Energy Company Obligation (ECO) Scheme

Introduced by the UK Government in 2013, the Energy Company Obligation (ECO) scheme aims to reduce emissions and tackle fuel poverty.

The scheme requires energy suppliers to deliver cost-effective carbon savings by offering energy efficient measures such as insulation and boiler replacements to eligible households for free.

Since launching in 2013, more than 3.4 million measures have been installed in over 2.4 million homes across the UK.

At the time of writing, there has now been five ECO schemes - the latest being ECO4, with ECO+ launched as a complementary scheme in April 2023.

Read on to find out how the ECO scheme can make your home more energy efficient and help bring down the cost of your energy bills in the process.

What is ECO4?

The primary purpose of the ECO4 scheme is to improve the energy efficiency of low income and vulnerable households.

The current phase of the ECO scheme, ECO4, has been allocated £4 billion in funding, and is expected to run until March 2026.

Who is eligible for ECO4?

To benefit from ECO4, you will need to meet the following requirements:

• You must own your own home or have the permission of your landlord. This rule applies even if the property you live in is owned by a social housing provider or management company.

You will also need to be receiving at least one of the following benefits:-

• Jobseekers Allowance (JSA)
• Employment & Support allowance (ESA)
• Income Support (IS)
• Pension Credit Guarantee Credit
• Working Tax Credit (WTC)
• Child Tax Credits (CTC)
• Universal Credit (UC)
• Child Benefits (depends on income threshold. See below)
• Housing Benefit
• Pension Credit Savings Credit

Changes in Child Benefit income threshold

Compared to previous iterations of the ECO scheme, ECO4 has made some changes to eligibility criteria for those receiving Child Benefits.

Other requirements for ECO4 eligibility

• You’re more likely to be eligible if you receive the Warm Home Discount in the ‘Core group’.
  
• If you are in receipt of additional Department of Work and Pensions (DWP) benefits, the government will ensure you have access to ECO4 - even if you do not receive Universal Credit.
  
• You will need to meet the criteria set by your local authority.

Energy Performance Certificate (EPC) requirements

Another determining factor in finding out your eligibility for ECO4, is that your property must be shown to require home improvements.

Homes with an EPC rating of F or G will receive appropriate measures to improve the property to at least a D rating. Homes with an existing EPC rating of a D or E, the grants will need to be used to increase the rating to at least a C.

The government is proposing that a minimum number of band E, F, and G homes be upgraded so that the most energy inefficient are not left behind.

What does ECO4 cover?

Depending on the energy supplier, you could be get access to a range of home improvements.

Insulation

Unlike its previous iterations, ECO4 takes a 'fabric-first' approach, which means it focuses on improving the building itself before installing new heating systems. These improvements include loft insulation, cavity wall insulation, solid-wall insulation, and double-glazing.

Any home with an EPC rating of 'D' or below will be required to install loft, roof, and exterior-facing cavity wall insulation before improvements to any existing heating systems can be made.

Repairing boilers

Instead of repairing efficient gas boilers, people are replacing them anywhere between three to eight years after purchase - far before the end of their expected lifetime of 12 years.

The ECO4 scheme aims to help change this by incentivising the repair of efficient heating systems where possible. Heating systems that are found to be beyond repair can be replaced through the Broken Heating Replacement Cap. However, only 5,000 homes per year will be eligible.

Installing greener heating systems

ECO4 focuses on replacing old and worn-out boilers with greener alternatives.

To help with the UK's net zero emissions target by 2050, the previous ECO scheme, ECO3, excluded coal-fuelled heating systems. ECO4 builds on this by adding oil and LPG-fuelled heating systems to its exclusion list.

As an alternative, the government will encourage old boilers to be replaced with greener alternatives - chiefly heat pumps and biomass boilers. ECO4 will also follow the previous schemes by continuing to install solar photovoltaics (PV) in all electrically heated homes - but only if a biomass machine or District Heat Network cannot be installed.

Far fewer boiler grants available under ECO4

Under the previous ECO scheme, ECO3, more than 134,000 boilers were installed. However, ECO4 is limited to just 5,000, with additional rules in place around the type of boilers that will qualify for installation. This means that very few homes will be eligible for boiler grants through the ECO4 scheme.

