Updated: The list of all buyers and sellers registered to trade on the brokerage platform has been updated today.
Introduction
Brokerage operates as a fortnightly anonymous auction where providers of the Energy Companies Obligation (ECO) can sell ‘lots’ of ECO Carbon Saving Obligation, ECO Carbon Saving Communities and ECO Affordable Warmth, to energy companies in return for ECO subsidy.
The Government Procurement Service hosts an e-auction online platform that allows energy companies to bid in real-time between 9.00 - 12.00 and 13.00 - 16.00 on each auction day.
ECO Brokerage Auction Dates and Deadlines to January 2014
Auction Date
Deadline for Lot Submission
Results available
16 July
8 July
18 July
30 July
22 July
1 August
13 August
5 August
15 August
27 August
19 August
29 August
10 September
2 September
12 September
24 September
16 September
26 September
8 October
30 September
10 October
22 October
14 October
24 October
5 November
28 October
7 November
19 November
11 November
21 November
3 December
25 November
5 December
17 December
9 December
19 December
14 January
6 January
16 January
Where the normal auction schedule has been altered to account for public holidays, participants always have the same number of working days to submit, review and bid on lots.
What is the ECO?
The Energy Company Obligation (ECO) will work alongside the Green Deal to provide additional support for packages of energy efficiency measures, including solid wall insulation or hard to treat cavity wall insulation – measures which are socially cost effective, but unlikely to be fully financeable by Green Deal finance. ECO will also provide insulation and heating measures to low-income and vulnerable households and insulation measures to low income communities.
ECO will deliver carbon savings and heating cost reductions to an indicative 75:25 split – with expected investment from energy suppliers to deliver on their targets at £1.3 billion per annum – and will be delivered through 3 obligations:
the Carbon Saving Obligation (worth around £760 million per year) will be available for energy efficiency measures in harder to treat homes, ie packages of measures that include solid wall or hard to treat cavity insulation
the Carbon Saving Communities obligation (worth around £190 million per year) will deliver insulation measures targeted at areas of low income, defined using the bottom 15% of Lower Super Output Areas from the Indices of Multiple Deprivation in England, Wales and Scotland - suppliers will be required to deliver 15% of their overall Carbon Saving Communities obligation to rural, low income households in settlements with a population size under 10,000
the Affordable Warmth obligation (worth around £350 million per year) will deliver heating and insulation measures to the poorest and most vulnerable consumers, and who are likely to be in fuel poverty - only those in private tenure and in receipt of a qualifying benefit will be eligible for support under Affordable Warmth
The objectives of the brokerage platform are:
transparency - an open market that: allows potential Green Deal providers to assess the market and if appropriate decide on entry strategies, and gives those already in the market certainty they can fairly compete with others
competition - with a broad and dynamic market for energy efficiency delivery, with a range of Green Deal providers, fairly competing on price to attract ECO support.
cost effectiveness – energy suppliers delivering ECO at the lowest possible cost, thereby reducing the impact on customer energy bills
market efficiency - a market with low transaction costs and administrative burdens for all parties
The Department of Energy & Climate Change (DECC) does not regulate energy companies to use the platform. This is because DECC is consulting on what percentage of ECO should be traded on the brokerage platform in order to deliver its objectives. DECC is also consulting on options for how it can ensure this volume of subsidy is traded, including whether or not it should regulate.
DECC has put all the elements in place to ensure that trading can start this year. There are already over 60 Green Deal providers who have registered an interest in trading. DECC expects energy companies to respond to the incentive that brokerage offers - low cost ECO compliance delivered by a range of providers. Given that they will want to deliver ECO at least cost to their consumers, it makes sense for them to participate. DECC is working closely with energy companies to finalise the conditions of trading and to encourage them to participate.
How it works
Registration
Buyers (ECO Obligated Energy Suppliers) and sellers must email eAuctionsecobrokerage@gps.gsi.gov.uk to register with the GPS Brokerage service. Initially only fully accredited Green Deal Providers will be able to sell on Brokerage, although we will look to expand this to other delivery partners over time.
Before trading, eligible buyers and sellers must sign a contract agreeing to the terms and conditions of trading. They must also sign a bilateral ‘Off-Take’ contract, which sets out standard terms for delivery, reporting and payment. This contract will be enacted once a lot is sold – the contract is between the buyer and the seller. The broker does not have a role in delivery or payment.
