The Energy Company Obligation: How Supplier-Funded Grants Work

The Energy Company Obligation, known as ECO, was a government energy efficiency scheme for Great Britain that placed legal obligations on larger energy suppliers to fund insulation, heating and, in some cases, solar panels in the homes of low-income, vulnerable and fuel-poor households¹. It started in January 2013 and ran through four main iterations, with the final phase, ECO4, running from 2022 to 2026³. Between 2013 and December 2025 it delivered 4.4 million measures in 2.6 million homes across Great Britain³.

The single most important thing to understand about ECO is that it was never a grant scheme. Ofgem states this directly: "ECO is not a grant scheme and as such, different companies or installers may provide different levels or types of support."² The money came from a levy on energy bills, so every billpayer contributed, and each supplier decided for itself which measures to fund, at what level, and through which installers⁴. The scheme has now closed to new applications: the Government announced in Budget 2025 that funding would end in March 2026, and energy suppliers have stopped advertising or accepting applications for ECO4 funding³.

What ECO was, and why it was never a grant

ECO placed legal obligations on larger energy suppliers to deliver energy efficiency measures to domestic premises⁸. The main objective was to reduce fuel poverty by improving the least energy efficient housing occupied by low income and vulnerable households⁹. It was designed to tackle fuel poverty and help reduce carbon emissions at the same time¹.

The word "grant" is the one to be careful with. Householders often searched for an "ECO grant" or a "free boiler grant", and installers marketed the scheme in those terms, but the legal reality was different. Ofgem's guidance for homeowners and tenants is unambiguous:

In practice this meant that eligibility did not guarantee anything. Ofgem notes that "eligibility for ECO doesn't necessarily mean that an energy supplier or installer will decide to install energy efficiency measures in your home."² It was up to energy suppliers to determine which measures they wanted to fund, the level of funding they provided, and the retrofit coordinators or installers they chose to work with². In some cases the householder was asked to contribute to the cost of the installation².

The scheme's own structure explains this. ECO set suppliers a target, divided between them based on their relative share of the domestic gas and electricity market, and left the delivery decisions to the suppliers¹. A supplier met its obligation by funding work in qualifying homes; it was not handing out a fixed grant to everyone who qualified. That distinction mattered most at the edges: two neighbours with identical houses and identical benefits income could receive very different outcomes depending on which supplier or installer they dealt with.

Key numbers: £1 billion a year, 4.4 million measures

The headline numbers are large. The Government expanded ECO to £1 billion per year for 2022 to 2026, up from £640 million a year in the previous arrangement⁷. A parliamentary committee recorded the same increase, from £640m to £1bn per year for the 2022 to 2026 iteration¹⁰. Earlier phases were set in different units: the original 2012 Order set carbon emissions reduction obligations of 4.18MtCO2 for phase 1 and 8.36MtCO2 for phase 2¹¹, while the ECO3 legislation set a home heating cost reduction obligation of £1.179 billion for its later phases¹².

The delivery record, as of December 2025: 4.4 million measures in 2.6 million homes across Great Britain between 2013 and December 2025³. The mix of measures shows where the money went.

Two things stand out from that mix. First, this was overwhelmingly an insulation and heating-replacement scheme, not a renewables scheme, even though solar panels were within the list of measures suppliers could deliver⁵. Second, nearly half of all measures were heating-related, either new boilers or heating controls, which is why ECO became so strongly associated in the public mind with "free boilers". That association was only partly fair: 21% of measures were new boilers, but a larger share was insulation of one kind or another³.

ECO also carried a share of government-supported heat pump installations. In the year ending June 2025, ECO accounted for 31% of government-supported heat pump installations, the majority of that total¹³. The quarterly counts were 3,403 installations in the first quarter of 2025, 3,223 in the second quarter and 3,790 in the third quarter¹⁴.

What drove the cost, and who actually paid it

ECO was funded through a levy on energy bills⁴. That single sentence carries the whole answer to "who funds ECO": the obligated suppliers paid in the first instance, but the cost was recovered through bills, so it was ultimately spread across all energy billpayers, including households that received nothing from the scheme.

