The value of ECO (Energy Company Obligation) funding is dictated by what an energy saving measure will accomplish once it has been installed.
It is also influenced by which ECO stand the customer falls into (e.g. The Home Heating Cost Reduction Obligation: HHCRO, the Carbon Emission Reduction Obligation: CERO and the Carbon Saving Community Obligation: CSCO).
This will affect the rate of ECO funding available and whether a project can be partially or fully funded by an Energy Company or Green Deal Provider.
ECO rates are fashioned on each measure’s potential as well as the ECO strand.
HHCRO rates are based on the financial heating savings available to a householder by having a measure installed, whereas CERO and CSCO rates are based on the amount of carbon the measure will save during its predicted lifespan.
ECO funding rates are not fixed, but are determined by the market. Energy companies are seeking to negotiate the lowest price to meet their ECO obligations in the most cost effective manner.
The Government has set up a new ECO brokerage system to make the process more transparent. The brokerage rates can be used by installers as a rough benchmark to model up their ECO proposals.
For example, the ECO brokerage rates published on the 12th February for the CERO element of ECO was valued at £120 per tonne of CO2 saved.
If an installer’s external wall insulation system costs £10,000 to install and saves 40 tonnes of carbon over its lifespan, the cost of the ‘carbon savings’ would be £250 per tonne.
This would mean that this ECO funding rate would not fully fund the installation.
The installer would need to source the remaining £130 per tonne, either through the customer making up the shortfall or by bundling the measure with others that offer a better cost per tonne to offset the balance.
If the brokerage rate was higher or if the installation cost was lower, the measure could be fully funded.
Please note that this is just a basic example and not based on any specific installation costs.
ECO brokerage is a good way for installers to predict the amount of funding that might be available and build their business model accordingly.
Most Energy Companies also work directly with Green Deal Providers which means rates can be confirmed in advance without the risk of brokerage price fluctuations.
Yorkshire Energy Services currently works in partnership with 3 of the major Energy Companies and will be offering select installers ECO funding on a case by case basis. ECO funding rates will always be determined by the specifications of the projects (e.g. measures installed, ECO strands, etc).