The bilateral contract
The bilateral contract sets out the terms of delivery, reporting and payment between seller and buyer:
sellers can deliver between 90% and 110% of the carbon/bill savings sold on brokerage (within the agreed 3, 6 or 12 months) and receive payment
payment to sellers is within 30 days of the date that ECO-compliant installed measures are reported to the energy company in an Ofgem-compliant format
the contract also ensures that if Ofgem does not verify the measures as ECO-compliant, or if the seller fails to deliver some or all of the contract, the energy company can obtain the contract carbon/bill savings without financial loss (the seller must either replace the carbon/bill saving or pay damages to make sure the energy company can re-purchase an equivalent amount of carbon/bill savings at the current market price)
buyers will report back to the broker on the actual percentage of delivery of all completed contracts and the broker will record this information
Related documents:
17552556 Bi-lateral off-take contract - this is the contract that binds the seller and buyer once lots have been sold and purchased on the on-line brokerage auction platform
17465856 Bid confirm letter - this letter is issued after the auction to confirm the parties to the above contract and brings into force the standard bilateral off-take contract between the buyer and seller
17552420 Terms and conditions ECO auction platform outlines the standard terms and conditions for buyers and sellers using the Auction Platform
1565009 ECO brokerage compliance letter is confirmation of the company’s acceptance of the terms and conditions for the auction platform.
The brokerage compliance letter also includes:
a form in addendum A that confirms who can trade on behalf of the company and who else will be needed to sign the bid confirm letters
the anti bribery questionnaire in addendum B which also requires copies of two forms of photo ID (passport and driving licence) for the ‘nominated person’ – the person able to submit lots for trading on the Auction Platform
The auction cycle
Step 1 - sellers submit lots electronically 6 days in advance of the auction day
Step 2 - the lots are compiled, made anonymous and uploaded onto the portal in advance of the auction so the buyers have the opportunity to consider the lots on offer before the auction starts and decide on their bidding strategy
Step 3 - at auction buyers bid using the online portal between 09:00 and 12:00 for both carbon lots, and between 13:00 and 16:00 for Affordable Warmth lots. The highest bid that has met or exceeded the reserve price at the end of the day wins the lot.
Step 4 - sellers and buyers are told what they have bought or sold, and who they have contracted with within 2 days of the close of the auction - those who have sold lots must sign and return a letter confirming what they will deliver, this binds them to deliver their sold lots according to the terms of the standard bilateral contract
Step 5 - anonymous trading data is published publicly on this website prior to the next auction to buyers, sellers and any interested parties
To preserve anonymity and maintain liquidity, lots sold on brokerage must have specified delivery timeframes:
ECO Carbon Saving Obligation - 3 months/6 months/12 months
ECO Carbon Saving Communities - 3 months/6 months/12 months
ECO Affordable Warmth - 3 months/6 months/12 months
ECO Affordable Warmth Boiler Repairs - 3 months/6 months/12 months
Brokerage lots
When submitting lots for sale, Green Deal providers will need to specify the specific volume of ECO they intend to deliver. To preserve anonymity however, when lots are published for sale on the brokerage they will be displayed as ranges. Once the auction has closed, the highest bidder will be informed of the exact amount of ECO they have bought (provided they have met the Seller’s reserve price).
ECO Carbon Saving Obligation/ ECO Carbon Saving Communities
Band 1
Band 2
Band 3
Band 4
Band 5
Band 6
Band 7
Lot size (tCO2)
1k to 3k
3k to 6k
6k to 10k
10k to 14k
14k to 19k
19k to 26k
26k to 35k
ECO Affordable Warmth
Band 1
Band 2
Band 3
Band 4
Band 5
Band 6
Band 7
Lot size (£bill saving)
£100k to £300k
£300k to £600k
£600k to £1m
£1m to £3m
£3m to £5m
£5m to £7.5m
£7.5m to £10m
Support
Web-based training, guidance and a telephone support service are available for buyers and sellers to familiarise themselves with the system.
For help when submitting lots contact Peter Youngman (from 09:00 to 16:00) on 0151 672 2202 or by emailing eAuctionsecobrokerage@gps.gsi.gov.uk. The eAuctions hotline is 0151 672 2046 and can be called during the hours of a Live eAuction.
The effectiveness of the brokerage mechanism will be kept under review and changes to the platform may be made with the Department of Energy & Climate Change’s approval.
Please contact ECObrokerage@decc.gsi.gov.uk with any comments or questions.
Results
Weekly breakdown of ECO brokerage results
Rules of ECO brokerage
We expect that Energy Companies will deliver ECO in 3 main ways:
through their own green deal delivery arms
through bilateral partnerships
through brokerage
ECO is not a grant pot for the supply chain. It is a target placed on energy companies to deliver carbon savings or fuel bill savings. Energy companies can choose how they deliver it, and who they work with to deliver it – it will be market driven.
