The Energy Company Obligation (ECO)
The Energy Company Obligation (ECO) is a government scheme that is delivered by energy companies through an obligation that is placed on them to make homes in Britain more energy efficient and cheaper to heat.
What is ECO?
The Energy Company Obligation (ECO) is a government initiative that was launched in April 2013, whose aim was to reduce the carbon emissions from Britain’s homes as well as a way of reducing the levels of fuel poverty through the installation of home energy efficiency measures.
The energy companies who have to participate in the scheme are the Big Six suppliers along with a further nine suppliers who have more than 250,000 customers, or those who provide over 400 gigawatt hours of electricity or over 2,000 gigawatt hours of gas.
The current ECO scheme is made up of two elements:
- Carbon Emissions Reduction Obligation (CERO) obligates suppliers to deliver ‘primary measures’ which are largely roof and wall insulation, as well as district heating system connections. A proportion of CERO must be delivered in rural areas.
- Home Heating Cost Reduction Obligation (HHCRO) obligates suppliers to deliver energy efficiency measures that result in vulnerable customers being able to heat their homes more efficiently. Often this scheme is referred to as the Affordable Warmth Obligation. This obligation includes replacement heating systems or heating repairs as well as insulation.
Who to Contact for More Information
You could also contact the energy companies who are obligated to deliver ECO directly to see if they can offer you energy efficiency measures through the ECO scheme.
If you have any questions about ECO, you can contact Ofgem’s ECO team at [email protected].
Which Energy Suppliers Are Participating in ECO?
Below are energy companies who are obligated to participate in ECO:
- British Gas
- E Gas and Electricity
- E.ON Energy
- EDF Energy
- Octopus Energy
- Outfox the Market
- OVO Energy
- Scottish Power
- Shell Energy
- So Energy
- The Utility Warehouse
Am I Eligible for ECO Funded Home Energy Efficiency Improvements?
To be eligible for ECO you must either own your home or have the permission of your landlord.
The two elements of ECO have different eligibility criteria.
- No specific eligibility criteria
- A proportion must be completed in rural areas
HHCRO eligibility requires you to be in receipt of at least one of the following:
- Income-related employment and support allowance (ESA)
- Income-based jobseeker’s allowance (JSA)
- Income support
- Pension Credit Guarantee Credit
- Tax Credits (income requirements apply)
- Universal Credit (income requirements apply)
Which Home Energy Efficiency Improvements Are Eligible?
There are criteria about the eligibility of measures and under what circumstances they are eligible that is fairly detailed, but the below list gives an indication of the broad range of measures eligible:
- Solid wall insulation (external and internal)
- External wall insulation on Park Homes
- Cavity wall insulation
- Loft insulation
- Flat roof insulation
- Room in room insulation
- Underfloor insulation
- Hot water cylinder insulation
- Draft proofing
- Window glazing upgrades
- High-performance external doors
- Electric storage heating replacement or repair
- Heating controls
- District heating system new connections, upgrades, and heat meters
- Microgeneration including air or ground source heat pumps, biomass boilers, and solar PV
Not all the above measures are eligible under all elements of ECO and some energy companies only focus on certain measures which are largely wall and loft insulation and replacement boilers.
How Can Installers Participate in ECO?
Installers that are interested in participating in ECO by delivering energy efficiency measures should contact the obligated energy suppliers. Ofgem has a range of templates and guidance available for installers to support them delivering compliant ECO measures.
You will need to check if you are appropriately accredited to install ECO compliant measures such as PAS accredited, and that your systems are also accredited and have the required guarantees.
What is the ECO Brokerage?
The ECO Brokerage is auction system to enable ECO providers to batch sell energy efficiency measures to the energy suppliers. The auctions are anonymous and held fortnightly.
Who Manages and Regulates ECO?
Each of the energy companies is responsible for managing their ECO obligation and ensuring that the energy efficiency measures are installed comply with ECO rules. Each month they are required to send details of all measures installed to Ofgem for checking and compliance, these measures once approved are added to the ECO register that Ofgem maintains.
