The next phase of ECO Funding07-02-2017 Back
ECO2T - the new rules and what they meanThe Government have confirmed the new rules for the next phase of their Energy Company Obligation (ECO) funding scheme.
But what does this means for Local Authorities and Housing Associations, and what are the opportunities?
YES Energy Solutions have reviewed the Government's Consultation Response. Here are the main headlines with a more detailed summary below:
ECO is a Government programme where major Energy Companies are required to fund domestic energy saving measures. Each firm is set a legally binding target to reduce CO2 and cut customer fuel bills throughout Great Britain.
Download the full Consultation Response on ECO2T
The Next Phase of ECOECO2T (also referred to as ECO Transition) will start in April and run for 18 months. The scheme is a transitional programme to bridge the gap between the current ECO funding period and a new 4 year fuel poverty focussed programme that will be introduced by Government in October 2018.
ECO2T will have two funding streams with different qualifying criteria:
CSCO (the Carbon Savings Community Obligation), which funded measures in properties within certain geographic locations, will close on 31st March 2017 and will not be part of the new scheme. This obligation was designed to support the most disadvantaged communities, however the Government feel that the revised eligibility criteria for the HHCRO funding stream will cover this area.
Local Authority ReferralsUnder the HHCRO funding stream, Local Authorities will be able to refer vulnerable homeowners or private renting tenants, even if they don’t receive qualifying benefits.
This is called ‘flexible eligibility.’
The Local Authority must make a declaration that the resident is living in ‘fuel poverty’ or ‘on a low income and vulnerable to the effects of living in a cold home.’
For solid wall insulation projects, Local Authorities can also qualify private householders for HHCRO funding that are not vulnerable, providing that at least two thirds of the project are.
Energy Companies can assign up to 10% of its HHCRO funding allocation to flexible eligibility. However, Local Authorities will need to ensure that an Energy Company is prepared to take the referrals before signing any declarations and promising funding to residents.
For an installation to go ahead, the Local Authority will need to sign a declaration to confirm the resident’s eligibility which will be submitted to the Energy Company funding the work.
Before any declarations are made, Local Authorities will need to publish a ‘statement of intent’ detailing the methodology and criteria they intend to use to identify eligible residents.
Local Authorities are then required to produce annual reports disclosing their use of flexible eligibility which the Government will monitor.
The Government will be issuing guidance on flexible eligibility for Local Authorities over the coming months.
Only Local Authorities will be able to use flexible eligibility and this responsibility cannot be passed over to a third party.
Social HousingSocial Housing properties with a pre (or post) EPC rating of E, F or G can now qualify for HHCRO funding regardless of the resident’s benefits eligibility.
The funding can only be used for insulation measures and for first time central heating systems where there has been no previous evidence of central heating or electric storage heaters in the property.
The Social Landlord must sign a declaration to confirm that the property is in fact Social Housing and that no changes were made after the EPC was issued and before the new measure was installed.
Deemed ScoresA new simplified system for working out funding allocations will be introduced for ECO2T. Instead of carrying out bespoke property assessments, each energy saving measure will be given a deemed score based on the property type it is being installed in.
This means that when designing an energy efficiency scheme, we will know the available funding allocation before visiting the properties. This will become a desktop exercises and means that funding rates can be worked out in advance. Installers will be able to confirm if the job will be fully funded based on their funding contracts (e.g. the rate they have secured from an Energy Company against each Deemed Score) or if there will be a customer contribution.
Please note that a technical survey will always need to be carried out before a measure is installed, so a home visit will still be required.
During the ECO2T consultation period many in the industry highlighted that the new deemed scores were actually significantly lower for some measures and property types compared to what was being scored in bespoke assessments. Therefore, to help smooth the transition to deemed scores the Government have introduced a 30% uplift on all measures for the full 18 month scheme.
This means that there will be a higher funding allocation for each measure. However, it’s the rate at which the funding is allocated that will be the main influencing factor for many projects. Installers are now all in the process of negotiating new contracts with Energy Companies to secure the best funding rates against deemed scores.
The table shows the difference in funding allocation based on the 30% uplift on Deemed Scores.
*This is the rate at which the Energy Company pays the contractor per deemed score (e.g. £0.11 for 1). This rate is negotiable and different companies will be able to secure higher rates based on their relationships with Energy Companies. YES Energy Solutions is currently working with partners to secure attractive funding rates for different energy saving measures for all of our projects.
Visit Ofgem's website to see a full list of all the Deemed Scores
New Benefits Eligibility CriteriaHomeowners and private renting tenants that receive certain qualifying state benefits will qualify for HHCRO funding (unless they have been defined as eligible by a Local Authority or fit the HHCRO criteria for Social Housing – please refer to the information above).
For ECO2T, the Government will alter the benefit criteria for HHCRO funding. This will potentially widen the net of eligible residents.
Residents that meet one or more of the following criteria will now qualify:
Please note that the CERO funding stream has no personal qualifying criteria. So if the property is technically suitable, then there will always be some funding towards the insulation measure. Under Deemed Scores, there is a higher funding allocation for HHCRO over CERO in favour of helping more vulnerable people.
Income Thresholds for Tax Credits & Universal Credit
Private residents that receive Tax Credits or Universal Credit will qualify for HHCRO funding if their income is under a set level for their household type:
Gas Boiler CapGone are the days of a FREE gas boiler! The Government will be introducing a 23% cap on qualifying gas boilers.
A qualifying gas boiler is when the unit has broken down or is deemed inefficient. Under the old ECO scoring criteria, these types of measures were given preferential funding allocations, which meant depending on an installers funding rate, the replacement systems were often fully funded.
For this reason, the majority of the HHCRO funding stream has been used for these qualifying gas boilers which has taken the focus off insulation measures (and other off gas heating measures) which could potentially save residents more money if installed. Therefore a qualifying gas boiler cap will now be introduced.
What’s more, Energy Companies will also have the flexibility to work towards a proportion of their ECO2T funding targets early (classed as carry over). This means that they can submit some work before April 1st. It is likely that many of them will have already funded enough qualifying gas boilers to cover the capped amount so won’t be looking to fund any more.
Installers can still access funding towards a gas boiler install outside of the 23% cap, but it will receive a lower funding allocation and be classed as a non-qualifying gas boiler.
YES Energy SolutionsYES Energy Solutions is an award winning Community Interest Company that currently works with major Energy Companies to help them achieve their ECO obligations. We have funding contracts in place covering multiple energy saving measures.
Through our national network of SME installers, we fund and manage domestic energy saving schemes on behalf of Local Authorities, Housing Associations and Social Housing Providers.
Find out more about our recent collaborations.
For more information on the next phase of ECO and how it can support your energy saving objectives, get in touch today.
T: 01422 880100 (Office Hours: 9am - 5pm, Mon - Fri)