Energy Company Obligation (ECO)
The Energy Company Obligation (ECO) is intended to provide additional support in the domestic sector, with a particular focus on vulnerable consumer groups and hard-to-treat homes.
ECO was introduced in January 2013 and is being funded and delivered by larger energy suppliers across Great Britain. It is administered by Ofgem. ECO is worth around £1.3 billion every year.
Through ECO, energy suppliers must improve the energy efficiency of households through the establishment of two distinct targets:
- Carbon Emissions Reduction Obligation (CERO)
Focusing on hard to treat homes. There is a requirement that 15% of suppliers’ Carbon Emissions Reduction Obligation be delivered in rural areas.
- Home Heating Cost Reduction Obligation (HHCRO) (Affordable Warmth)
Requiring energy suppliers to provide measures which improve the ability of low income and vulnerable households (the ‘Affordable Warmth Group’) to affordably heat their homes.
Changes to ECO
The new obligation period, known as ECO2t, launched on 1 April 2017 and will run until September 2018. This is a transition towards a longer term scheme which will run from 2018 to 2022.
The Department for Business, Energy and Industrial Strategy (BEIS) carried out an ECO: Help to Heat consultation in autumn 2016. Key policy decisions include:
- An 18 month extension to the ECO scheme (April 2017 – September 2018).
- Introduction of a more simplified and targeted scheme. The Affordable Warmth Group will be increased to around 4.7m households. This will include more households who are in fuel poverty, and those on lower incomes, who may be struggling to meet heating and other bills;
- Rural delivery will be protected as 15% of Carbon Emission Reduction Obligation will be delivered in rural areas.
- ‘Deemed scores’ will be introduced in place of the current Standard Assessment Procedure (SAP) methodology.
- The Carbon Saving Community Obligation (CSCO) aspect of ECO would not continue from April 2017 onwards.
For statistics on ECO, please see the UK Government (BEIS) Household Energy Efficiency National Statistics page
The Scottish Government produced a report in March 2016 of the energy efficiency measures which were installed in Scotland under ECO1 (between 1 January 2013 and 31 March 2015). See here for the report.
For Further Information
ECO website - Ofgem
ECO website - Department of Business, Energy and Industrial Strategy (BEIS)