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CEO ECO Update 17 February 2017

Well blow me down, this could quite well be the record for the amount of information that has to be disseminated in a single ECO update. BEIS and Ofgem must have an army of little ECO elves working around the clock to publish the flurry of consultation releases, draft guidance documents and updated standard templates that have popped out in the last week. Most importantly, you will not have missed that BEIS have published their response to the Help to Heat ECO2t transition which lays out the format and targets for ECO from April onwards. And, if you are a room in roof installer currently submitting prices for the next 12 months, you need to read this update. So without further ado, let’s get into the nitty gritty…

Help to Heat Consultation Response

A fairly even handed response from BEIS which seemed to give a little bit for everybody. The suppliers got some relaxed HHCRO eligibility creating a larger pool of eligible customers plus a circa 30% reduction of the HHCRO target originally proposed, installers and suppliers both got the benefit of an 18 month extensions easing the pressure to deliver a completely new scheme in 12 months from a standing start, local authorities got a foot in the ECO door with flexible eligibility and Registered Providers gained access as expected to HHCRO funding for certain households. So here is the ECO2t in a nutshell.

What we thought would happen…

• The notional annual spend will remain at £640m a year as originally consulted
• The Affordable Warmth (AW) obligation will increase from 36% of spend to 70% of spend
• The sub criteria has been removed from some of the benefit categories to make it easier e.g. children under 16, specific benefit elements etc.
• Social housing properties with EPC bands E, F or G will be eligible under AW for certain measures (insulation, first time heating inc renewable heating)
• Qualifying gas boilers limited to the equivalent of 25,000 a year
• Deemed scores will be introduced from 1st April
• Solid wall minima retained
• CSCO is no more (good)
• Chartered Surveyor Report or GDAR now no longer needed to recommend the measure (double good)
• RHI can be claimed alongside ECO funding
• Party wall insulation will get a boost in savings
• All measures installed from 1 June 2017 must be installed in accordance with PAS2030:2017 Edition 1 (have you bought your copy yet? Quite a few changes)

The little BEIS surprises…

• The transition or extension will now be 18 months rather than 12 months
• Local authority flexible eligibility is to be included – at 10% of the AW target
• LAs also able to sign off infill properties e.g. Do one half of a semi as AW and the other half can also be done as AW regardless of the resident’s financial status
• Deemed scores will be increased by 30% to attempt to levelise them against the current EPC based scores*
• The income thresholds for tax credits have been raised significantly to help bring in more JAMs (Just About Managing) families. This increases the AW group to a possible 4.7m people, up from 4m as consulted (see table below)
• Solid wall insulation minimum increased from 17,000 a year to 21,000 a year
• CERO will now have a 15% rural element. Don’t get excited, this is likely to come in without any effort trying so rates are unlikely to be any higher for this

*Clearly by increasing the deemed scores by 30% this reduces the number of measures that are needed to be done by suppliers to hit their target. But never fear, BEIS is here and they stated that they would “increase the size of the obligation correspondingly”.  So let me get my fag packet out to crunch the numbers. The previous AW target was £1.84bn but that was for 12 months, so extend that to 18 months and you get £2.76bn, now add an extra 30% and you get £3.59bn, my maths teacher would be proud. Now let’s see what the final AW target is shall we? Oh! The final AW target appears to be £2.76bn not £3.59bn, silly me, better head off and get myself a new calculator or a better maths teacher :-/

So whilst it would seem that the CERO target has been increased by 30% plus a bit more due to a lower estimated cost of delivery for solid wall insulation, the AW target has not been increased which creates an effective 30% reduction in the target compared to that originally consulted on. BEIS did raise this at the recent ECO Stakeholder Group meeting, they said it was down to a revised modelling of measure types and because the AW group had increased in size, this apparently came to exactly the 30% that the deemed scores had increased by. Hmmm call me a sceptic but…

https://www.gov.uk/government/consultations/energy-company-obligation-eco-help-to-heat

Ofgem Consultation Response

Ofgem also recently published the results of its consultation on how it intends to administer the new changes to ECO2t. As part of this Ofgem had proposed requiring a pre installation inspection regime to ensure that the starting depth of loft insulation was correct. Thankfully, after a lot of push back, this proposal was dropped. However, homes with less than 100mm in the loft will now have to have a declaration similar to the current virgin loft declaration confirming the existing depth, to be signed by the customer and the surveyor and attached to a joist in the loft with suppliers probably wanting a photograph taken for compliance purposes. Installers will also need to staple up a piece of paper in every bedroom signed by the surveyor and the customer saying “This is a bedroom not a broom cupboard honestly” and for homes with storage heaters a signed declaration saying “This is definitely a storage heater not a gas boiler” 🙂

https://www.ofgem.gov.uk/publications-and-updates/response-eco2t-consultation-part-one-and-draft-guidance-update

