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ECO2T - the new rules and what they mean
The 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.
ECO2T (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:
|ECO2T (1st April 2017 - 31st Sept 2018)|
|HHCRO Funding Stream||CERO Funding Stream|
|The Home Heating Cost Reduction Obligation (HHCRO) will account for 70% of all activity funded through ECO. HHCRO is the funding stream that supports vulnerable homeowners and private renting tenants in receipt of certain state benefits.
||The Carbon Emissions Reduction Obligation (CERO) is the funding stream designed to reduce the country’s domestic carbon footprint. It will account for around 30% of all ECO activity. CERO funding can be applied to any home (both Social and Private) and focuses on insulation measures.
|HHCRO is measured in the estimated fuel bill savings residents could receive over the lifetime of the energy saving measures being installed in their homes. Energy Companies must collectively achieve £2.76 Billion Life Time Savings (LTS) over the 18 month ECO2T scheme.||CERO is measured in the amount of CO2 that can be saved from an installation in a home.,Energy Companies must collectively achieve savings of 7.3Mt of CO2 over the 18 month ECO2T scheme.
|15% of all CERO activity must be carried out in Rural areas.|
|A proportion of ECO funding must be assigned to insulate homes with solid walls. This will be governed by a ‘Solid Wall Minimum Requirement.’ This means that around 32,000 solid wall properties will be improved during the 18 month ECO2T scheme.|
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.
Under 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.
|Flexible Eligibility Criteria for Local Authorities|
|HHCRO funding criteria for insulation and heating measures||HHCRO criteria for solid wall insulation measures|
|Must be a homeowner or private renting tenant.||Must be a homeowner or private renting tenant.|
|Must be defined by the Local Authority as living in ‘fuel poverty’ or ‘on a low income and vulnerable to the effects of living in a cold home.’||The properties must be either flats, maisonettes, terraces or detached houses next door to each other and are part of a project where at least two thirds of the households have been declared as fuel poor, or low income and vulnerable to the effects of living in a cold home by the Local Authority.|
|In the case of a pair of semi-detached properties or a single building that contains two flats, residents from one of the pair must be declared as fuel poor, or low income and vulnerable to the effects of living in a cold home by the Local Authority.|
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 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.
|Housing Type||Available Measures|
|Social Housing with an EPC rating of E, F or G||Insulation measures can be funded through HHCRO.
First time central heating systems can be funded through HHCRO providing:
There is no evidence of central heating or electric storage heaters and that the property currently has either:
- Electric room heaters
- Gas room heaters
- LPG room heaters
- Solid fossil fuel room heaters
- Oil room heaters*
*Only relevant if upgrading to a District Heating Scheme
The new central heating system funded through HHCRO can be powered by:
- Gas Boiler
- Oil Boiler
- Biomass Boiler
- LPG Boiler
- Air Source Heat Pump
- Ground Source Heat Pumps
- Electric Boiler
- District Heating Scheme Connection
A 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.
|Cavity Wall Insulation in a 3 bedroom Semi-detached house||6245||£0.11||£686.95||1874||8119||£893.09||£700||£0|
|Standard Gas Boiler swap in a 3 bedroom Semi-detached house||944||£0.11||£103.84||283||1227||£134.97||£1,500||£1,365.03|
*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.
Homeowners 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:
|Old criteria (up until March 31st 2017)||New Criteria (1st April 2017 - 31st Sept 2018)|
|Residents that receive income based benefits will need a supplementary qualifying component (such as have parental responsibility for a child or claim a disability premium) to qualify for HHCRO.
||Residents that receive Income-related Employment and Support Allowance, Income-based Jobseeker’s Allowance or Income Support will no longer need a supplementary qualifying component to qualify for HHCRO.
|Residents that receive Tax Credits must have a household income of £16,010 or less. Residents that receive Universal Credit must have a net monthly income of £1,250 or less.||Residents that receive Tax Credits or Universal Credit must have a household income below a set threshold that is determined by how many people live in the property. (E.g. the more children, the higher the income threshold). See table below.|
|You will qualify for HHCRO if you receive any form of Pension Credit (both Pension Guarantee Credit and Pension Savings Credit).||Only residents that receive ‘Pension Guarantee Credit’ which is the element where the State tops up weekly income to a guaranteed level, will now qualify for HHCRO.|
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:
|Household Composition||Tax Credit recipents - Gross income (annual)||Universal Credit recipents - Net earned income (monthly)|
|and 1 child||£17,400||£1,450|
|and 2 children||£21,600||£1,800|
|and 3 children||£25,800||£2,150|
|and 4 or more children||£30,000||£2,500|
|and 1 child||£24,000||£2,000|
|and 2 children||£28,200||£2,350|
|and 3 children||£32,400||£2,700|
|and 4 or more children||£36,600||£3,050|
Gone 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 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.
For more information on the next phase of ECO and how it can support your energy saving objectives, get in touch today.
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