Where is ECO4?

The Energy Company Obligation (ECO) has been running for almost 10 years now, with the current iteration of this energy efficiency scheme (ECO3) running since 2018. A consultation released by the government last summer, confirmed that the next phase of ECO (ECO4) should be released on 1st April 2022, however, the industry has yet to see the outcome of this consultation, which begs the question - where is ECO4?

What is the Energy Company Obligation?

ECO is a government energy efficiency scheme which was set up to help customers in England, Wales and Scotland, to make their homes more energy efficient.

Under ECO, large energy companies such as British Gas, EDF, EON etc are required to deliver energy efficiency measures to domestic premises. It is up to the energy companies to determine which measures they choose to fund, the level of funding they provide and the installer they choose to work with.

Ofgem currently administers the scheme on behalf of the Department for Business Energy & Industrial Strategy (BEIS).

What has been proposed for ECO4?

ECO4 is set to run from April 2022 until March 2026 and is expected to deliver another £1 billion per year. This is a significant jump from the £640m cost per year seen within ECO3.

Targeting the most fuel poor homes

The aim of the scheme will be to improve the worst performing homes, which are occupied by low income and vulnerable households.

The government has proposed the introduction of an ECO4 'minimum requirement' where properties which currently have an Energy Performance Certificate (EPC) rating of F or G must meet at least band D following improvements. This also extends to properties rated EPC band D or E which must meet EPC band C following improvements. Projects that do not achieve these requirements could receive deflated partial project scores.

This all aligns with the governments target to improve as many fuel poor homes as possible to EPC band C by 2030.

Updated scoring methodology

It has been proposed that the ECO4 scoring methodology will be based on the difference in expected annual energy costs between the starting and finishing SAP rating of the premises- this will also regard the floor area.

This would be evidenced via a valid pre-installation SAP or RdSAP assessment. For the property’s finishing SAP rating, the proposals allow any evidence considered appropriate by Ofgem, which could include a post installation SAP or RdSAP assessment.

PAS 2035 will remain a requirement

"Improving the energy efficiency of homes by adopting a ‘fabric first’ approach is key in ensuring the transition to low carbon heating is cost-effective for households".  ECO4 will continue to mandate compliance with PAS 2035. This means that installers will need to have PAS 2030:2019 certification in order to deliver installs within ECO, and all eco funded projects will need to be overseen by a TrustMark Approved Retrofit Coordinator (Retrofit Coordinators can be found via our online search facility).

In support of the PAS 2035 approach all energy efficiency measures installed within a property will be packaged together for each property and scored as a package, this differs from ECO3 where measures were scored independently.

So where is it?

The ECO4 consultation closed back in September 2021, and referenced an April 2022 start date. However, it is now strongly believed that an ECO3 interim period will be introduced from the beginning of April and will run until the end of June 2022. This will give the industry some time to adapt to changes coming in ECO4. Nothing has been published in the public domain to confirm this, but we suspect that an announcement will be due from the government or Ofgem any day now.

In any case we will keep our eyes open, and will ofcourse industry informed, once an update is released.

ECO4 consultation: https://www.gov.uk/government/consultations/design-of-the-energy-company-obligation-eco4-2022-2026

Article Published: 30/03/22

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