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Energy Companies Obligation (ECO)

The Energy Companies Obligation (ECO) was introduced as the successor to the CERT scheme, and can be seen as an evolution and continuation of the recent tradition of supplier obligations (SO) as the preferred means of energy efficiency delivery in the UK. ECO is divided into three obligations:

Carbon Emissions Reduction Obligation (CERO) Under the Carbon Emissions Reduction Obligation, obligated suppliers must promote ‘primary measures’, including roof and wall insulation and connections to district heating systems. Other ‘secondary measures’, which improve the insulating properties of premises, can also be installed at the same premises as primary measures.
Carbon Saving Community Obligation (CSCO) Under the Carbon Saving Community Obligation, obligated suppliers must promote insulation measures and connections to district heating systems in areas of low income. The CSCO target has a sub-obligation, which requires that at least 15% of a supplier’s CSCO must be achieved by promoting measures to low income and vulnerable households in rural areas or deprived rural areas.
Home Heating Cost Reduction Obligation (HHRCO) Under the Home Heating Cost Reduction Obligation, obligated suppliers must promote measures which improve the ability of low income and vulnerable households (the ‘affordable warmth group’) to heat their homes. This includes actions that result in heating savings, such as the replacement or repair of a boiler.

Whilst ECO has been seen as a continuation of the CERT scheme it included an important provision for measures for ‘hard to treat homes’. These properties may include requirements for more invasive and expensive measures such as solid wall insulation, floor insulation and replacement of carbon intensive oil or electric heating; with heat pump technology for example. ECO has undergone 2 phases with the first phase having seen funding allocations for the scheme becoming extremely popular.

Concerns over the ECO Scheme

Some commentators have highlighted ECO’s potentially regressive nature, whereby the costs of the scheme were adding to consumers’ energy bills. Concerns over the costs of the scheme have led to the government scaling back of the initiative and reducing the number of qualifying measures, such as solid wall insulation. As of August 2015 1,504,898 ECO measures have been installed, again with a large component of cavity wall insulation 573,859 and loft insulation 404,462.

However, the depth and comprehensiveness of the measures implemented under ECO appears to be limited, given that only 91,362 solid wall insulation measures  have been undertaken during the scheme . The majority of these measures are likely to have occurred during the first phase, since much of the funding for these measures has been scaled back. Given that the climate change committee indicates that 3.5 million homes will need solid wall insulation by 2030  it seems that ECO will make a limited contribution to this goal.

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