The Energy Company Obligation (ECO) is a scheme that places a responsibility on energy suppliers to provide funding for improving energy efficiency in qualifying homes. The overall aim is to help tackle fuel poverty and reduce carbon emissions.
The ECO Scheme has been in place since 2013 with the last phase known as ECO3. The successor to ECO3, ECO4, is set to come into effect in late 2022 and there are some key changes to the scheme that will be introduced when ECO4 kicks off. Find out everything you need to know about ECO4 in this article.
First, what exactly is the Energy Company Obligation?
ECO is a scheme that aims to help households who are struggling with their fuel bills. It is a government-backed scheme that obligates energy companies to help homes lower carbon emissions and meet carbon reduction targets. Through this obligation, energy suppliers provide funding for qualifying homes which enables them to install energy efficiency measures throughout England, Scotland, and Wales. The Energy Company Obligation began in 2013 and, according to official government figures, more than 3.1 million measures have so far been added to over 2.3 million homes.
What is ECO4 and how is it different from ECO3?
ECO4 is the newest and last phase of the ECO scheme, it is due to start in 2022 and continue until 2026. The government has been consulting on the last phase of the scheme and several alterations are expected to be made to the eligibility criteria.
Proposed changes for ECO4 include:
- Changes to qualifying benefits (taking away multiple disability benefits)
- Changes to the number of measures that can be installed under Local Authority Flexible Energy (up to 50% of measures can be fitted under council rules whereas it was previously capped at 25%)
- There are suggested additional Energy Performance Certificate (EPC) improvement requirements
- Almost full removal of boilers from the scheme
Changes to qualifying benefits
The government has planned to remove a few of the disability benefits from the new scheme. Also, their intention is to add Housing Benefit and Pension Credit Savings Credit in the new criteria of the scheme. This is because there is going to be a greater emphasis placed on the level of income in the eligibility criteria to ensure low-income households who really will benefit from the scheme can access it. If a household has a combined income of less than £31,000, it could be eligible for the ECO4 scheme.
You will see the full list of proposed eligible benefits for ECO4 below.
- Income-based Jobseekers Allowance (JSA)
- Income-related Employment Support Allowance (ESA)
- Income Support (IS)
- Pension Credit Guarantee Credit
- Working Tax Credit (WTC)
- Child Tax Credits (CTC)
- Universal Credit (UC)
- Housing Benefit (now eligible through ECO4)
- Pension Credit Savings Credit (now eligible through ECO4)
Previously qualifying benefits that will be removed under ECO4:
- Disability Living Allowance (DLA)
- Personal Independence Payment (PIP)
- Attendance Allowance
- Carer’s Allowance
- Severe Disablement Allowance
- Industrial Injuries Disablement Benefit
- War Pensions Mobility Supplement
- Constant Attendance Allowance
- Armed Forces Independence Payment
Child benefit income thresholds for ECO4
|Type of claimant||Number of children or qualifying young people|
|Member of a couple||£27,300||£32,100||£36,900||£41,700|
The figures in the above table were taken from the ECO3 thresholds and inflated to reflect 2022 figures, rounded to the nearest £100.
Changes to the number of measures to be fitted under Local Authority Flexible Energy
During the ECO3 variation of the scheme energy companies were permitted to use a maximum of 25% of their obligation through Local Authority Flexible Energy rules (also referred to as LA Flex). This allows councils to put in place their own eligibility criteria and they do this by publishing a statement of intent for flexible energy and the rules help households that are not claiming any benefits get access to funding.
As part of the new changes for ECO4, energy suppliers can provide up to 50% of their obligation through Local Authority Flexible Energy (double the amount that was previously allowed).
Energy Performance Certificate (EPC) improvement requirements
There are extra requirements for minimum increases in the energy efficiency rating of homes after measures have been installed. In cases where a property has an existing Energy Performance Certificate (EPC) band of F or G, the grants will have to improve the rating to at least a D rating.
If a home has an existing band of D or E the grants will need to improve the rating to at least a C. The idea behind this approach is that it will increase the number of grants and the level of energy efficiency savings achieved. The government is also stating that a minimum number of band E, F, and G properties will be upgraded, to ensure that the most inefficient homes are not forgotten or left out of the scheme.
Boiler grants (almost) removal from the scheme
Nearly 134,000 boilers were fitted under ECO3, but through ECO4 the number of boilers installed will be limited to 5,000 and there are extra rules around the types of boilers that are eligible, meaning that a much smaller number of households will be able to qualify for boiler grants under the new rules.
PAS 2035 will stay a requirement
ECO4 will continue in the same way as past versions of the scheme when it comes to mandating compliance with PAS 2035. This means that installers of the new measures will need to have PAS 2030:2019 certification in order to provide installs within ECO. Also, all projects that are funded by ECO will need to be overseen by a TrustMark Approved Retrofit Coordinator. By way of support of the PAS 2035 approach, all energy efficiency measures that are fitted within a property will be packaged together for each home and scored as a package. This is different from ECO3 where measures were scored independently.
Who needs to know about these changes?
If you are claiming one of the qualifying benefits that are being removed from the criteria you need to know the changes so you can check to see if you could meet the new terms in any other way and access a grant. If you receive Housing Benefit alongside any of the non-qualifying benefits you will still be eligible for a grant through ECO4, but we still recommend that you check your eligibility for the scheme via our website sooner rather than later.
Also, homeowners with old and inefficient boilers should apply for an air source heat pump grant as soon as they can as very few boilers are expected to qualify under the new terms of ECO4, and even if your boiler does qualify, as soon as the cap has been reached there won’t be any more boiler grants available.