ECO is a major social programme, and since it was established in 2013 it has spent over £13 billion (2025 prices) to upgrade almost 2.6 million homes. Funding for the scheme is raised directly from energy bills via a levy, rather than public spending from the Treasury. ECO currently adds around £60 to the typical household energy bill (£24 on the electricity bill and £36 on the gas bill).

The UK government has had some form of supplier obligation for over 30 years.

• The Energy Efficiency Standards of Performance scheme (1994-2002) required electricity suppliers (and gas suppliers from 2000) to reduce energy consumption, with a focus on disadvantaged customers.
• The Energy Efficiency Commitment (2002-2008) added carbon targets.
• The Carbon Emissions Reduction Target (CERT, 2008-2012) and the Community Energy Savings Programme (CESP, 2009-2012) created the template for ECO, but had larger budgets and differed in their administration and approach to delivery.

For example, CERT had a much wider portfolio of eligible measures, which included insulation, heating, lighting and energy-efficient appliances (such as fridges and TVs). While CESP placed an obligation on both gas and electricity suppliers, and electricity generators, to deliver upgrades to homes using an area-based approach.

ECO - like its predecessors - aims to increase the energy efficiency of homes. Making the homes of fuel-poor households more efficient will reduce their bills (helping to lift them out of fuel poverty) and also reduce emissions. Through ECO, eligible households can get free upgrades including: new or better insulation, a more efficient heating system, or other energy-saving measures such as heating controls, solar PV, or a smart meter.

Since 2013, there have been four iterations of ECO, and each has had a different emphasis on the balance of bill savings and emissions savings.

The scheme was established by the UK government, and it is administered by Ofgem (the energy regulator). But the actual responsibility for delivering the work lies with energy companies. This is the obligation - every energy company (above a certain size) is required to upgrade a certain number of homes each year, in line with targets set by the government.

The obligation only applies to energy companies with more than 150,000 customers. The individual targets for each company depend on their overall market share, with bigger companies expected to do more. This means that Octopus (the largest supplier, with a 25% share of both the electricity and gas markets) is expected to do more than a supplier such as OVO (which has a 12% share of the electricity market and a 10% share of the gas market).

Though there have been four major iterations of ECO - each with slightly varied objectives - the way they work has been fairly consistent.

Targets

The government sets the outcomes that suppliers will be judged against. Suppliers are not required to upgrade a set number of homes. Instead, they are required to deliver upgrades that achieve a certain amount of efficiency savings in total. Efficiency savings have been measured in different ways with each round of ECO, but they generally track reductions in energy consumption, energy bills, or carbon emissions.

Requirements

The nature of the targets means that a supplier could (in principle) meet its obligation by doing minor upgrades in lots of homes, or extensive upgrades in a few homes. Therefore, each round of ECO has tried to direct this to some extent by imposing additional requirements beyond the headline targets. For example, the latest round (ECO4) intentionally focused on deep retrofits of the worst-performing homes.

Budget

The government also sets an annual budget for the scheme, typically spanning three or four years, with actual in-year budgets increased in line with inflation. So, ECO4 was originally launched as £4 billion over four years, but in practice the scheme has cost over £6.5 billion.

Funding

Once the budget is set, Ofgem (as the scheme administrator) sets the rate for the levy on bills that raises revenue for the scheme. The total cost of ECO has always been split evenly between domestic gas and electricity bills. The levy rate is based on the annualized cost (adjusted for inflation) divided by Ofgem’s projections for domestic gas and electricity consumption over the year ahead (and is not symmetric as the total amounts of gas and electricity consumption are different.

Delivery

Energy suppliers typically contract out most of the work involved - from finding and recruiting homes to installations. The supply chain is diverse and includes managing agents, lead generation companies, installers and others.

Since it started in 2013, ECO has provided upgraded almost 2.6 million homes, installing 4.3 million measures. Each iteration of the scheme has focused on a slightly different mix of measures:

• ECO1 delivered the most measures overall, with a big emphasis on cavity wall and loft insulation.
• ECO2 continued with a similar mix of upgrades, but only half the budget.
• From April 2017 ECO Help-to-Heat and ECO3 (which ran concurrently) shifted the focus of fabric measures towards heating controls and under-floor insulation (listed under ’other’ in the chart below).

Under ECO4 the share of homes getting solid wall insulation jumped from 8% in 2022 to 31% in 2023 and 41% in 2024. The focus on deep retrofits meant the number of measures per home also doubled from two in 2022 to four in 2023. ECO4 was also the first phase of the scheme to do a meaningful number of heat pump installations. Over 37,000 heat pumps were installed up to June 2025, compared to 2,500 between 2013 and 2022.

