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UTILITY Week 11th September 2015

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12 | 11TH -17TH SEPTEMBER 2015 | UTILITY WEEK Policy & Regulation Market view A lthough the Energy Company Obliga- tion (Eco) ends in 2017, the UK still has some way to go to improve the energy efficiency of its building stock. With no successor scheme yet in place, we have a golden opportunity to build on previous programmes with some simple changes and deliver better value for money, tackle fuel poverty and meet legally binding targets. Eco and its predecessors have been suc- cessful in delivering energy-efficiency sav- ings for households across the country. Millions of measures have been installed, cutting bills for those receiving them. While there is healthy debate about the type of schemes needed to reduce energy demand in the longer term, in the near term, traditional structural energy efficiency has an important role to play. So we can expect evolution rather than revolution when the Department of Energy and Climate Change sets out its plan for what will follow in 2017 – and therein lies the opportunity. Few would dispute that there remains significant room for improvement in Eco. It's a complicated scheme, which, ironically, means it is not particularly efficient. But there are simple ways this can be addressed; we've identified five steps that could stream- line Eco and make sure the bill payers who fund it get more for their money. First, we need to address the burdensome RdSAP (reduced data standard assessment procedure) scoring system. This was a well- intentioned attempt to ensure the carbon savings claimed accurately reflect the actual result. Unfortunately, the approach creates an additional layer of complexity, increases costs and saps resources. It is also confusing for consumers, who see similar, neighbour- ing properties benefiting from free or heavily subsidised work without being offered the same support. The lack of a standardised scoring system also makes it difficult for energy companies or insulation installers to offer upfront certainty in their offers to cus- tomers. SSE's calculations suggest that rein- troducing deemed scoring by measure and house type could save more than £200 per measure. Second, the famine and feast created by the stop-start nature of schemes with a relatively short life (and changes to rules midway) makes it difficult for them to be effi- cient. Giving obligated parties longer-term certainty over schemes would help to control costs, present a simpler and clearer message to eligible customers and enable a sustain- able supply chain to develop. Third, we need to avoid duplication of effort when policing the industry and enforc- ing standards. We want to see improvements in the customer experience and certainty in the quality of the job, so we are delighted that Dr Peter Bonfield has been appointed to review standards across the industry. Energy companies use contractors to deliver Eco and require them to be accredited, which means they are registered and monitored under government accreditation schemes with oversight bodies. Energy companies are then required by Ofgem to carry out additional but almost identical checks on these same installers. We need clearer responsibility for accreditation bodies on monitoring and improving standards. Fourth, the scheme beyond 2017 could be designed to ensure that funding incen- tives do not drive inappropriate practices. For example, although Eco was intended to encourage some more expensive energy- saving measures, it makes no distinction between low-cost and high-cost measures. This has resulted in some measures, such as 'virgin lo' insulation, carrying an artificially high value and being incorrectly claimed. Separating out high- and low-cost schemes would help to protect customers and prevent money being wasted. In addition, the rein- troduction of deemed scores would not only reduce the administrative burden, but make it easier to ensure that the right levels of funding are applied to the right work. Finally, the one-month reporting rule creates challenging deadlines for the sup- ply chain, with little flexibility or margin for error. Eco measures can involve a long sup- ply chain. The one-month window was intro- duced to ensure progress is transparent and measures are submitted regularly, but has led to rushed paperwork and perfectly good measures being rejected. A two-month win- dow would protect the supply chain and ulti- mately mean that customers do not pay more than they should. A clear timetable for work going through Ofgem's approval process would also provide more certainty that work has been successfully 'banked' as being Eco- compliant. Alternatively, an annual banking schedule could also provide greater certainty to all participants that work is likely to be accepted at the end of the scheme. Clarity on a simplified, extended scheme is needed to help the industry maintain momentum. These simple changes have the potential to cut costs, protect customers, cre- ate a sustainable supply chain and improve customer engagement. Importantly, they can all be implemented swily, improving the scheme while allowing time for longer-term changes, such as greater targeting through data sharing, to be considered. Keith Armstrong, head of energy services, SSE A guide to Eco improvement Keith Armstrong outlines five straightforward steps that policymakers should take to improve the effectiveness of the Energy Company Obligation. Key points Replace the existing carbon savings scoring procedure with a standardised system based on the energy-saving measures implemented and the type of property. Extend the duration of energy-efficiency schemes to give obligated parties longer- term certainty. Clarify the responsibilities of accreditation bodies to avoid duplicating assessments and monitoring of installers. Ensure funding incentives to do not drive inappropriate practices, for example by distinguishing between low-cost and high- cost energy-saving measures. Increase the reporting window from one to two months to give the lengthy supply chain greater flexibility and margin for error.

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