The ECO brokerage

November 2012: Though there has been much discussion on the ‘start’ of the Green Deal and Energy Company Obligation (ECO), there has been little mention of the new ECO brokerage system that had been proposed. The key idea behind the brokerage –  a new online system that would allow Green Deal Providers to access ECO  funds by bidding in projects which energy suppliers could choose to ‘buy’ – was that it would potentially allow a wider number of actors to participate in the ECO, such as local authorities and community groups. It would also provide DECC with greater transparency with regard to the costs met by suppliers in meeting their ECO obligation, something which DECC has little information of to date under CERT.

The brokerage was discussed in a workshop at last week’s Local Government Association’s Green Deal and ECO conference where the following updates were provided by DECC:

• DECC had established a brokerage working group to discuss how the system could operate. No agreement was reached however on the key issue of what level the brokerage would play in suppliers achieving their ECO targets – ie to what extent suppliers would be obligated to purchase ECO ‘points’ from Green Deal Providers submitting projects – or if suppliers participation in the brokerage system is to be volutnary
• An ECO brokerage consultation document was to be issued in the ‘summer’. DECC’s Green Deal’s progress document in June 2012 stated that “we will seek voluntary commitments from the energy companies to use the brokerage mechanism from October to allow other organisations to access  ECO subsidy. In September we will consult on whether there is a need for further legislation to oblige energy companies to use the ECO brokerage mechanism and if so how much subsidy they should be required to trade.” All of this is behind schedule.
• In yesterday’s Green Deal webchat DECC Minister Greg Barker stated “Energy Compnies can already start delivering against their ECO targets already but we want to open the market up further and will be consulting shortly on the ECO Brokerage.”
• DECC announced at the LGA conference that they had hired a ‘trader’ within the department and a few trial trades will take place this December to help with some ‘active learning’ on how such a system could work
• DECC also stated that they ‘would not oblige energy companies to use the brokerage – but could do’
• The brokerage would operate as a ‘blind mechanism’ – ie energy companies would not see which specific organisation were bidding in projects, to ensure that all trades were fair
• The brokerage would not deliver 100% of all ECO projects: existing obligation programmes had established good relationships between energy companies and local authorities and other housing providers. Such bilateral contracts should continue
• Related to the above – British Gas – who were at the workshop – stated that their aspiration was to continue building such longer term partnerships
• Only Green Deal Providers would be allowed to submit projects into the brokerage system. Local authorities and social landlords would fit this criteria – and some are looking at registering as Providers. There would still be scope for smaller organisations, such as  community groups, to participate in the brokerage, as they could partner with a Green Deal Providers to submit projects, without having to go through the necessary ‘due diligence’ Green Deal Provider process themselves
• A key concern raised was the ability of local authorities to develop projects to submit into the brokerage when funds were being withdrawn from key growth sectors such as environmental and energy services.