The Ofgem draft guidance can also be seen here https://www.ofgem.gov.uk/system/files/docs/2017/02/170210_ecotguidanceparti_updated_draft_guidance_final.pdf

New ECO forms

Ofgem’s little ECO elves have also finalised a raft of updated standard templates, some have already been released and some are due for release soon. These include:

• A standard privacy statement. No honestly, it has actually been released! This new version has the DWP Data Match statement so every customer can be checked for HHCRO eligibility if the box is ticked
• Updated Affordable Warmth eligibility checklist
• Updated DOCC – this may need to have 2 or 3 versions due to changes in PAS
• Updated RIR survey
• ECO2t social housing E,F,G rated declaration
• Deemed score input document
• Local authority flexible eligibility declaration
• Updated ECO2t measures table

https://www.ofgem.gov.uk/publications-and-updates/eco-reporting-working-group-standardised-templates

Get some caffeine, new acronyms – POMI & POPT

Soon we will be in the new world of deemed scores and along with these you will need to get to know all about POMI and POPT. Now listen very carefully, this is flipping confusing.

POMI – Percent of Measure Installed
POPT – Percent of Property Treated

One is used to multiply by the deemed score to get the final savings. Go on, have a guess which one?

The answer is POPT. POMI is the amount of the measure that you can possibly install, so if a house had cavity walls and you insulated all 4 walls, you would have 100% POMI and 100% POPT. If you only insulated half the walls, you would have 50% POMI and POPT. But if the house had half solid walls and half cavity walls and you insulated just the cavity, you would have insulated as much of the cavity measure as you can (100% POMI), but only half the house (50% POPT). Therefore you take the deemed score for cavity wall insulation for the chosen house type and multiply it by the 50% POPT.

Still with me? I can see your eyes glazing over so suggest you read all about it on page 64 of the Ofgem draft guidance https://www.ofgem.gov.uk/system/files/docs/2017/02/170210_ecotguidanceparti_updated_draft_guidance_final.pdf

Room in roof – time to go overboard?

Room in roof installers probably hate reading my updates as I always seem to be the bearer of bad news, as always though, please don’t shoot the messenger! For sometime now installers have used what I technically call the slidey up the slope method for insulating the pitched roof element of the roof room. This somewhat hit and miss technique can at times work perfectly and other times can lead to a bit of a dog’s ear due to noggins, lath and plaster and occasionally sloppy workmanship. The issue is that there has not really been any guides or standards on how a roof room should be insulated, so installers have done their best to improve the thermal values as best they can for as reasonable a cost as they can.

Whilst no official decision has been made, you should be warned that in ECO2t the slidey slope method is likely to bite the dust and in instead you will be required to overboard the slopes. To my mind this is always a better approach but of course it does come at a cost. We are not experts but also think that Building Regulations Part L (page 17) also comes into play as below:

For the purposes of this Approved Document, renovation of a thermal element through:
a. the provision of a new layer means either of the following activities:

ii Dry-lining the internal surface of a thermal element.

This requirement means you need to achieve a u-value of 0.16 if it is “technically, functionally and economically feasible. A reasonable test of economic feasibility is to achieve a simple payback of 15 years or less”. Otherwise you must meet a threshold u-value of at least 0.35 which our fag packet u-value calculator indicated required a minimum of a 60mm PIR backed plasterboard.

I reiterate that this is not official at the moment but I think it is important that people are aware that this is on the cards, if the changes are implemented, you may see the new requirement coming into effect at the beginning of April or the 1st June when you are required to work to the new PAS standards.

It’s party time

Party wall insulation has always been a bit of an odd one in my mind. How do you know a home has a cavity party wall and how often are you going to fill up the neighbour’s front room with millions of little beads? Anyway, some people cleverer than me seem to know what they are doing and the nice people at BEIS have given them a boost by reducing the in-use factor for party wall insulation thereby increasing the scores. Also a little surprise in the recently released Ofgem draft guidance, if you insulate the party walls between a pair of semis, you can claim the savings for both homes. In an electrically heated 3 bed semi that gives you around 24 tonnes or £6800 LTS if HHCRO, it won’t buy you a Lamborghini, but it does make it worthwhile having a look if you are at the house drilling the rest of the walls.

