Energy UK Response to the Consultation on extending the ECO4 end date

Executive Summary

Energy UK welcomes the consultation on extending the Energy Company Obligation 4 (ECO4) end date. The Government’s approach reflects a pragmatic solution to scheme end. However, for the proposals to deliver on their ambition, the Government must announce its intention for a future supplier obligation without delay and consult upon its design before the end of this year.

As the consultation sets out, ECO4 is currently the most impactful Government energy efficiency scheme, delivering 875,900 measures to around 260,400 households over its lifetime. The Government’s ambition is to retrofit five million homes by the end of this Parliament, so it is imperative that suppliers and the supply chain, upon whom the success of this scheme depends, have the certainty needed to deliver at this scale.

A member survey by the Installation Assurance Authority Federation found that 88% of respondents reported they had six months or less in cash reserves. Therefore, certainty surrounding both the ECO4 extension and a future obligation are essential to enable businesses to stay in the sector, thus protecting the existing supply chain.

Energy UK’s response makes several key recommendations to ensure that the proposals set out in this consultation achieve their intended purpose:

Future scheme

• Commit to a 10-year future scheme to provide confidence to the supply chain.
• Adopt a phased approach to scheme design, which ensures that the basics of the scheme are robust, allowing refinement over time.
• Provide details of the first phase of a future scheme at the earliest opportunity to enable suppliers to calculate the risk and value of participating in the carry-over and to enable other stakeholders to begin preparations, such as quality assurance managers and Ofgem as the scheme administrator.

ECO4 extension

• Afford suppliers the flexibility to choose between the two proposed conversion methods when considering participation in the carry-over.
• Ofgem should publish guidance on price cap allowance and historical cost recovery at the earliest opportunity and engage with suppliers to ensure no cost under-recovery for ECO4 and GBIS.
• Clear roles and responsibilities for suppliers and certification bodies regarding consumer protections should be set.
• Improve consumer protection through mandated on-site inspections by a relevant certification body for high-risk measures and faster fraud feedback loops from Ofgem.