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Government responds to consultation on interim scheme for the Energy Company Obligation

With the end of the first phase of the Energy Company Obligation in sight, government has released its response to a recent consultation, setting out what we can expect from the next phase of the scheme.

The Energy Company Obligation (ECO) is a mechanism by which household energy efficiency measures are delivered by energy companies. With the end of the first phase of ECO in sight, the government ran a consultation as to the future of the scheme, specifically on an interim scheme which would run from 2017-18. Following the release of the government response, the below outlines how this compares to the CBI’s priorities for the future of the scheme.

The new scheme will see a move to more simple targets, with a greater focus on the fuel poor. This includes increasing the ‘Affordable Warmth’ obligation to 70% of overall spend (£640m/pa), up from 36%.

  • The CBI welcomes the move to increase the focus to the fuel poor, however we also argued that with significant change to the scheme, business would need clarity on legislation as soon as possible. 

The Carbon Emissions Reduction Obligation (CERO) will decrease as a proportion of the overall spend, from 34% to 30%, and the Carbon Saving Community Obligation has been brought to an end. 

  • With tough carbon emission targets to meet in the coming years, scaling this back may undermine chances of reaching these goals. It’s therefore important that a considered, holistic approach to household energy efficiency should be part of the government’s upcoming emissions reduction plan. 

Government announced a range of measures to reduce the administrative burden of ECO, including a move to deemed scoring to simplify the method of assessing bill and carbon savings in homes. 

  • The CBI was pleased to see measures to reduce the administrative burden. The move to deemed scoring is something that CBI members have long called for, however this should be carefully implemented to ensure that the scores are as accurate as possible, and take into account a range of property features.

Government will also be introducing a ‘flexible eligibility’ mechanism, which allows energy suppliers to work with local authorities to determine up to 10% of the Affordable Warmth obligation.

  • This is another positive step towards reducing the administrative burden of ECO. The government should look to learn from this mechanism in order to maximise any opportunities for a range of trusted partners to support the future, long term scheme. 

As well as extending the delivery period to 18 months, Government would also look favourably on enabling suppliers to ‘carry-under’ a certain amount of shortfall in delivery. 

  • This is welcomed by members, however clarity is needed on the detail of this ‘carry-under’ scheme, and business will welcome the commitment to consult on this within the planning for the long-term ECO scheme running 2018-22. 

The CBI’s submission to the ECO consultation

The Government’s final response following the consultation