Consultation on ECO4 published by Government Jul 30, 2021

A consultation on the next phase of the Energy Company Obligation (ECO) scheme has been launched to seek views on current proposals.

The consultation sets out the Government’s plans for a four-year scheme worth £1 billion a year from April 2022 to March 2026.

The scope of the scheme will continue to target low income, vulnerable and fuel poor households, much like ECO3.

However, ECO4 goes further, as proposals suggest the scheme will no longer be applicable to homes in EPC band A, B and C, a decision that aims to support the Government's fuel poverty commitments.

For properties taking part in the scheme, works are subject to a minimum requirement of improvement measured by SAP score on EPC's (Energy Performance Certificate).

Improvements required will depend on their starting EPC (Energy Performance Certificate) rating.

There are also plans for wholesale changes to eligibility, with alterations to qualifying benefits as well as an overhaul of flexible eligibility (LA Flex).

Changes to eligibility criteria in ECO4

Property eligibility

The scheme will only support D, E, F or G rated homes, in line with national targets to upgrade as many homes as practical to EPC band C by 2035.

There are minimum requirements depending on the starting EPC banding.

• F or G rated properties must be improved to D
• E or D rated properties must be improved to C

Householder eligibility

Benefits

Some benefits have been removed from the qualification criteria for ECO4.

For those in receipt of disablement benefits, only means tested benefits apply.

However, several benefits have been added in ECO4 including Housing Benefit and Pension Credit Savings Credit.

The criteria now includes those who qualify for the Warm Homes Discount scheme.

Flexible eligibility (LA Flex)

Proposals for LA Flex are unrecognisable from the layout in ECO3.

Four new routes in which households are deemed eligible have been developed, and now include suppliers in a so called Supplier Flex.

50% of a supplier’s obligation to be met through measures in households referred under the new LA & Supplier Flex

All four routes can be used by a single local authority, however suppliers may only use route 2.

Route 1 – Household income

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

The changes do not take into account housing costs.

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)
• A householder receives a Council Tax rebate – (excludes single person rebates)
• A householder is vulnerable to living in a cold home as identified in the NICE Guidance
• A householder is referred under a local authority run scheme which aims to support low income and vulnerable households.
• A householder receives free school meals
• Household 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 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.

Measures in ECO4

The proposal for ECO4 is aligned with the Government’s goals to achieve net zero by 2050, therefore greater emphasis has been placed on the transition to low carbon technologies.

Despite this, the proposals stand as a stepping stone to future drives to low carbon, with gas heating measures and electric storage heaters still permitted, but in reduced circumstances as opposed to ECO3.

The proposals require a whole-house approach, in line with the latest PAS 2035 legislation, providing long term energy efficiency benefits for householders.

Projects must be completed within three months of installation of the first measure being finished.

Fossil fuel heating

Oil and LPG heating systems would be excluded in the current proposals - this is to encourage a switch to low carbon heating for off-gas properties.

Furthermore, off-gas properties would not be eligible for First Time Central Heating (FTCH). Only homes already connected to the gas network can qualify for FTCH – subject to cavity wall and loft insulation measures being pre-existing or installed ahead of the heating measure.

In addition, FTCH must be a low temperature heating system, more efficient, safer, cleaner and easier to integrate with heat pumps.

Warm air central heating systems would now fall under FTCH in the new proposals.

Fabric first approach

Greater emphasis is being placed on insulation improvements in the proposed reforms.

Obligations for solid wall insulation installs have been increased for suppliers from 17,000 under ECO3, to 22,000 in ECO4.

Cavity wall and loft/room in roof insulation must be installed before FTCH measures.

Private rented sector

The private rented sector has additional restrictions to which measures can be installed in the proposals in the ECO4 proposals.

Of the measures installed in the property in the whole-house approach, at least one must be either; solid wall insulation, first-time central heating, a renewable heating system or district heating.

Once fulfilled, other appropriate ECO4 measures can be installed to meet the minimum EPC score increases (i.e loft insulation, cavity wall insulation etc.)

ECO4 In-fill strategy

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.

Funding allocations and deemed scores

Amendments are proposed to the method of producing deemed scores for properties and therefore the funding amount for measures.

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.

For the property’s finishing SAP rating, the proposals allow any evidence considered appropriate by Ofgem, which could include a post installation EPC or post installation SAP assessment.

What's a SAP score?

A SAP (Standard Energy Procedure) is a method set by the Government to show a property's overall energy and carbon performance. It’s a measure of the energy and environmental performance of a dwelling.

Lifetime Bill Savings to be abolished

ECO scores are no longer to be multiplied by measure-specific lifetimes for ECO4, with scores only being calculated on annual bill savings.

Uplifts in ECO4

Proposals state that ECO4 will maintain the following uplifts:

• Innovation Measure uplifts
• replacement of efficient broken boiler and electric storage heater (ESH) uplifts;
• Off mains-gas uplifts.

Added to the uplifts for ECO4 will be a new Hard to Treat policy for E, F and G homes.

ECO4 will remove the LA Flex F & G non-PRS uplift and introduce new uplifts for efficient broken heating repairs, hard-to-treat issues and pay-for-performance.

PAS requirements

Installs in the scheme must be compliant with the latest PAS specifications and installed by a PAS certified installer.

This ensures householders benefit from robust installation standards and the whole-house, end-to-end coordination of projects via the requirements for retrofit co-ordinators.

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