The obligation itself was allocated by market share. The overall target for the measures was divided between suppliers based on their relative share of the domestic gas and electricity market¹. A supplier with a large customer base therefore carried a proportionally large slice of the obligation, which is why the scheme fell on "medium and large energy suppliers" rather than on every company selling energy in Britain¹.

The scale of the obligation drove the scale of the cost. Moving from £640 million a year to £1 billion a year for ECO4 meant a corresponding increase in the levy recovered through bills⁷. The Government's own justification for ending the scheme was framed in exactly these terms: it decided to end ECO because it did not represent strong value for money³. That is a judgement about what the levy bought per pound raised on bills, not about whether the individual measures worked.

There is also a design point worth understanding. From December 2018, ECO set suppliers only a target to reduce household energy bills, under the Home Heating Cost Reduction Obligation³. The earlier carbon-saving obligations were dropped. This changed what suppliers were incentivised to deliver: work that demonstrably cut a household's heating cost, measured through a scoring formula, rather than work that maximised carbon savings regardless of the bill effect.

ECO's operation throughout Great Britain

ECO was a Great Britain scheme: it covered England, Scotland and Wales, and never Northern Ireland¹. Every phase, from the first scheme in 2013 through ECO4, was defined as an energy efficiency scheme for Great Britain⁶. Northern Ireland households had separate arrangements, and the grants available in Northern Ireland are covered elsewhere on this site.

Within Great Britain, the scheme was administered centrally by Ofgem, but delivery leaned heavily on local authorities through a mechanism called flexible eligibility, or LA Flex. Local authorities could set their own criteria for eligibility for funding for domestic energy efficiency measures, but they had to publish a statement of intent defining who was eligible before this could happen¹⁷. Energy companies could spend up to a maximum of 10% of their full obligation within these flexible criteria¹⁸.

Wales provides the clearest picture of how heavily the flex route was used. In February 2025, Ofgem confirmed there were over 11,600 ECO Flex submissions made by Welsh local authorities¹⁹. The Welsh Government also provided a further £500,000 of funding to support local authorities in 2024 to 2025 in connection with this work¹⁹. Scotland's own fuel poverty programmes, such as Warmer Homes Scotland, ran alongside ECO rather than through it, and the grants available in Scotland are listed separately.

For a householder, the practical effect of the GB-wide design was that the core eligibility rules were the same in all three nations, but the flex route meant your own council's published criteria could open a door that the national rules did not. Councils published statements of intent naming the groups they considered fuel poor or vulnerable in their area, and a household meeting those local criteria could be referred into the scheme even without receiving a qualifying benefit.

The rules: who was obligated and who could qualify

The obligation fell on larger suppliers. The statutory obligation applied to energy suppliers with over 250,000 domestic customers and delivering over a certain amount of electricity or gas²⁰. The legislation set the qualifying supply threshold at 400 gigawatt hours of electricity supplied to domestic customers, and a supplier below the thresholds had obligations of zero for a phase²¹. Suppliers below the threshold could still take part voluntarily in some routes, but the legal duty sat on the larger companies.

For households, the qualifying conditions had several parts:

• Benefits receipt. You could be eligible if you received at least one of a list of benefits: Child Benefit, Pension Guarantee Credit, income-related Employment and Support Allowance, income-based Jobseeker's Allowance, Income Support, Universal Credit, Housing Benefit, or Pension Credit Savings Credit².
• Property need. The property had to require energy efficiency upgrades; the specific measures that would benefit the home were determined by a retrofit assessment².
• Permission. You had to own your own home or have permission from your landlord, including where the property was owned by a social housing provider or management company².
• Local flexibility. Alternatively, a local authority's published statement of intent could make a household eligible without benefits receipt¹⁷.

Two further rules shaped what a household actually experienced. Installers under ECO had to be TrustMark accredited and have a registration number, except for installers of district heating connections². And a householder could contact any of the obligated energy suppliers, even one that was not their own energy provider, to ask about the scheme².

The legal basis shifted over time. ECO4's final arrangements were set out in the Electricity and Gas (Energy Company Obligation) (Amendment) Order 2026 and the associated Specified Period Order¹⁶. Measure eligibility did not change unless the legislation did, as the original guidance put it²². The scheme's rules were therefore fixed in law at each phase, with Ofgem administering them and consulting from time to time on how it administered aspects of the scheme²³.