How can I apply for the ECO4 scheme?

The first step in applying for the ECO4 scheme is to contact an energy supplier taking part in the scheme and ask what measures they offer.

You will need to undertake a telephone assessment which will cover questions regarding your eligibility including income, whether you receive certain benefits, and your property's energy efficiency rating.

An installer will then visit your property at a pre-agreed date and time to confirm it's suitability for ECO4.

Which energy companies offer ECO4?

Any gas or electricity suppliers with more than 150,000 customers are required to deliver ECO4. The current list of energy suppliers are:-

• British Gas
• Bulb
• EDF Energy
• E-ON
• Octopus Energy
• Outfox the Market
• OVO Energy
• Scottish Power
• Shell Energy
• So Energy
• SSE Energy
• Utility Warehouse
• Utilita

You don’t have to approach your current energy supplier. You can simply opt for the company that best suits your needs.

What is the ECO+ scheme?

The ECO+ scheme aims to help homes improve their insulation measures, in turn reducing the need to use up energy. Beginning in Spring 2023 and running for three years until 2026, the ECO+ scheme covers loft and cavity-wall installation for any type of property - rented, private, or social housing - as long as the property's energy efficiency is rated as a D or lower.

The government says that homes eligible for the ECO+ scheme could save up to £310 per year on their energy bills.

What insulation measures are available under the ECO+ scheme?

The following insulation measures are available under the ECO+ scheme:-

• Solid wall insulation (internal and external)
• Cavity wall insulation
• Loft insulation
• Flat roof insulation
• Pitched roof insulation
• Solid floor insulation
• Under floor insulation
• Park home insulation
• Room-in-roof insulation

You can only apply for funding for one form of insulation through the scheme.

Also, it's important to remember that not every type of insulation is suitable for every property, so do your research.

What is the difference between ECO4 and ECO+?

The ECO4 scheme targets low-income households who cannot afford to upgrade their insulation or heating system.

The ECO+ scheme takes ECO4 a step further to include supporting households that don't come under the low income bracket. It will support all homes that are in council tax bands A-D in England, A-E in Scotland, and A-C in Wales - as long as the property has an EPC rating of D or below.

Landlords and the ECO+ scheme

Landlords who own a property or properties with a low EPC rating are also able to apply for ECO+.

In the coming years, the minimum EPC rating for a rental property will rise to a 'C'. Although the current minimum rating is an E, the ECO+ scheme could provide an opportunity for landlords to meet the requirements of the proposed new legislation in advance.

How can I qualify for the ECO+ scheme?

To be eligible for the ECO+ scheme, you'll need to make sure that your property has an up-to-date Energy Performance Certificate (EPC) rating.

To get a new energy certificate for your home, you can organise this through GOV.UK, who will provide you with a list of qualified assessors in your area.

Once your property is assessed, and if given an EPC rating of a 'D' or lower, you'll then need to contact your energy supplier. They will carry out a further assessment and cover the cost of insulation measures taken out on the property.

Aside from the ECO scheme, what other energy efficiency help is available?

In addition to ECO4 and ECO+, there are a number of other government schemes available to help with making your home as energy efficient as possible.

Boiler Upgrade Scheme

The Boiler Upgrade scheme offers grants of up to £6,000 to households in England and Wales looking at installing greener heating systems to replace their current boiler.

Home Upgrade Grant (HUG): Phase 2

The Home Upgrade Grant (HUG) aims to provide energy efficient upgrades and low carbon heating via local authority funding, to households that:-

• have an EPC rating between 'D' and 'G'.
• off the gas grid
• are low income and/or live in an eligible postcode area.

Landlords can also apply for the grant in order to receive up to two thirds of the cost to improve the energy efficiency of the homes they let out.

Applications from local authorities to apply for HUG closed at the end of January 2023 and have yet to be re-opened.

What about the Affordable Warmth Obligation?

The Affordable Warmth Obligation - designed to help low income households make their property more energy efficient - has now closed, having been absorbed by the ECO4 scheme.