What changes are coming in ECO4?

Proposals are still required to go through parliament before the scheme can be rolled out, however we predict very little will change with gas and oil being the biggest losers and sweeping changes to scoring and flexible eligibility.

Contents

• Headlines
• Transition period
• Householder eligibility
• Benefits
• ECO4 flexible eligibility
• Blending funding
• In-fill
• Private Renters
• Social Housing
• Measures
• Minimum Requirements
• Scoring
• Partial scores
• EPC gaming response
• Timescales
• Guarantees
• PAS
• Innovation
• Scheme layout

Headlines

• Band D-G homeowners, band E-G private and social renters
• Flexible eligibility includes four new routes
• LPG/oil cut back
• FTCH only for on-gas properties
• Minimum requirements brought in based on SAP scores
• Partial scores to be imposed in multiple scenarios
• Annual bill savings to replace lifetime bill savings in scoring methodology

Transition period

Between 1 April 2022 – 30 June 2022, measures can be installed to ECO3 rules, subject to latest installation standards and certain measure exclusions.

EPC eligibility

Band D-G homes for homeowners.

Band E-G homes for private and social renters.

Householder eligibility

To support households on the lowest incomes, as proposed, households in receipt of means tested benefits will be eligible.

Private rented tenants will benefit where more costly measures are needed to upgrade the home.

Benefits

Government has decided to remove eligibility for non-means tested benefits. This means those in receipt of disability benefits must also receive a means tested benefit now to qualify.

List also now includes Housing Benefit and Pension Credit Savings Credit.

Increased Child Benefit income caps.

Household recipients of the Warm Homes Discount rebate will be eligible for ECO.

ECO4 Flexible eligibility

Statement of Intent:

Ofgem will introduce and create a new mechanism enabling LAs and the devolved administrations to notify Ofgem with the declaration number, household address and the route the household has been matched under, for each household referred.

This will enable Ofgem to match the LA or DAs issued declarations with the notified declarations they receive from suppliers.

The Scottish and Welsh Governments will be able to participate under ECO4 Flex and refer low income households.

Government will introduce four new flex routes

Route 1 - Household income

Households must have an income of £31,000 or less.

The changes do not take into account housing cost

Route 2 - Proxy targeting

A household must be in EPC bands E, F or G and meet any two of the following qualifying criteria:

• In LSOA 1-3 (Lower Super Output Area – a measure of deprivation)
• Receives a Council Tax rebate – (excludes single person rebates)
• Vulnerable to living in a cold home as identified in the NICE Guidance
• Referred under a local authority run scheme which aims to support low income and vulnerable households.
• Receives free school meals identified as struggling with sustained debt on utility bills and mortgage payments and has been referred to the local authority for support by Citizens Advice, their energy supplier or from their mortgage lender.

Route 3 - NHS referrals

This would help to support those who are suffering from conditions that are likely to be most affected from living in a cold home, including respiratory, cardiovascular, limited mobility or immune suppressed conditions.

Long term health conditions such as diabetes and mental health have not been included in this scheme due to their variable severity.

Route 4 - bespoke targeting

A supplier or local authority could submit a proposal explaining how they would achieve a high proportion of fuel poverty targeting.

For example, this could include specifically targeted referrals, campaigns or use of data - the proposal would be submitted to and assessed by a BEIS panel and if it were approved, projects completed in households targeted using that method would receive a score uplift.

This route carries a 10% uplift.

An application process will be designed for targeting approaches to be submitted to the Department of Business Energy and Industrial Strategy (BEIS).

Further guidance on the application process and assessment is planned for publication in summer.

Blending funding

Measures funded outside of ECO could be installed prior to the ECO4 project, or after the final ECO4 project has been notified to Ofgem.

In-fill

There will be a continuation of the in-fill policy for EWI but this will be extended to flats at a ratio of 1:1, meaning if 50% of the flats qualify then the remaining half can also receive the upgrades.

Houses are at a ratio of 1:3, however this now can apply to properties that have the same street address.

Cavity wall insulation will now also be added to the in-fill strategy in ECO4.

Private Renters

Band E-G only.

Must have at least one of solid wall insulation, first-time central heating, a renewable heating system or district heating.

Can then receive any ECO measure (excluding repairs or replacements to broken heating, as in ECO3) provided at least one mandatory measure is included.

Social Housing

Band E-G rated properties will be eligible for insulation measures, FTCH, renewable heating, DHCs and IMs.

Measures

Fabric first approach

Government has decided to introduce the minimum insulation preconditions for all homes receiving any heating measure, including heating controls, as proposed:

1. all band D homes receiving any heating measure must first have at least one primary insulation measure installed
2. all band E, F and G homes receiving any heating measure and band D homes receiving FTCH must first have all the exterior facing cavity walls and loft (including rafters) or roof (including flat, pitched and room-in-roof) insulated;
3. unless all eligible fabric measures are already installed to meet the current Building Regulation standards, or where exemptions apply.