Shortcomings of ECO: poor workmanship and putting it right

ECO's closure was not only about value for money. The extension of the scheme to 31 December 2026 was explicitly to meet existing targets and to remediate non-compliant installations⁵. In other words, some of the work delivered under the scheme did not meet the required standards, and suppliers were given time to put it right.

For householders, the routes for raising problems were set out by Ofgem. Complaints about an installation went to a dedicated complaints process page, and questions about supplier compliance went to a specific Ofgem mailbox²⁴. Fraud could be reported directly: "To report fraud, contact counterfraud@ofgem.gov.uk."²⁴ General enquiries went to eco@ofgem.gov.uk²⁴.

The scale of the delivery machine explains why quality varied. With 4.4 million measures delivered by suppliers working through chosen installers, and with suppliers free to decide which installers to work with, quality control depended heavily on the TrustMark accreditation requirement and on Ofgem's monitoring². Ofgem published monthly reports showing how suppliers were progressing towards their targets and the number and types of measures installed²⁴. A householder could see whether their supplier was on track, but the assurance that their own installation would be done properly rested on accreditation and audit rather than on any individual guarantee from the scheme itself.

This is the sharpest edge of the "not a grant scheme" point. A grant scheme pays for a defined thing to a defined standard. ECO paid suppliers to hit a target, and the householder's protection was the accreditation regime plus the complaints and remediation routes afterwards.

The closure explained and its replacement

The end came in stages. The Government announced in Budget 2025 that funding for ECO would end in March 2026³. Energy suppliers then stopped advertising or accepting applications for ECO4 funding⁵. Energy efficiency measures under ECO continue until the end of 2026, but only to complete existing commitments and remediate non-compliant installations³. A parliamentary committee had already questioned whether the Government was committed to ECO beyond 2026, when it was due to expire²⁵.

The stated reason was value for money: the Government decided to end ECO as it did not represent strong value for money³. Since December 2018 the scheme had set suppliers only a target to reduce household energy bills, and that narrower objective, funded by a bill levy, was judged no longer the best use of the money³.

What replaces it is a different architecture. Rather than a single supplier obligation, support now runs through schemes such as the Warm Homes: Local Grant, the Warm Homes: Social Housing Fund and the Great British Insulation Scheme, with the Boiler Upgrade Scheme funding heat pumps. The full picture, including what each scheme covers and who qualifies, is in the home energy grants guide.

For a household that had work done under ECO, the closure does not remove existing protections: the remediation window runs to 31 December 2026, and the complaints routes remain⁵. For a household hoping for new funding, ECO is no longer a route, and the answer lies with the successor schemes.

Supplier-funded retrofit and its effect on independence

ECO's contribution to household energy independence was real but bounded. On the positive side, 2.6 million homes received measures that cut their heating demand: insulation that reduces how much heat a home loses, and heating upgrades that improve how efficiently the remaining heat is produced³. A home with properly insulated walls and loft, and a working, efficient heating system, needs less energy whoever supplies it. That is a genuine reduction in dependence on energy purchases, and for low-income households it was often the difference between heating a home and not.

The scheme also carried a meaningful share of the heat pump transition: 31% of government-supported heat pump installations in the year ending June 2025 came through ECO¹³. For those households, ECO funded a shift away from gas heating entirely, which is the deepest form of heating independence a British home can currently achieve.

The limits are equally clear. ECO did nothing to reduce a household's dependence on the energy supply system itself: the levy that funded it was collected through bills, and the measures were chosen and delivered by suppliers and their installers, not by the householder⁴. A household receiving ECO measures remained a customer of an energy supplier, remained exposed to energy prices, and had no control over which measures were offered or at what level of support. The scheme's own design, in which eligibility guaranteed nothing and householders could be asked to contribute, meant the householder was a recipient of a supplier's decision rather than a party to it.

And the scheme is gone. A household planning energy independence today cannot build on ECO. The successor schemes, the insulation programmes and the heat pump grants now carry that role, and the honest summary of ECO's legacy is this: it made 2.6 million homes cheaper to heat, it was paid for by every billpayer, and it ended because the Government judged the return on that spending insufficient³.