012 and the ECO will then address energy efficiency in the domestic sector. ECO is made up of three obligations: Affordable Warmth: reduce notional heating costs for low income and vulnerable consumers by £3.4bn by March 2015, around £350m per year Carbon Savings: reduce CO2 emissions by 0.52MtCO2 per year, around £950m per year Carbon Saving Communities: targeting insulation measures in low-income communities, around £190m per year In total the Department for Energy and Climate Change (DECC) estimate suppliers will invest £1.3bn per annum into ECO. ECO will come into force in January 2013. However, the Government believes it is important that where companies are willing and able to deliver ECO activity before then, they should not be prevented from doing so. The Government therefore is putting in place provisions which allow eligible measures promoted and installed in accordance with the ECO to count against the eventual overall ECO targets.
How does ECO relate to the Green Deal? Energy efficiency measures determined by the Green Deal Advisor will be costed by the Green Deal Provider (GDP). If the cost of the work outweighs the savings, breaking the Golden Rule, the GDP will see if ECO can be used. This will only be possible if the customer is eligible for one of the ECO measures (see below). Customers may be made aware of ECO during the assessment or through communications from the government or a GDP. The GDP accesses ECO through a broker organisation who, as of July 2012, is yet to be established.
What measures are eligible under ECO With the ECO Affordable Warmth Obligation any measure is eligible if it reduces the notional cost of heating the property. This includes heating, hot-water insulation, glazing and microgeneration technologies (except PV).
Boiler repairs have been included as an eligible measure provided the repaired boiler is accompanied with a level of aftercare for the household. The ECO Carbon Saving Obligation will only fund a package of measures, including district heating, which include insulation of solid-walled properties (internal and external) and properties with ‘hard-to-treat’ cavity walls. This is not means-tested but will be used in conjunction with the Green Deal. This is because the cost for these measures is still relatively high, so they do not meet the Golden Rule. A wider range of measures will be eligible under the Carbon Saving Communities obligation, including loft and glazing. ECO Affordable Warmth will support district heating, but energy companies will only be given credit for any eligible households on a new scheme, and these are likely to be a subset of all the households that get connected to a district heating scheme. On page 11 of DECCs ‘Which energy efficiency improvements qualify for Green Deal Finance’ there is a table showing the measures qualifying for ECO and whether the subsidy is partial or full. Currently, industry information is suggesting energy companies are offering partial subsidies for external wall insulation of 60%.
What are the eligibility criteria for ECO? The following criteria are eligible: ECO Affordable Warmth: need to be in receipt of a qualifying benefit or tax credit (such as child tax credit with a household income under £15,860, income-related employment and support allowance, income-based jobseekers allowance, income support, state pension credit, working tax credit with a household income under £15,860) and eligible households will be those in private tenures only ECO Carbon Saving: the only eligibility factor is that the package of measures must include solid wall and hard to treat cavity wall insulation ECO Carbon Saving Communities Obligation: need to be defined as a low-income community (bottom 15% of Lower Super Output Areas from the Index of Multiple Deprivation, for a list of eligible geographical areas please click here) and suppliers are required to deliver 15% of their overall Carbon Saving Communities Obligation to rural, low income households in settlements with a population size under 10,000
Who is responsible for delivering ECO? Responsibility for delivering the ECO will be apportioned to energy suppliers based on their energy sales volume (i.e. kWh energy sold to domestic customers) with an exemption for suppliers with fewer than 250,000 domestic customer accounts, and a smooth increase in the obligation for companies who cross this threshold. Delivery will be scored in terms of carbon or notional bill savings over the lifetime of the measures installed. ECO scores will be calculated based on property specific information (such as the SAP) rather than deemed scores, to reflect the benefits delivered over the expected lifetime of the measures installed. This will ensure accurate individualised calculations per property to establish carbon and bill savings. There will be no interim targets to be met within ECO, as the initial obligation period runs for 30 months.