As homes move to deeper retrofit, it is important that adequate ventilation is considered in line with PAS2035 requirements.

Oil/LPG

ECO4 excludes the installation of all new replacement oil and LPG heating systems.

Allows the repair of broken oil and LPG heating systems, subject to the Broken Heating Repair Cap, as a last option where none of the eligible heating measures for off-gas homes are reasonably practicable to install.

Broken boiler cap

Broken Heating Replacement Cap for broken efficient boilers and ESH that cannot be economically repaired set at 5,000 homes per year.

All homes will also need to meet the new Minimum Requirements, and the minimum insulation preconditions for heating measures, unless an exemption applies.

Gas connections and FTCH

Mains gas and hybrid mains gas FTCH may only be installed in the small number of homes that are connected to the gas grid (on-gas homes).

On-gas homes are homes with a primary heating system which may be a fixed mains-gas heating system, or a fixed electric heating system with evidence (gas bill) of using a mains-gas cooker.

Homes with gas back boilers and Agas with one radiator will be considered eligible for FTCH where the eligibility rules can be met.

All homes that receive FTCH must first have cavity wall and loft/roof insulation installed.

Wet central heating systems to be installed as a ‘low temperature heating system’ through ECO4.

Electric heating

Electric heating (other than heat pumps) may only be installed in homes that currently have electric heating (both on and off the gas grid).

Or in off-gas homes where it is not reasonably practicable to install a heat pump, solid biomass heating system or DHC, subject to the Broken Heating Replacement Cap.

ESH

All new ESH installed (in both on and off-gas homes) must have a manufactured responsiveness rating of 0.8 or above when assessed against SAP.

Smart meters

Smart meter advice must be provided to all ECO households before measures are installed, ideally alongside the initial retrofit energy efficiency advice provided to households required by PAS2035.

Minimum Requirements

Band F and G homes to at least a band D.

Band D and E to a least a band C.

Upgrading the least energy efficient homes to meet Minimum Requirements will be facilitated through the scoring methodology. There are some exemptions for certain situations where a home cannot be upgraded to meet Minimum Requirements.

Minimum requirement exceptions

Allowance for the following exemptions:

• listed building
• conservation area (and failed to gain planning permission)
• property houses a protected species
• environmental conditions mean some measures can never be appropriately installed
• Where the structure or fabric of the building or access constraints prevents installation of some measures
• unlawful – e.g., where planning permission has been refused.

Scoring

The updated scoring methodology will be based on:

• the difference in average annual bill expenditure between the starting SAP rating of the property (pre-retrofit) and the finishing SAP rating of that property (post-retrofit).
• the floor area of a property
• This is to be evidenced via a valid pre-installation EPC or a pre-installation SAP assessment as part of PAS 2035.

Partial scores

There will be a Partial Score cap

If the Minimum Requirement is not met in practice, all the remaining measures in the package will receive Partial Scores, while rejected measures receive no score.

Where measures have been rejected due to minor errors and can therefore still be considered qualifying actions, we consider that the Minimum Requirement will still be met in practice in these retrofits and should receive full scores, provided the MR is met.

These types of errors could include a minor administrative error or a minor paperwork mistake, where the measure itself is still functioning normally.

Annual bill savings

ECO4 scores based in annual rather than lifetime bill savings.

EPC gaming response

The EPC regime is subject to a programme of planned, unplanned, and risk-based, criteria-led smart audits, incorporating random sampling. The government has agreements with the six Accreditation

Schemes that require them to operate a sound complaints procedure and have Fraud Identification Plans in place.

Timescales

Project completion timelines at three months from the date of the installation of the first measure for all measures.

Extension time for the delivery of measures at a period of up to three months from the expiration date of the three-month project timeline including for DHCs.

Circumstances under which an extension may be necessary will be decided by Ofgem.

Partial score penalty for late measures.

Guarantees

Boiler and LI guarantees may be increased to strengthen consumer protection requirements.

Length of boiler and ESH repair guarantees may be reduced from two years to one year, and to cover only the faulty part that is repaired rather than the whole heating system

All guarantee requirements will be mandated by TrustMark through its registration and compliance process, rather than specifically through ECO regulations.

PAS

ECO4 projects are expected to be carried out in accordance with the latest PAS2035 standards and associated processes; this includes installation in accordance with latest version of PAS2030 and MCS standards where relevant.

Innovation

Government has decided that the Innovative Measure route will now have two levels of uplift. There will be a 25% uplift awarded for applications that demonstrate a reasonable explanation of how the measure is an improvement against its standard counterparts which are commonly available on the market.

A new 45% uplift for measures that demonstrate a substantial improvement across a range of criteria (including, but not limited to, expected bill savings, supplier cost savings, environmental impact, or other benefits).

Scheme layout

Government has decided to maintain annual obligation phases, with Phase 1 commencing at the start of the scheme and running until 31 March 2023, followed by three annual phases starting 1 April.

Full response available here

Original consultation here

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