Summary

The Energy Company Obligation (ECO) is a UK government-mandated energy efficiency scheme obliging larger energy suppliers to deliver improvements to domestic properties, with the aim of reducing fuel bills and carbon emissions. The current phase is ECO4 (commencing April 2022 / formally from 27 July 2022) and will run until 31 March 2026 and the focus is mainly on making upgrades throughout the whole house, prioritizing the least energy efficient homes. To the end of March 2025, around 4.2 million measures have been installed in approximately 2.5 million properties under the overall ECO scheme, specifically under ECO4 there have been roughly 810,700 measures installed across about 243,900 households, the estimated annual bill savings from ECO4 measures to that date total approximately £138.5 million HHCRO (Home Heating Cost Reduction Obligation) component.

What is the ECO4 scheme

The Energy Company Obligation (ECO) is a government-mandated energy efficiency scheme that requires large energy suppliers to fund and deliver improvements to domestic homes.
Its focus is:
– Reduce carbon emissions from the housing stock.
– Cut household energy bills, specifically for low-income and vulnerable households.
– Support the UK’s net-zero and fuel poverty targets.

ECO isn’t a government-budgeted grant, it’s an obligation on private energy companies, who then pass on the cost through energy tariffs. Ofgem (Office of Gas and Electricity Markets) regulates and audits this process.

Who is involved

UK Government: Sets the overall policy and legal framework through ECO Orders.
Ofgem (Office of Gas and Electricity Markets): Regulates suppliers, enforces compliance, and publishes data.
Energy Suppliers: Companies like British Gas, Octopus, E.ON, and EDF must meet targets for bill savings by funding or installing approved measures.
Installers and Contractors: Carry out insulation, heating, and retrofit works in homes.
Local Authorities: Identify eligible households under “ECO Flex” and coordinate delivery locally.

When did it start and What stage are we in now

– ECO1 (2013–2015): initial scheme replacing CERT and CESP.
– ECO2 (2015–2017): refined targeting and reduced costs.
– ECO3 (2018–2022): focus on low-income households (Home Heating Cost Reduction Obligation – HHCRO).
– ECO4 (2022–2026): the current phase — launched officially on 27 July 2022, running until 31 March 2026.
Each phase adjusts funding rules, eligible measures, and targets.

Where does it apply

ECO applies across Great Britain — that’s England, Scotland, and Wales (Northern Ireland has a separate energy efficiency policy).
Regional delivery data shows concentration in:
• Northwest England (around 18–19 % of measures),
•West Midlands and Yorkshire & Humber, with somewhat lower delivery rates in the Southeast and rural Scotland. 

Why does the UK have ECO funds

The scheme exists to tackle three interlinked national issues:
1.High household energy bills — particularly affecting low-income families.
2.Poor energy efficiency — the UK has some of the oldest, least efficient housing stock in Europe.
3.Carbon emissions — domestic energy use contributes significantly to the UK’s overall emissions; upgrading homes supports the Net Zero 2050 goal. ⁷
In short: ECO funds are a policy instrument to make homes warmer, cheaper to heat, and less polluting.

How much funding and impact are we talking about

– Total cost of ECO4 to date (as of spring 2025): roughly £3.6 billion, plus around £90 million in administrative costs.
–Approx. 810,000 measures have been installed in 243,000 households, delivering about £138.5 million in annual bill savings so far.
–Average cost-effectiveness ratio: £22.36 spent per £1 annual bill saving — which is acceptable in policy terms but not exceptional.
–Average measures per home: about 4 – 5 (showing that the “whole-house” model is being applied). 

How Does the Scheme Work

• Large energy suppliers must meet legally binding energy efficiency targets set by the government.
•They achieve these by funding improvements (like insulation or heating upgrades) in qualifying homes.
•Each improvement earns a “score” based on its potential to reduce energy bills and emissions.
•Ofgem monitors progress and ensures compliance.
•The costs are covered indirectly through customer energy bills, rather than through direct government spending.
What are the current challenges
1.being applied Installation quality: A 2025 audit found that up to 98 % of external wall insulation installations may require corrective work — a serious consumer-protection concern. 
2.Cost vs benefit: High unit costs risk reducing overall reach if not managed carefully.
3.Targeting: A large share of benefits go to owner-occupiers rather than private renters or off-grid homes, limiting reach to the most vulnerable. ¹⁰
4.Regional imbalance: Delivery uneven across regions, depending on local authority engagement and installer capacity.
5.Complex delivery chain: Multi-measure projects can be delayed or poorly coordinated without strong oversight.

The Energy Company Obligation (ECO) is one of the UK’s most significant energy efficiency schemes. It has evolved since 2013 to better support low-income households and reduce emissions. While not perfect, ¹² ECO remains a cornerstone of the UK’s approach to tackling fuel poverty and meeting its environmental goals.