The UK government estimates that the upgrades delivered by ECO1 to 3 will save 35MTCO2e over their lifetime - relative to what would have happened without any intervention. It also estimates that measures installed in the first two years of ECO4 will reduce energy bills by £127 million over their lifetime. The overall target for ECO4 is £224.3 million of lifetime bill savings.

The latest round of the scheme - ECO4, since 2022 - has been marred by high-profile failures and heavy criticism following an investigation by the National Audit Office (NAO). The NAO’s findings revealed widespread consumer protection failures, placing tens of thousands of homes at risk from poor-quality, or even actively dangerous, installations. This was coupled with evidence of widespread fraud, with businesses overclaiming for work done. Some of these failings reflect long-standing flaws in the scheme as a whole, while others were a consequence of specific policy choices made for this particular iteration (ECO4, since 2022).

Stop-start

The overall scheme has suffered from being run as a series of relatively short rounds, with each changing rules and requirements with each new iteration. Each iteration has run for three-to-four years, but progress is always slow at the start of the scheme because the supply chain effectively needs to re-establish itself. Running the scheme for longer periods would require a greater up-front funding commitment, but would allow firms time to establish the supply chain and deliver higher-quality work.

High (and rising) costs

ECO’s costs have fluctuated over time (although it has never had a comparable budget to its predecessors, CERT and CESP). However, the total cost of the scheme ballooned under ECO4 due to a sharp increase in spending on expensive solid wall insulation. This was intentional; the scheme had an explicit solid wall minimum requirement that suppliers had to follow. Solid wall insulation is inherently expensive, but there is good evidence that suppliers are overpaying for work more generally due to the weakness of the supply chain, as well as allegations of outright fraud.

Admin costs have also been a long-running issue, and accounted for around 10% of the scheme’s budget between 2013 and 2020. Admin costs are highest at the start of each new iteration of the scheme - so having many short-run schemes has pushed these up. One of the biggest admin expenses is search costs, as suppliers have to pay to find households that are both eligible (on the basis of their own criteria, and separate criteria for their home) and willing to have the work done. The scheme has added more requirements over time which only make it harder (and so more expensive) to find eligible households.

Weak consumer protection

Energy suppliers have relatively little oversight or control over the work done in their name. They have relied on Trustmark and other quality-assurance schemes to ensure that the work meets the required standards. However, as the NAO report showed, Trustmark consistently failed to provide this guarantee.

Complex requirements

The way ECO measures bill savings means that low-carbon heating systems do not qualify as an option in most homes. This is why, even in 2024, the scheme installed twice as many gas boilers as heat pumps. Other conditions, such as the requirement to upgrade a home by at least two EPC grades, or to install a certain amount of solid wall insulation, all add further cost and difficulty.

Limited impact on fuel poverty

Even if the households getting upgrades through ECO were all getting an ideal experience, the number is tiny compared to the overall scale of fuel poverty. ECO4 upgraded 244,000 homes between March 2022 and March 2025. This accounts for about 3% of all households in fuel poverty. While earlier versions of the scheme did more volume (by focusing on simpler upgrades rather than deep retrofits), the overall impact of ECO on fuel poverty has been limited.

Limited impact on emissions

While each round of ECO has had an emissions target, it has emphasised bill savings. Combined with the wider requirements this means that most of the heating system upgrades have involved replacing less-efficient fossil boilers with more-efficient ones, and then focusing heavily on insulation. While this does have a marginal impact on emissions, it is far less than if these homes were getting low-carbon heating.

The Great British Insulation Scheme (GBIS) was a smaller, separate, but similar scheme that was also funded using the ECO levy on energy bills. It was established in 2020 and is set to end in April 2026. GBIS was supposed to help so-called ‘able to pay’ households meet the cost of energy efficiency upgrades for their homes.

The government changed the scheme in 2023, allowing energy suppliers to draw down funding from the GBIS budget to top-up their ECO spending.

As ECO4 nears its scheduled conclusion in March 2026, the scheme’s future is under intense scrutiny. Prompted by the NAO’s critical report and an ongoing inquiry from the Public Account Committee into the failings of both ECO4 and GBIS, UK government and industry are reevaluating the path forward.

Whatever the future of the scheme, what remains clear is the need for ambitious, long term plans to deliver warmer, cheaper and more energy-efficient homes for households struggling with fuel poverty.