Ofgem administers ECO on behalf of the Department for Business, Energy, and Industrial Strategy. They set the targets for the suppliers and monitor the ECO scheme, as well as ensuring that the energy companies meet their obligated targets and comply with the ECO rules.
They also report to the Secretary of State on the scheme and publish monthly updates on the supplier progress.
Why Does the Government Place This Obligation on Energy Companies?
The government has put this requirement on the energy companies to deliver this energy efficiency programme because they are the companies selling energy to consumers and are partly responsible for the carbon emissions from energy.
They are the customer facing element of the energy industry and the best placed to deliver such a scheme. The delivery of previous energy efficiency schemes has shown the experience and capabilities that the energy companies have to deliver schemes of this kind in a cost-effective manner.
How Is Each Energy Company’s Obligation Target Calculated?
Ofgem calculates each energy company’s target by using the proportion of the energy market that they hold to meet an equal proportion of the overall obligated amount.
In 2017, The Department for Business, Energy, and Industrial Strategy decided to allow the energy companies to trade their obligations with other obligated companies.
What Happens If the Energy Company Does Not Meet Their Obligation?
As demonstrated at the end of the CERT and CESP schemes, those energy companies that failed to meet their obligation were fined and they still had to deliver the equivalent amount of measures that they missed their target by. This penalty signalled to the energy companies that the government and Ofgem took the obligation seriously and under delivery would not be tolerated.
The ECO scheme began in April 2013 and has since been amended several times to ensure that the right people and homes benefit from the scheme. The latest changes were applied in April 2017 and the revised scheme has been termed ECO2t.
The first phase of ECO was known as ECO1 and this ran from January 2013 to March 2015, although the scheme officially did not begin until April 2013 energy suppliers were able to start installing qualifying energy efficiency measures from January 2013 so that there was not a break between the completion of the previous energy efficiency obligation.
Earlier versions of ECO included an additional element called the Carbon Saving Community Obligation (CSCO) which targeted some of the most deprived areas of the country to ensure that insulation measures were directed to areas that needed the support.
The second phase of the ECO obligation was known as ECO2 and this ran from April 2015 to March 2017. ECO2 was extended to 2018 and is known as ECO2t, this was extended in order for the government to set the next stage of the supplier obligation which they have confirmed will run to at least 2021-22. The Department for Business, Energy, and Industrial Strategy is currently working on the next scheme.
Prior to ECO, there were two supplier obligations that ran concurrently:
- Carbon Emissions Reduction Target (CERT)
- Community Energy Savings Programme (CESP)
CERT ran from April 2008 to December 2012 and was an obligation that was placed on the larger energy suppliers to reduce carbon emissions from homes in Britain. Collectively the energy suppliers were required to reach a target of 293 million lifetime tonnes of carbon dioxide, of which the suppliers achieved 296.9 Mt CO2.
CESP ran from October 2009 to December 2012 and it was created as a part of the government’s Home Energy Saving Programme. The target for CESP was 19.25 Mt CO2 and the energy companies achieved 16.31 Mt CO2. It required gas and electricity suppliers and for the first time some electricity generators to deliver energy efficiency measures to homes that were located in designated low-income areas of Britain.
The philosophy behind CESP was to encourage a whole house approach and to target support in areas that need help the most, as well as create economies of scale through targeted geographical schemes.
Prior to this there was a scheme called the Energy Efficiency Commitment which ran in two phases the first from 2002 to 2005, and the second 2005 to 2008. EEC was created from the success of an earlier scheme called the Energy Efficiency Standards of Performance (EESoP), which Ofgem jointly developed with the Energy Saving Trust.
EESoP ran in three stages between 1994 to 2002. Both EESoP and EEC focused on disadvantaged customers with a minimum of 50% of the target having to be from priority group customers who are in receipt of certain benefits.