The UK government has set a clear ambition to set up a new scheme to support low-income homes to install energy efficiency measures and low carbon heating technologies. With gas bills once again set to rise, energy efficiency remains a key part of the UK government's strategy for tackling fuel poverty.

But with a historically poor track record of similar programmes, how can it be designed and delivered differently to guarantee success? And what vital steps must be taken within the next year to build a solid foundation?

Since 2013, the UK government has funded energy efficiency projects for low-income homes through a supplier obligation, paid for by contributions from household energy bills. ECO aimed to reduce fuel poverty and carbon emissions by improving the energy efficiency of homes. Since it was established in 2013, over £13 billion (2025 prices) has been spent to upgrade almost 2.6 million homes. Until April 2026, ECO will continue to add around £60 to the typical annual household energy bill.

In the 2025 Autumn budget it was announced the ECO would be scrapped in order to reduce household energy bills, and to change the way that energy efficiency support for low-income households is delivered.

The existing ECO scheme will run until December 2027. Two other energy efficiency grant schemes – the Warm Homes Social Housing Fund (WH:SHF) and the Warm Homes Local Grant (WH:LG) – will be merged from 2027/28 onwards and will become a single integrated capital scheme for fuel-poor homes, covering social housing, owner occupied and private rental.

The Warm Homes Plan and Fuel Poverty Strategy introduced plans for a new £5 billion low-income scheme until 2030. Ambitions for the scheme are cross-cutting, focusing on:

• supporting fuel-poor homes with cost-effective energy efficiency measures
• reducing emissions and emphasising sustainability/net zero (no new fossil fuel boilers)
• targeting the least efficient homes (EPC E, F, G)
• extending vulnerability definitions (age, health)
• protecting consumers
• shifting to area-based delivery and working in a joined-up way across local government and delivery partners.

The UK government has a major opportunity to accelerate the transition to clean, affordable home heating for those most vulnerable to fuel poverty. The ambition is right, but the critical question now is delivery and ensuring the plan’s open questions are met with practical solutions that work in homes and communities.

Alongside this new £5 billion low-income scheme, the Warm Homes Plan introduced shifts across the industry, including towards: new heating and retrofit technologies, increased area-based delivery, greater customer protection, and a new coordination organisation in the Warm Homes Agency. There is a risk that setting up and scaling the low-income scheme will become overly complex if it isn't well designed and tested now.

We are currently identifying the scheme's practical needs, possible delivery models, and key uncertainties that we and others can jointly test and refine over the next one to two years. Five key uncertainties are detailed below.

1. Interim steps - how could you test the scheme in the short term?

With ECO extended and WH:SHF and WH:LG continuing until 2027/28, can this interim period be used to test and improve a better scheme, and build the platforms and capabilities for national scale-up? This includes addressing the supply chain affected by the end of ECO.

2. The right kind of scheme - are these ambitions achievable with one scheme, or is more variation needed for different needs and contexts?

Supporting homes in fuel poverty is vital, but homes meeting the same criteria may have totally different individual needs and require different solutions. Routes to supporting people with health issues, for example, are likely different from those for people in energy debt. Similarly, different local areas face different challenges with housing stock and populations, and the programme's delivery needs to adapt to reflect this. For example, our work on optimising heat pump installations in social housing in Bristol shows there’s unique practical considerations for low carbon heating installation in these contexts.

3. Making sure it works across the UK - how will the scheme work in Wales and Scotland?

There is also a big question about how any scheme will work for Wales and Scotland, as well as England. ECO was previously a UK-wide scheme as it was levied on all bills. Scottish and Welsh governments will receive settlements to fund similar programmes but there are no guarantees on how these will run or how they might build on existing programmes in these countries. Additionally, ECO funded disproportionately high numbers of heat pump installations in Wales and Scotland, and it remains to be seen whether its replacement can fill this space, with implications for the supply chain in each area.

4. Delivery roles and responsibilities - what should be done nationally, and what should be locally delivered?

The ambition for local areas to lead on delivery is clear, as is the role of a national Warm Homes Agency – the new coordination body announced in the Warm Homes Plan. More certainty is needed on what should be delivered at different levels and how this best meets user needs – such as unified customer journeys and provision of guarantees on work completed or redress routes.

As well as local delivery, we need to better define the role that area-based delivery should play. We believe there’s massive potential for area-based schemes, where groups of similar homes or whole streets benefit from upgrades together, but these are unproven and needs will naturally differ from place to place. How can area-based models fit into this national low-income grants programme, and will they be able to unlock bigger benefits and savings?

We also need to map the relationship of the new programme with other schemes and delivery mechanisms. In coming years there will potentially be an increasingly overlapping set of bodies, schemes, and responsibilities involved in retrofit delivery, particularly at a local level. A flagship national scheme either risks further confusion or has the potential to clarify these. Work also needs to determine how this works with other priorities - for example, the 3 million solar panels target and the targets for heat pump installation in privately owned homes.

5. Measures and benefits for each household - who decides what house gets what measure and how budgets are used?

The strategies signal a strong shift towards lower cost and more net-zero technologies installed under fuel poverty programmes. But ensuring the right solutions are put in the right homes will be crucial for success. We think there is a case to explore widening the eligibility criteria for different interventions beyond Energy Performance Certificate (EPC) and Low Income Low Energy Efficiency (LILEE) criteria to deliver the best outcomes for people.

In particular, with low-carbon technologies such as solar, heat pumps, and batteries, we need to enable households to benefit fully from electrification and experience the benefits of flexibility. This will require potentially different kinds of contact and support with homes to guide them through living with their upgrades beyond previous schemes.

In the context of these open questions, we’re starting work to better understand how this new scheme could be designed and delivered – and will be publishing more detailed insights and recommendations on this as our work progresses.

Right now we’re focussed on supporting a user-centred 'test and learn' approach before committing to a huge and risky scheme (see last blog post).

We will be working with government, industry and local authorities to understand and rapidly test the new scheme's specific building blocks. For example, prototyping household identification, consumer protection, and measure selection. We will be identifying blocks from existing schemes that can be repurposed and improved.

Our early recommendations for the design and delivery the new low income energy efficiency scheme are as follows:

1. Use the interim period until 2027/28 to develop key features and scale up only what works.
2. The new scheme should be as flexible as possible within clear constraints and goals. This could include allowing recipients to combine funding sources (like ECO and the Boiler Upgrade Scheme (BUS)), flexible eligibility, and the ability to cover ongoing costs (e.g., tariffs and bill management software).
3. Keep funding mechanisms and eligibility criteria simple to avoid high admin spend (e.g., reduce lead generation costs seen in ECO4).
4. Build early, strong consumer protection by properly funding relevant bodies (like the new Warm Homes Agency) and allowing better data sharing. Learn from ECO4 to build trust and ensure protections are in place from the outset.
5. Create a roadmap for after 2030 to ensure scheme continuity, reducing the need for supply chains and local delivery bodies to re-establish themselves after each iteration.
6. Reflecting the value of local clean heat planning for supply chain facilitation and project derisking, properly fund local areas to build capabilities, such as local delivery organisations.

Ultimately, the ambition is right, but the UK government must identify what works before committing to national rollout. This means blending rapid piloting with rigorous evaluation, and scaling only when impact and value for money are proven.

To keep up to date with our work on this, follow A sustainable future at Nesta on Linkedin.