Energy Company Obligation The Energy Company Obligation (ECO) will take over from the existing obligations for energy suppliers: the Carbon Emissions Reduction Target (CERT) and the Community Energy Saving Programme (CESP). These existing obligations are due to end in December 2012 and the ECO will then address energy efficiency in the domestic sector. ECO is made up of three obligations: Affordable Warmth: reduce notional heating costs for low income and vulnerable consumers by £3.4bn by March 2015, around £350m per year Carbon Savings: reduce CO2 emissions by 0.52MtCO2 per year, around £950m per year Carbon Saving Communities: targeting insulation measures in low-income communities, around £190m per year In total the Department for Energy and Climate Change (DECC) estimate suppliers will invest £1.3bn per annum into ECO. ECO will come into force in January 2013. However, the Government believes it is important that where companies are willing and able to deliver ECO activity before then, they should not be prevented from doing so. The Government therefore is putting in place provisions which allow eligible measures promoted and installed in accordance with the ECO to count against the eventual overall ECO targets.
How does ECO relate to the Green Deal? Energy efficiency measures determined by the Green Deal Advisor will be costed by the Green Deal Provider (GDP). If the cost of the work outweighs the savings, breaking the Golden Rule, the GDP will see if ECO can be used. This will only be possible if the customer is eligible for one of the ECO measures (see below). Customers may be made aware of ECO during the assessment or through communications from the government or a GDP. The GDP accesses ECO through a broker organisation who, as of July 2012, is yet to be established.
What measures are eligible under ECO With the ECO Affordable Warmth Obligation any measure is eligible if it reduces the notional cost of heating the property. This includes heating, hot-water insulation, glazing and microgeneration technologies (except PV).
Boiler repairs have been included as an eligible measure provided the repaired boiler is accompanied with a level of aftercare for the household. The ECO Carbon Saving Obligation will only fund a package of measures, including district heating, which include insulation of solid-walled properties (internal and external) and properties with ‘hard-to-treat’ cavity walls. This is not means-tested but will be used in conjunction with the Green Deal. This is because the cost for these measures is still relatively high, so they do not meet the Golden Rule. A wider range of measures will be eligible under the Carbon Saving Communities obligation, including loft and glazing. ECO Affordable Warmth will support district heating, but energy companies will only be given credit for any eligible households on a new scheme, and these are likely to be a subset of all the households that get connected to a district heating scheme. On page 11 of DECCs ‘Which energy efficiency improvements qualify for Green Deal Finance’ there is a table showing the measures qualifying for ECO and whether the subsidy is partial or full. Currently, industry information is suggesting energy companies are offering partial subsidies for external wall insulation of 60%.
What are the eligibility criteria for ECO? The following criteria are eligible: ECO Affordable Warmth: need to be in receipt of a qualifying benefit or tax credit (such as child tax credit with a household income under £15,860, income-related employment and support allowance, income-based jobseekers allowance, income support, state pension credit, working tax credit with a household income under £15,860) and eligible households will be those in private tenures only ECO Carbon Saving: the only eligibility factor is that the package of measures must include solid wall and hard to treat cavity wall insulation ECO Carbon Saving Communities Obligation: need to be defined as a low-income community (bottom 15% of Lower Super Output Areas from the Index of Multiple Deprivation, for a list of eligible geographical areas please click here) and suppliers are required to deliver 15% of their overall Carbon Saving Communities Obligation to rural, low income households in settlements with a population size under 10,000
Who is responsible for delivering ECO? Responsibility for delivering the ECO will be apportioned to energy suppliers based on their energy sales volume (i.e. kWh energy sold to domestic customers) with an exemption for suppliers with fewer than 250,000 domestic customer accounts, and a smooth increase in the obligation for companies who cross this threshold. Delivery will be scored in terms of carbon or notional bill savings over the lifetime of the measures installed. ECO scores will be calculated based on property specific information (such as the SAP) rather than deemed scores, to reflect the benefits delivered over the expected lifetime of the measures installed. This will ensure accurate individualised calculations per property to establish carbon and bill savings. There will be no interim targets to be met within ECO, as the initial obligation period runs for 30 months.
