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Energy Company Obligation SECAN Update Robert Marjoram Senior Account Development Executive 3 rd November 2014.

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Presentation on theme: "Energy Company Obligation SECAN Update Robert Marjoram Senior Account Development Executive 3 rd November 2014."— Presentation transcript:

1 Energy Company Obligation SECAN Update Robert Marjoram Senior Account Development Executive 3 rd November 2014

2 2 Targets – key changes CERO will be reduced by 33%, then HHCRO, CSCO and CERO targets are pro rata extended from 31 March 2015 to 31 March CERO - at 31 March 2014 any delivery in excess of 25-35% of current phase 1 & 2 will receive an uplift of times the carbon score primary measures only. This excludes Excess Action. The CERO uplifts at 31 March 2014 generate bonus carbon which can be applied towards the target. These ranges will be consulted upon before they are finalised. 1.75x uplift on all excess >35% of phase 1 and 2 CERO 2015 to be a non enforceable target but a 10% increase will be made to under delivered CERO HHCRO and CSCO 31 March 2015 targets must still be met. CERO can fall short by revised 31 st March target but any shortfall will be incurred as additional obligation at a multiple of 1.1 times. Eligible Measures – key changes HHCRO and CSCO – no change CERO (only SWI and Hard To Treat Cavities can qualify as primary measures installed) Easy cavity walls, loft insulation and district heating will become eligible primary measures for CERO. A minimum SWI sub-obligation of 100k measures for the industry until March Government Autumn Ambition Potential ECO Changes

3 3 Levelisation Mechanism Threshold and Uplift as per the Term Sheet – threshold of 35% (Phase 1 and 2) and uplift factor of 1.75 Uplift for primary measures only above the threshold (threshold made up of primary measures only). Carry-over Cap There will be no cap on over-delivery against 2015 targets. Carry-over Rules All CERO and CSCO surplus action can be carried forward with no rule changes. In the case of HHCRO surplus action installed from 1 st January 2014: –A deflated score (0.75 without warranty and 0.8 with warranty) will apply for replacement gas boilers. –An uplifted score (1.40 without warranty and 1.45 with warranty) will apply for insulation and boilers in households whose main space heating systems are ‘non-gas’. –The warranty requirement is for a one year installation warranty (no annual service) provided at the time of installation with a customer declaration that there was no charge for the warranty. –Warranties are obligatory for HHCRO surplus action (boilers) from 1 st January –The deflator and uplifts will continue to apply in ECO2 (from April 2015) CSCO Additional qualifying areas Rural rule changes - Lowest 25% of LSOAs in settlements under 10,000 population SWI Minimum Government will introduce a SWI minimum of 4MtCO2 by 31 March apportioned according to market share. Targets The 33% Reduction will be applied to Phase 3 only The targets remain as consulted on (2.25 years) apart from HHCRO, which has reduced by £0.1bn to reflect the updated policy decisions and market delivery data – this depends on a move away from gas boilers. Mandation There will be no mandation of: GDARs, the use of Green Deal Installers, lodged EPCs, Brokerage, Green Deal blending with ECO, packages of measures, the use of ESAS, limits to customer contributions under HHCRO, delivery of low cost CERO measures to low income households and delivery to non-gas fuelled households. ECO Policy Changes Government Response to the ECO Consultation – Summary

4 4 Key ECO Policy/Regulatory Milestones MARCH/APRIL 2015 ECO2 Final Guidance due to be published, ECO1 comes to an end on 31 st March and ECO2 begins on 1 st April NOVEMBER/DECEMBER 2014 ECO 1.2 Guidance to be published, ECO Amendment Order (No.2) to come into effect and 2 nd Ofgem ECO2 Guidance Consultation to be published. SEPTEMBER/OCTOBER 2014 Draft ECO2 Order due to be published by DECC/due to be laid in Parliament and 1 st ECO2 Guidance Consultation to be published - due mid/late Jan. AUGUST 2014 Ofgem Published the Changes to the ECO Guidance Consultation and Draft ECO 1.2 Guidance JULY 2014 DECC Published Response to the Future of ECO Consultation and The Draft ECO Amendment Order (No.2) was laid in Parliament MARCH 2014 DECC Published The Future of ECO Consultation DECEMBER 2013 Chancellor’s Autumn Statement Announcement The March Consultation introduced uncertainty as DECC language created concern. The final response was in line with original expectations, with the exception of the HHCRO Boiler deflator. The industry has been delivering ‘Interim Measures’ at our own risk since April Certainty comes in November when all the changes come into effect – many of which will be backdated to 1 st April We await the draft ECO2 Order/Guidance - in particular the Boiler Warranty specification – required 1 st January The focus will soon turn to ECO policy post 2017 – particularly in light of the new Fuel Poverty (energy efficiency) target.

5 5 Ofgem consultation on Draft ECO HHCRO Guidance link below: https://www.ofgem.gov.uk/ofgem-publications/90828/eco21consultation.pdf https://www.ofgem.gov.uk/ofgem-publications/90828/eco21consultation.pdf The HHCRO requirements will have an impact on measures delivered from 1 January Some of these requirements relate to whether certain measures can be credited towards a supplier’s ECO2 HHCRO. These are: Demonstrating whether a premises is non-gas fuelled. Introducing qualifying warranties for boiler replacements. Introducing warranties for electric storage heater replacements. Non Gas fuelled premises An uplift may be applied to the cost saving of a heating qualifying action if the measure is installed in a non-gas fuelled premises under ECO2 (next consultation will have more information on uplifts) HHCRO surplus actions under ECO1 may be applied to ECO2 if installed between 1 st Jan 2014 and 31 st March 2015 these will be subject a conversion factor (between 1.35 & 1.45 depending on the measure) The ECO2 order also confirms the proposed definition of a non-gas fuelled premise as the following :- –The main space heating system of a premises includes any heating systems present that are not fixed room heaters. –Where the premises is only heated by fixed room heaters then these will be the assumed main heating system. Warranties for replacement boilers All replacement boilers installed must be accompanied by a qualifying warranty. This requirement will apply to all replacement boilers, irrespective of fuel type and whether they are qualifying or non-qualifying boiler replacements. ECO Ofgem Consulting


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