Green Deal & the Energy Company Obligation (ECO)

The preparations for the Green Deal grow apace. Among the mountains of literature on policy and implementation there is a report from the Association for the Conservation of Energy on potential directions for the Energy Company Obligation. The ECO is a programme of energy company spending on energy efficiency that takes over from CESP and CERT in 2012. Its primary focus will be on the alleviation of fuel poverty for those who live in hard-to-treat homes or who are vulnerable. The Community Energy Savings Programme (CESP) which it replaces, was targeted at the 10% lowest income families in the UK.

The report identifies a number of issues that surround the design of the ECO and suggests solutions to them, but also ignores some other issues that needs to be considered.

The most significant recommendation in the report is that the Green Deal and ECO programmes should be delivered in an integrated way. This is so obvious that it barely needs to be said, but in creating policy there is no such thing as ‘obvious’. The report recommends that the two programmes be integrated so that

-works to qualifying properties can be carried out in an integrated way

-the same finance mechanism can be used for both schemes, i.e. a pay-as-you-save over a long period, but the Energy Company pays for the ECO works and not the occupant

There are other benefits that are not picked up, bing too practical to appeal to policymakers:

-finance for the works can be arranged by one provider

-the design of the two programmes can be done using the same software with the same efficiency objectives

-neighbouring properties where one qualifies for Green Deal and the other for the ECO can be treated at the same time to reap efficiency benefits

The ‘currency’ of savings is covered in some detail and provides an interesting insight into the design of systems to suit policy objectives. The analysis suggests to me that either SAP or the Energy Cost Factor generated by SAP are likely to be the units used to estimate energy efficiency gains. Whilst users of SAP recognise that it is far from perfect, the more it is used, the greater the pressure there will come on the DCLG to improve it and make it more fit for purpose. It seems strange to create a policy aimed at spending billions of pounds based on a piece of flawed assessment software.

One issue that the report mentions as a problem but offers no solution is the lack of geographical information in SAP. A Green Deal package for a tower block in Glasgow will pay back quicker than the same package in London because there is more energy to be saved in Glasgow. Unusually in policy mechanisms adding geography into the calculations will benefit the North and particularly Scotland. It remains to be seen whether this gets picked up and dealt with in the year remaining to develop the Green Deal/ECO assessment mechanism.

One of the stranger pieces of information buried in the report is the fact that there are about 100,000 properties in the UK that have a SAP score of less than 1! A town consisting of electrically heated tents?

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