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Energy Company Obligation overview

Posted on: 2012-06-06 10:38:42

The Energy Company Obligation (ECO) is aimed at supporting the poorest and most vulnerable in society, including people in deprived areas from rising energy bills by upgrading their homes so that they are cheaper to heat for good.

Energy companies are required to provide an estimate £1.3bn a year of support for energy efficiency in our home with at least £540m to fund energy saving improvements in the worst off homes.

This includes:

·        Around £350m a year to deliver heating and insulation measures to low income and vulnerable households. This will focus assistance where fuel poverty rates are highest.

·        Government are currently considering ways to provide more targeted support for the lowest income homes. This could mean that for those living in the poorest areas including social housing, specific support worth around £190m a year will be available from the energy companies to upgrade home and flats with loft and cavity wall insulation, as well as other insulation measures to make them warmer and cheaper to run.

The Affordable Warmth Target – focus on providing support to low income households, identified by their entitlement to certain means tested benefits and tax credits, who are also vulnerable to detrimental health impacts from living in cold homes. 2015 statutory target £3.4 billion reduction in notional lifetime costs of heating. Assisting to a minimum of 325,000 households by the end of March 2015. Continuing with a similar level of commitment out to 2022, this could deliver measures to around 1 million households by 2022.



·        Low income and vulnerable households

·        Private tenure


·        Any measure should be available under the Affordable Warmth Target, focus is on measures which will improve the thermal performance of a property, measured through a reduction in the expected cost of heating space or water in the property.


The Carbon Target – will provide additional support for hard to treat homes requiring measures which include solid wall insulation (SWI), including households who cannot fully fund the measures through Green Deal finance alone. Other measures can be funded, but only when packaged with SWI. 2015 statutory target – 0.52 million tonnes of CO2 per year saved



·        Open to any householder

·        Equitable distribution


·        Expected to focus on SWI and possibly HTT cavity walls

·        Other measures can be funded but only when they are in a package of measures, such as glazing and draft proofing

Brokerage proposal

A market based mechanism that brings together energy companies and Green Deal providers in an open market where carbon that energy companies require to meet their obligation is traded for ECO subsidy.

In summary - £1.3bn p/a

£540m for vulnerable homes, slit into:

·        Affordable Warmth Target - £350m p/a

·        Communities - £190m p/a

o   This includes social housing