Energy Company Obligation (ECO3)

The current ECO2t scheme ended on the 30th September, and an adapted ECO3 scheme will run from 1st October 2018 to 31st March 2022.  Here is a summary of the public consultation and government response on the changes to ECO, which are available here. The biggest change to the scheme is that the full focus of funding will be on Affordable Warmth, for low income and vulnerable households, to help the Government meet their fuel poverty commitments. This means that there will be household eligibility criteria for all measures, and these have also been updated.

Another change to the scheme is that the supplier obligation threshold will decrease over this time, to 200,000 customers from April 2019 and to 150,000 customers from April 2020, so more suppliers will need to provide ECO funding. With the introduction of Minimum Energy Efficiency Standards (MEES) in April 2018, the ECO scheme has been updated so that landlords can’t use ECO to meet minimum standards, apart from the hard to treat measures of solid wall insulation and renewable heating.

The Local Authority Flexible Eligibility (ECO Flex) element of Affordable Warmth, which was introduced with ECO2t in April 2017, will continue with the percentage of obligation available rising from 10% to 25%. Deemed scores, which were also introduced with ECO2t apart from for district heating, will continue to be set by Ofgem, although the 30% uplift to all scores is removed.

Eligibility criteria

  • Means-tested benefits (see below) as before
  • There are no longer income thresholds for Universal Credit and Tax Credits
  • Disability Benefits (see below) are now eligible
  • Child Benefits and Armed Forces Benefits (see below) are also eligible, with equivalised income threshold*, and self-declaration*
DWP means-tested benefits DWP Disability Benefits Armed Forces Benefits
  • income-based Jobseeker’s Allowance (JSA)
  • income-related Employment and Support Allowance (ESA)
  • Income Support (IS)
  • Pension Guarantee Credit
  • Working Tax Credit
  • Child Tax Credit
  • Universal Credit
  • Disability Living Allowance (DLA)
  • Personal Independence Payment (PIP)
  • Attendance Allowance (AA)
  • Carer’s Allowance
  • Severe Disablement Allowance
  • Industrial Injuries Disablement Benefits
  • War Pensions Mobility Supplement
  • Constant Attendance Allowance
  • Armed Forces Independence Payment

Energy efficiency measures

As well as changes to eligibility, ECO3 also includes changes to measures delivered. Broken heating system repairs or replacements will be capped at 35,000 systems per year, though other heating upgrades (including heating controls) are allowed to be delivered outside of the cap, and the repair of boilers and broken electric storage heaters will be limited to 5% of each of the supplier’s obligations. There will be a 400% uplift for replacing broken boilers and 240% uplift for broken storage heaters. Solid wall insulation installs will be capped at 17,000 homes per year.

To protect rural households, the Government will require suppliers to meet at least 15% of their obligation by delivering measures in rural areas, broken oil boilers are allowed to be repaired or replaced and there will be a 35% off-gas uplift for insulation measures. Ground source heat pumps are an eligible ECO measure even if they receive the Renewable Heat Incentive (RHI), as long as obligated energy suppliers do not receive the RHI payments, but other technologies are not eligible if receiving RHI. In addition, up to 10% of a supplier’s obligation can be met through innovation* and up to 10% can be met through in-situ performance*.

Measures allowed in privately owned housing:

  • Insulation
  • Broken heating repairs and replacements (doesn’t include coal, but does include oil)
  • First time central heating (doesn’t include oil, and if replacing electric storage heaters these must be broken or inefficient)
  • Inefficient heating replacements (doesn’t include coal and oil), alongside certain insulation measures (wall insulation, Room in Roof insulation, flat roof insulation, insulation of a mobile home and under floor insulation, but not loft insulation)
  • Efficient heating replacements if replaced by renewables
  • District heating

Measures allowed in social housing:

  • E, F and G rated properties are eligible for insulation and first time central heating (doesn’t include oil, and if replacing electric storage heaters these must be broken or inefficient) but no other heating repairs or replacements
  • Prior insulation requirements will continue to apply where the FTCH is a district heating connection
  • Innovation measures will be eligible for D-G rated properties

Measures allowed in privately rented housing:

  • Tenants need to meet Affordable Warmth eligibility criteria
  • A-E rated properties are eligible for the same measures as privately owned properties (insulation, first time central heating, inefficient heating replacements, efficient heating replaced by renewables and district heating) apart from broken heating repairs and replacements, as this is the responsibility of the landlord
  • Properties that do not meet the minimum standard i.e. F and G rated properties are not eligible for grants for most measures, apart from solid wall insulation and renewable heating systems
  • Green Deal loans are available to landlords looking to improve the energy efficiency of their properties to meet minimum standards, from the Green Deal Finance Company

ECO Flex

Up to 25% of the supplier obligation can be met through measures delivered under Local Authority ECO Flex, and there is a 25% uplift on measures delivered to F and G rated properties.

Solid wall insulation in-fill

  • This will remain largely the same as under ECO2t
  • Under Affordable Warmth, in-fill for SWI and district heating is available if 66% of eligible households receive either of these measures. If so, an adjacent property can also receive the same measure, as long as the number of these ‘in-fill’ properties does not exceed 34% in that area
  • Under ECO Flex, in-fill is allowed to count for up to 50% of the eligible households, so that local authorities can manage residents’ expectations and avoid situations where a decision could be perceived as inequitable, for example if one household doesn’t receive a measure due to them not living adjacent to an eligible household

*Guidance documents are due to be published with a further explanation of these elements.