Slimline storage heaters

In my previous update I published some draft guidance for storage heaters and in it I stated that slimline storage heaters are not an eligible measure that can be scored through an ECO scoring tool. Whilst this is correct, Ofgem have subsequently confirmed that slimline heaters are a valid product to install but they need to be scored using outside of an ECO scoring tool. Not all energy suppliers will allow this scoring method or slimline heaters so in all cases we would recommend you chat to your funder before going ahead and installing these.

So how can you score slimline storage heaters when using the qualifying ESH method? This is how I understand it, but as always check with your funder.

  1. Create an EPR from your EPC data with the heating set to “no heating system present”. Note down the total running costs for the home in £s = A
  2. Create a second EPR this time changing the heating back to storage heaters and entering the type of heater being installed. If high heat retention, select the model from the PCDB and the associated HHRSH controls, otherwise select the type of heater and control 2402 “automatic charge control”. Note down the new total running costs = B
  3. Calculate A-B then multiply by the storage heater lifetime of 20 years. Hey presto.

If you are not replacing all of the storage heaters, or if you are not installing enough heaters to adequately heat the house, in step 2 above you would create 2 primary heating systems, one being the new type of heater and the other the existing type. The percentages would then be entered (rounded to the nearest 10%) with the proportion being calculated either based on the number being replaced compared to the number currently in situ, or the number being replaced compared to the number of heaters that are needed in total to adequately heat the property.

Ofgem Room in roof investigation

Ofgem have published an outline of the action that they have taken regarding room in roof insulation which was fitted prior to their guidance being published at the end of July. In this guidance, Ofgem made it clear that the gable and party walls needed to be insulated or deducted from the score. Whilst Ofgem accepted that there was some confusion around the party wall element, they were adamant that the requirement to insulate the gable wall and other elements such as the dormer cheeks and ceiling was clear. Suppliers were asked to undertake an audit which clarified on jobs installed before the guidance, which elements had actually been insulated. The audit highlighted that more than half of jobs had been overstated in terms of the percentage installed and on average over stated by 17%. Suppliers were therefore offered 3 choices, accept the percentage reduction as per below, undertake more technical monitoring, or put forwards a third option. All suppliers agreed to the reduction apart from one who undertook additional TM for a small number of measures.

Personally I think that the requirement to insulate the gable wall was far from clear prior to the guidance and this is another case of retrospective action. It is essential for clear guidance to be issued and in the absence of such guidance, that suppliers and the supply chain are not penalised retrospectively when for the most part they were using their best endeavours to install the work to the required standards and to claim the correct score.

Supplier Percentage Point Correction
British Gas 17%
Co-operative Energy 8%
EDF Energy 10%
E.ON 17%
First Utility 17%
Npower 14%
OVO Energy 17%
Scottish Power 9%
SSE 17%
Utilita 0%

https://www.ofgem.gov.uk/publications-and-updates/room-roof-insulation-investigation-update

New standards will increase delivery costs

From 1st June 2017 all installers working under ECO will need to be working to the new PAS 2030:2017 standards. These new standards will significantly toughen up installation and survey requirements which will include references to new guides such as the room in roof guide currently being produced by the NIA and ATMA. The new PAS requires additional inspections to be carried out by the PAS accreditation bodies, the cost of which will in turn be passed through to installers. The Cavity Assessment Surveillance Scheme (CASS) will also soon be launched with a cost of £10 on every cavity job on top of the recent price increase for CIGA warranties. The Bonfield Review, now known as Each Home Counts, will see additional costs and requirements overlaid onto the supply chain as the recommendations are implemented over the next 1-2 years.

These, along with double digit price increases for materials due to currency fluctuations, mean that the cost to deliver ECO measures will continue to increase over the coming 12-18 months. Neil Marshall from the NIA raised this at the recent ECO Stakeholder meeting, stating that there will be an additional cost to meet all of these new standards and requirements and that the downward pressure on ECO rates was not sustainable. Otherwise, corners will be cut, quality will fall and more companies will exit ECO for good. Sadly another stalwart insulation installer fell this week, Warmspace of Swindon, trading since 1996, a sign of just how tough ECO2 has been.

Get up to speed with the new PAS and RIR guide

From the 1st June you will need to be working to the PAS2030: 2017 standard. To make sure you are fully up to speed on the latest requirements of PAS and the new room in roof insulation best practice guide that you will be required to follow as a requirement of PAS, we would recommend you attend one of the events being organised by the NIA as below:

• Jurys Inn Hinckley Island Hotel Leicestershire – 2nd March 2017.
• Radisson Blu Hotel Edinburgh – 8th March.

Installers who are not currently members of the NIA can join before the event to be able to attend and we are advised that membership starts from £580. Contact Bev.hodson@nia-uk.org

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