DECC Blog – Changes to the Green Deal and the Energy Company Obligation

December 4, 2013

Changes to the Green Deal and the Energy Company Obligation By:

As part of the Energy Bills announcements earlier this week, the government outlined proposed changes to ECO, and announced that £540 million will be made available over the next three years to boost energy efficiency.  £450 million of the £540 million will be aimed at households and private landlords.  Alongside this, the Green Deal is also being improved to make it more attractive for consumers and to remove unnecessary cost for companies.

Reforming Green Deal

In establishing Green Deal, we set the conditions to grow Britain’s energy efficiency market.  It is still early days but activity so far shows a growing number of participants are keen to take advantage of this new market and consumers are being inspired to make their homes more efficient. Over 100,000 assessments have been undertaken since January, with our research suggesting they are being well received and action taken: over 80% of those households assessed have already improved or are taking active steps to improve their home’s energy efficiency. That’s an encouraging start. But new markets take time to establish and Green Deal is no different.

In these formative months for this new market we have worked closely with industry and listened to consumer groups and individual consumers. We have heard the many voices telling us the Green Deal needs to be simpler and more accessible to business and consumers alike.

So among this week’s announcements are several proposals to streamline and improve Green Deal:  we want to make it easier for businesses to enter this developing market and for consumers to act to make energy saving improvements to their properties.  And we want to work with you to make that happen.

New support for energy efficiency

The proposed new incentives and support we outlined earlier this week will boost take up of energy efficiency measures both for households and for the public sector too. Worth £150m each year for the three years from 2014-15, they will be designed to reward new rather than replacement energy efficiency improvements, dovetailing with the Green Deal to leverage private finance. Importantly, they will ensure that the impact of the changes proposed to ECO as a result of the Green Taxes review is carbon neutral.

This package will include:

  • A stamp duty rebate worth at least £1,000 from Government to spend on important energy-saving measures – equivalent to half the stamp duty on the average house – and more for expensive measures like solid wall insulation – up to £4,000.  All movers, not just those who have paid stamp duty, will be able to benefit, encouraging a whole-house approach and helping around 180,000 households over three years.
  • Targeted investment for more energy efficient homes within the Private Rented Sector (PRS), designed to help landlords meet the minimum standard (EPC E rating) that will be required under the PRS Regulations from April 2018.  We will also encourage landlords to bring their properties up to higher energy efficiency levels faster than the up-coming standards require.
  • £90 million of the overall £540 million package will help improve the energy efficiency of public sector buildings, including schools and hospitals, where an additional £30m will be made available in each of the 3 years from 2014/15 building on the existing successful Public Sector loans programme (SALIX).

Together with additional, further savings expected to be made from the transport sector, with details to be announced in the Autumn Statement, these schemes will, in total, be designed to deliver total carbon savings of around 0.6Mt per year to maintain progress towards meeting our legally-binding carbon budgets to 2020 and beyond.

We will work with Green Deal providers, industry and consumer groups to design these new schemes to start from April.

Immediate changes

We recognise the importance of giving certainty to industry at this time so we are making some immediate changes that will give a real boost to the supply chain while we design the new schemes and ahead of consulting on our proposed changes to ECO.

There has already been high demand for funds under DECC’s Green Deal Communities competition so a quadrupling of the money available to English local authorities this year to £80m to promote Green Deal on a street by street basis will be a great opportunity for the industry and for the energy efficiency of those communities.

Alongside the Green Deal cash back scheme, which stays open, it will incentivise the delivery of hard to treat cavity and solid wall insulation.  

And we will work actively with obligated energy companies to promote stronger integration of ECO and Green Deal finance so more households can improve their homes

Energy Company Obligation

The changes to ECO, to be consulted on, include:

  • Reducing the Carbon Obligation (CERO) target by 33%. The 2015 Carbon Saving Communities (CSCO) and Affordable Warmth (AW) targets will remain the same.
  • Extending the ECO scheme to March 2017 with new targets for CERO, CSCO and AW at 2015 levels.
  • Enabling energy suppliers to carry forward any over delivery against 2015 targets to count towards their 2017 targets.
  • Enabling energy suppliers to carry forward over-performance from the predecessor schemes (CERT/CESP) and count it towards their ECO targets.
  • Allowing companies which have delivered substantial early progress against their current CERO target to benefit from an uplift in scores for the measures delivered
  • Extending the CSCO element of ECO from the 15% to the 25% lowest areas on the Index of Multiple Deprivation and simplifying the qualifying criteria.
  • Including District Heating as an allowable primary measure under CERO.
  • Including loft and easy to treat cavity walls as an allowable primary measure under CERO.
  • Introducing and standardising measures to prevent fraud, particularly around loft and easy to treat cavity wall insulation.
  • Introducing a solid wall minima set at 100,000 measures to be delivered by 2017 across all companies and all elements of ECO.

Streamlining and improving the Green Deal: making things simpler

Alongside this package of support for Green Deal, we have also published this week a set of improvements to the Green Deal – to make it simpler and quicker for householders to improve their homes as well as stripping out time and cost for industry, while ensuring that consumers remain properly protected and can rely on work done under the Green Deal Quality Mark.

Starting from January and then over the following months we will make changes in three broad areas:

  • Making Green Deal more accessible to consumers through improved information and signposting;
  • Making it easier for firms to operate in the market; and
  • With the Green Deal Finance Company, making sure the Green Deal  finance offer gives customers what they need.

The market is already seeing simpler documentation available from the Green Deal Finance Company, for example.  By speeding up the processes through which Green Deal Providers are approved then giving those companies more support once they are approved, we will help them to become active quickly, giving consumers more choice in future.

I hope you will welcome these proposals as an important step.

The Green Deal will need to adapt as the energy services market develops, and as consumer attitudes to energy efficiency change.  We will continue to talk with you, across the industry, about your early experiences over the last ten months, and to research how consumers are finding the Green Deal.  We want to hear your views.

The Government is resolutely committed to the Green Deal.  We will continue to work with you to make the Green Deal a success.