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Government publish Green Deal and ECO consultation

posted by Tom Whitehead on 23 November 2011

tags: Green Deal ,

The government has announced the publication of the Green Deal and Energy Company Obligation Consultation today.

The 237 page document is available to download now from the DECC website.  Closing date for responses is 18th January 2012. 

Key points from Green Deal and ECO consultation

  • The consultation closes on 18th January 2012.
  • The charge will be recovered via the electricity bill.
  • There is recognition that solid wall insulation is unlikely to meet the Golden Rule without additional funding and solid wall insulation is mentioned several times as the key measures suitable for ECO support.
  • Customers may take out Green Deal plans alongside their own investment and can repay the plan early.
  • The Government want the market to be truly open  and are therefore not Proposing a single business model for providers
  • There will be a remote advice services via telephone and the internet
  • An independent body to oversee the activities of the participants
  • There will be a Green Deal Code of Practice
  • A ECO ‘brokerage system’ is proposed to give fair and transparent access to ECO funding
  • Green Deal receivables will be securitised i.e. there could be onward sale of Green Deal repayments
  • An ECO Administrator will be appointed to oversee the activities of energy suppliers
  • RDSAP and SBEM will be the underlying assessment tools for domestic and non-domestic buildings respectively.
  • ECO will have a ‘Carbon Saving Obligation’ aimed at hard to treat homes with a focus on solid wall insulation and other measures will only be considered alongside SWI.
  • ECO will have an ‘Affordable Warmth Obligation’ aimed primarily at heating systems and basic insulation.
  • Green Deal Plans will be regulated under the Consumer Credit Act 1974 and Green Deal Providers will need to be licenced under same.
  • The question is asked ‘Should the plan be limited to the minimum guaranteed life of the measures?’
  • There will be a limit on the cash advancement promotional offers that a customer may receive, potentially £150 or 5% of the value of the green deal plan.
  • Once measures are installed a new EPC shall be provided to the Customer.
  • Installations will be underpinned by insurance backed guarantees.
  • A voluntary arrangement is proposed with energy suppliers to deal with those householders referred on by Government. Provision will be made for obtaining consents e.g. from freeholders and local authority
  • Provision will be made for full disclosure of Green Deal plans when a property changes hands.
  • There is a call for evidence for circumstances where multi-party consent is required and that this may act as a barrier to take up.
  • It will be mandatory for installers to meet an Green Deal Quality Mark
  • A Green deal installer standard is being developed by BSI.
  • Energy Suppliers with fewer than 250,000 will not be obliged to collect the Green deal charge but they will be able to opt in.
  • ECO will be set at a level equivalent to £1.3bn per annum.
  • The assessment and advice by the Green deal assessor must be free of any commercial considerations i.e. wholly impartial.
  • The way that assessors market their services are regulated under existing legislation.
  • The approach to the payment of assessors will be left to the market
  • It is expected that Green Deal and ECO will work in tandem in the majority of cases.
  • Green Deal providers will be incentivised to seek ECO funding to enable some expensive measures (e.g. Solid Wall) to be provided to customers.
  • It is proposed that energy suppliers receive the whole carbon and cost saving benefit from any measure they have been involved in.  This will create an incentive to energy suppliers to seek out Green Deal provider that can offer a mixture of Green Deal finance and ECO and to achieve their obligations at the lowest cost possible. 
  • The government want the interaction between Green Deal and ECO (and the Green Deal provider and energy suppliers) to be seamless so that the consumer is present with one package.
  • There are three scenarios that are expected for Green Deal and ECO:
  1. Green Deal finance only
  2. ECO Support and Green Deal finance combined
  3. ECO Support only
  • There are 4 objectives for ECO that the government want to achieve:
  1. Competition
  2. Transparency
  3. Market Efficiency
  4. Cost effectiveness
  • The government has recognised that there are two main risks with ECO:
  • that ECO suppliers may disproportionally fund their own activities
  • that ECO suppliers only partner a small number of Green Deal providers
  • It is recognised that the above behaviour would make it more difficult for new or smaller players to establish a foothold.  The government want to ensure that ECO does not present any additional barriers to entry than might already inherently be there for Green Deal.
  • The preferred solution is to set up a brokerage system.  An on-line portal will be set up to bring together energy suppliers and green deal providers in an open market where “ECO points” can be traded for ECO subsidy.    
  • Energy suppliers make a significant proportion of their ECO spending available to those Green Deal providers that are able to deliver in the most cost effective way.  It is proposed that the mechanism be transparent so as to encourage Green Deal providers to compete on price.  A further step would be to make the brokerage blind so the only variable driving competition is price.
  • A working group is being set up to develop the ideas further and agree a detailed specification. The terms of reference and membership list will be published on the DECC website shortly.
