Energy UK Explains: Energy efficiency schemes to improve our homes

What are the main energy efficiency schemes to support households?

• Energy Company Obligation (ECO): ECO is the main scheme designed to tackle fuel poverty and improve the energy efficiency of homes. In 2023, ECO accounted for 83% of all energy efficiency measures installed. Eligible households receive certain benefits or are directly referred by a local authority or energy supplier. More information is available on Ofgem’s website. 
• Great British Insulation Scheme (GBIS): A three-year scheme delivering energy efficiency measures (such as cavity wall insulation) to eligible households. This scheme is open to low-income and vulnerable households, and more generally households that have both an EPC rating of D – G, and that are within Council Tax bands A to D in England, or A to E in Scotland and Wales. More information is available on Ofgem’s website. 
• Boiler Upgrade Scheme (BUS): The BUS provides a grant of up to £7,500 to support the installation of a heat pump or biomass boiler in homes and non-domestic buildings in England and Wales. Eligible households have fossil fuel heating systems, and a valid EPC, and must own their property. More information is available on gov.uk.    
• Social Housing Decarbonisation Fund (SHDF): The principle scheme to decarbonise and improve the energy efficiency of social housing. Local authorities or social housing providers apply for this funding. More information is available on gov.uk. 

What are some of the issues with energy efficiency schemes?

• GB energy efficiency schemes have been negatively impacted by boom-bust policy cycles. The recent Green Homes Grant Voucher scheme, for instance, was extended before being closed early due to a range of issues affecting its performance…^[1]   
• Supply chains cannot be built overnight and businesses need confidence in the longevity of schemes to invest in materials and people. It can take up to four years to train specialists in some construction trades, for example. 
• The way schemes have been designed often results in a ‘one size fits all’ approach where every building is assumed to have similar needs in order to improve its efficiency. The UK’s building stock is incredibly varied, however, and this approach means that some households miss out on the more specific support their building requires. 
• Local authorities can help to achieve a tailored approach to energy efficiency improvements in their communities. Local authorities need more resources to be able to engage with households and local supply chains. 

How could energy efficiency schemes be improved?  

• Reflect the true costs of installing measures: The Department for Energy Security and Net Zero (DESNZ) is the lead Government department and has at times under-priced the cost of installing measures when designing the schemes or has not reflected market changes such as the recent inflation rates which have impacted costs across the supply chain.   
• Make it easier to find out about eligibility: Scheme eligibility is complicated by the fact that both the household and the property need to qualify for the schemes, and the criteria varies across the different schemes. An online checker tool helps households understand what they are eligible for, however this process could be improved to ensure that a higher proportion of applications can be taken forward.  
• Improve the customer application process: The current approach sees a high rate of failed GBIS applications due to unclear criteria. For instance, the application webpage incorrectly suggests that customers might be eligible for eight different types of insulation, even though GBIS is a ‘single measure’ scheme where only one form of insulation is provided. Clearer guidelines at the point of application would streamline the process and reduce failures. 
• Extend the schemes: Extend ECO4 and GBIS by two years to account for challenges within delivery, and to ensure that they successfully deliver on fuel poverty targets. 
• Change the approach to Shared Ground Loops within ECO4: Unlock the potential for ECO4 funding to support the installation of shared ground loops (SGL), in line with heat decarbonisation goals. This can be achieved by reverting back to the way that SGLs were assessed under ECO3, using SAP instead of RdSAP, and requiring their accreditation only through MCS, and not TrustMark. This is because TrustMark is a single-measure accreditation process where an SGL is a system. 
• Increase installer capacity:  Long-term policy certainty, taken together with a skills strategy, would help plug the gaps within the construction sector. Increasing the supply chain that has the qualifications necessary to deliver Government-funded schemes should be prioritised.  
• Introduce variable grant levels based on Council Tax bands for the BUS: Aligning grant levels with Council Tax bands whereby households in higher bands are eligible for a higher rate of grant than those in lower bands could help to fully cover the cost of installations for low to middle-income households. 
• Review third-party ownership restrictions of heat pumps and permit alternative ownership models: The BUS currently doesn’t allow third-party ownership of heat pumps installed in homes, creating a barrier for new models, such as subscription services, which could significantly lower upfront costs and make heat pumps more accessible. Allowing third-party ownership would enable more households to benefit from the scheme. 
• Increase the number of clean heat measures being funded by the SHDF. To deliver on objectives relating to fuel poverty, climate, and value for money, the SHDF should adopt a more intent focus on installing heat pumps in social housing. This can be achieved by allowing providers complete flexibility to use SHDF funding on measures that would achieve carbon and energy bill savings. Furthermore, creating a ‘clean heat’ funding pot within SHDF Wave 3 would ensure a minimum level of clean heat projects. 

[1] Public Accounts Committee (2021), PAC report: Green Homes Grant scheme “underperformed badly”