There is no fixed price for ECO measures sold on brokerage. It is a market based platform. Brokerage has been designed to drive down the costs by encouraging competition. Sellers would be expected to make a competitive offer on brokerage by:
part-funding measures through Green Deal Finance
leveraging in other sources of funding, such as through partnerships with local authorities
driving down costs by economies of scale
driving down costs through more efficient lead generation or delivery routes
Providers cannot sell delivered measures on ECO brokerage, only ‘future’ measures. Energy Companies have to be able to prove that the carbon and bill saving measures were delivered as a result of ECO subsidy and would not have happened anyway.
The smallest lot that can be sold on brokerage is 1,000 tonnes of CO2 or £100,000 of bill savings.
Once a lot is sold, the seller must deliver the actual/specific amount of carbon that it submitted to the broker, within a 10% tolerance. This means they will be able to deliver between 90 and 110% of the actual amount sold at the same price per tonne as it was sold for. E.g. a provider that has sold 10,000 tonnes of carbon on brokerage, can deliver between 9,000 tonnes and 11,000 tonnes of carbon, without penalty.
Sellers should give serious consideration to their ability to deliver a complete lot (within the 10% tolerance) before submitting it to the broker as the penalties for delivering below the tolerance can be high.
If a seller delivers less than 90% of the contract, they are only paid for what they deliver (and this may not be at the price it originally sold for), and must pay damages so that the energy company is not out of pocket in replacing the ECO delivery they have lost, eg if the market price has dropped then the seller gets paid for what they have delivered, plus administrative damages.
If the market price has risen then the seller gets paid for what they have delivered, plus administrative damages, and must also pay damages at the current market price for the un-delivered ECO. The current market price will be published by the broker.
What happens if prices rise on brokerage, and I am half-way through a contract, can I get out of it?
Not without paying damages for the un-delivered ECO at the current market price, so there would be no financial benefit in doing so. This is to discourage sellers over-contracting or under-delivering, or playing the market to their advantage.
DECC will also be monitoring the final delivery rates of all contracts, to look for evidence of companies routinely under-delivering on contracts.
Ofgem issues guidance to Energy companies on how and when they report the delivery of ECO measures. Sellers will need to comply with this guidance.
If Ofgem does not verify the measures sold on brokerage and if the measure has been paid for, and Ofgem determines that it is not ECO-compliant, the seller must replace it with an equivalent compliant measure or pay the energy supplier at the current market price under a claw-back mechanism.
Payment is within 30 days of the date the seller notifies the buyer the measures have been installed (in Ofgem-compliant format).
Who can trade
Only obligated Energy Suppliers will be able to buy from ECO brokerage. In the first instance only accredited Green Deal providers will be able to sell, but we will look to expand this over time to include other delivery partners eg local authorities and social landlords
DECC’s expectation is that Green Deal Providers will deliver Green Deals alongside or in conjunction with ECO delivery. Becoming a Green Deal provider is a serious undertaking with a number of legal responsibilities, and applications should be made with due consideration and not solely to access brokerage. Green Deal installers are not eligible to access brokerage.
Only companies who have been accredited by Gemserve will be able to trade on brokerage. You can register an interest in brokerage while your application is being processed by emailing eAuctionsecobrokerage@gps.gsi.gov.uk.
The primary objective of brokerage has always been to stimulate the Green Deal market and to link ECO and the Green Deal. Therefore in the very first instance we will look to restrict trading to domestic Green Deal Providers. However, over time we will look to open the platform to other sellers. We are committed to working with social landlords and local authorities to see how this can best be done.
Smaller Green Deal providers
ECO brokerage is a blind trading mechanism. Energy companies will not be able to see who they are buying from. Therefore, if a smaller Green Deal provider can offer ECO at a competitive price they will be able to compete on the brokerage platform.
DECC will be monitoring ECO brokerage trading activity for any evidence of uncompetitive behaviors from buyers and sellers.
List of all buyers and sellers registered to trade on the brokerage platform
[PDF, 22.1KB, 1 page]
Customers
All ECO enquiries should be directed in the first instance to the company that installed the measure.
Guidance for buyers and sellers
The Government Procurement Service has issued guidance for buyers and sellers:
ECO Brokerage Guidance for Sellers (Green Deal Providers)
ECO Brokerage Guidance for Bidders (Energy Companies)
Further information:
ECO Brokerage: common questions