  • It is proposed that up to 50% of an Energy Suppliers obligation will be put through the brokerage portal so allowing the energy suppliers to form partnerships that build “shared brands” for example.
  • The idea of the brokerage system is largely focused on the carbon saving aspect of ECO but the mechanism might well be used for the delivery of affordable warmth measures too.
  • The government is keen to encourage localised approaches that can create opportunities to bring delivery costs down through “beneficial circles of delivery”.
  • The government thinks there is potential for the Big Society agenda to play a supporting role, perhaps by making community organisers available.
  • The government expect the Localism Bill to have in impact, encouraging Local Authorities to develop innovative ways of delivering energy efficiency and provide local incentives.
  • The government are not stipulating how Local Authorities might act within the Green Deal and can foresee a number of ways in which they might get involved in localised delivery.
  • It is the intention to retain the Home Energy Conservation Act (HECA) 1995 in England to provide a mechanism by which Local Authorities can report on activity in their area. Guidance is being developed and the government is hoping to publish this in the spring.  (the new guidance is likely to ask LAs to report on how they plan to engage with ECO)
  • The government is keen to encourage street by street roll out ( Area Based Approach). Various approaches have been considered to achieve this but the government strongly supports Local Authority partnerships with Energy Suppliers.
  • There are various considerations to consider for devolved nations.  Scotland has it’s own programme to deliver heating measures (Energy Assistance Package) and Wales will have a new fuel poverty strategy from April 2011 (NEST).  The government does not foresee any conflict of interests here and will leave it up to the devolved governments to decide on how their programmes should interact with ECO.
  • It is proposed that the life of a green deal plan is only limited by the warranted lifetime of the measures installed and could extend to 25 years, or more in some cases.
  • It is expected that all professionals operating within the green deal will promote green deal and inform their customers of the independent advice line and website.
  • Area based approaches are encouraged provided that cold calling and door stop selling techniques are used with the necessary safeguards in place.
  • The assessment will be underpinned by a robust energy assessment methodology and strong redress should anything go wrong. (as discussed in chapter 1)
  • Green Deal providers offering green deal plans in the domestic sector will need to be licenced under the Consumer Credit Act.
  • The green deal provider will be first point of contact should anything go wrong.
  • Payments will only commence after the measures have been installed to the agreed specification and once the energy company has notified the customer of the payment give the customer opportunity to object.
  • Green deal provider is responsible for providing an updated EPC post installation.
  • Energy Supply billing and collection will be regulated by OFGEM.  They will have recourse to the Energy Ombudsman and to the Financial Ombudsman if appropriate.
  • Relationship between Green Deal provider and energy companies will be governed by a new Green Deal Collection Remittance Agreement.
  • In the case of transfer of occupancy (new bill payer) there will be an obligation on the energy supplier to secure an acknowledge from the new bill payer that they are liable for the Green Deal charge.
  • The government is seeking to make a long term commitment to ECO (10 years) but set a statutory target to be achieved by 2015
  • Of the 1.3.billion estimated obligation 25% is expected to directed towards meeting Affordable Warmth aims with the remaining 75% directed towards the carbon target
  • It is proposed that interim minimum / maximum targets are set with a trajectory set up for companies to follow to ensure that the funding remains available (particularly for vulnerable households ) throughout the programme period. 
  • Government will allow energy suppliers to trade any over-delivery with other obligated companies, allowing them to under deliver on the same obligation.
  • The overall obligation will be split between eligible companies in proportion to their share of the supply market.  The split will be recalculated on a yearly basis.
  • There is a proposal to require a property specific assessment for ECO using the same methodology as the Green Deal assessment
  • It is proposed that ECO reporting be much more robust than was the case for CERT.  It is proposed that the energy companies report on a monthly basis.  This is to have a much more up to date picture of what is going on.
  • It is proposed that the data reported back to the administrators is much more detailed than under CERT.
  • Ofgem are the default ECO administrator. The Energy Act 2011 allows the secretary of state to appoint another person to be the ECO administrator.  Views are invited on whether Ofgem remain the administrator or whether DECC become the administrator but outsource the technical functions.
  • The current CESP and CERT obligations will end on 31st December 2012.
  • Green Deal and ECO will formally begin from October 2012 to allow an orderly transition.
  • ECO targets will be calculated to begin from 1st January 2013 to avoid double counting and the potential to place undue burden on energy bills.
  • The government is proposing to allow over-achievement by energy companies on their CERT and CESP targets to count towards their ECO targets.
  • The government has stated that they will not be extending CERT or CESP. 
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