ECO4 and GBIS mid-scheme changes: options assessment (published and updated 20 November 2024)
Updated 7 April 2025
© Crown copyright 2025
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/consultations/energy-company-obligation-4-and-the-great-british-insulation-scheme-mid-scheme-changes/eco4-and-gbis-mid-scheme-changes-options-assessment-published-and-updated-20-november-2024
Title: Energy Company Obligation 4 and the Great British Insulation Scheme consultation on mid-scheme changes
Type of measure: Consultation
Department or agency: Department for Energy Security and Net Zero
IA number: DESNZ015(OA)-24-ERHA
Contact for enquiries: Chris Nicholls, chris.nicholls@energysecurity.gov.uk
Date: 19 November 2025
1. Summary of proposal
The government is proposing to update the Great British Insulation Scheme (GBIS) to make it more attractive for the supply chain, which should reduce costs and increase the volume of contracts available in the market. The accompanying consultation is seeking views on allowing loft and cavity wall insulation to be installed simultaneously as part of a GBIS project, and allowing smart thermostats to be installed in the low-income group. Additionally, the consultation proposes that delivery achieved under ECO4 rules could count towards an obligated supplier’s GBIS target.
The changes being proposed through this consultation would help to ensure ECO4 and GBIS support our statutory objectives of improving as many fuel poor homes to band C by 2030 as is reasonably practicable.
To encourage increased delivery of loft insulation, this consultation outlines proposals to allow the option of an alternative installation standard to PAS 2035/2030 for specific measures under GBIS. Industry representatives and TrustMark have considered how TrustMark Licence Plus (TMLP) could be adapted for loft insulation under GBIS, when delivered as a single measure (and heating controls when paired with loft insulation), thereby lowering costs while mitigating risks and prioritising consumer protection. Separately, TrustMark is consulting on the details of this alternative standard.[footnote 1] To enhance consumer protection, TrustMark is expected to consult on strengthening guarantees for loft insulation and boilers where these are available through the schemes.
This consultation also requests feedback in relation to the costs of compliance with PAS 2035/2030. It outlines proposals for minor legislative amendments to aid scheme administration, as well as options for strengthening financial protection.
This consultation also proposes a range of small changes to align with wider industry changes and address specific delivery issues. These changes aim to support increased uptake of measures in ECO4 and GBIS.
The final part of this consultation proposes to introduce a voluntary Pay-For-Performance (PFP) mechanism to ECO4 and GBIS. PFP could incentivise better quality retrofits and provide valuable data for PFP-style approaches in future schemes. PFP would measure and reward actual improvements to the energy efficiency of a treated home using Smart Meter Enabled Thermal Efficiency Ratings (SMETERs). SMETER technologies take direct measurements from a building to assess its performance. This proposal is expected to drive industry to use better quality measures and work to even higher standards.
2. Strategic case for proposed regulation
Several market barriers and failures exist in the energy efficiency market, preventing the deployment of measures in the absence of government intervention. Without intervention, many households will struggle to pay their bills.
The ECO4 and GBIS schemes place a legal obligation on larger energy suppliers to deliver energy efficiency measures to eligible households. They aim to reduce fuel poverty, improve security of energy supply, and reduce household carbon emissions to support the government’s net zero ambitions. Since 2013 ECO schemes have delivered around 4.0 million measures in around 2.5 million households, representing just over 9% of households in Great Britain. The current scheme, ECO4, is due to end on 31 March 2026 and is worth £4 billion.
GBIS was launched after energy prices spiked in 2022 with the aim to reduce energy demand in the residential sector (contributing to the national ambition of a 15% reduction in energy consumption by 2030), lower energy bills, make progress against the government’s statutory fuel poverty and net zero commitments, improve energy security, and support jobs and growth.
In its original Impact Assessment, GBIS was estimated to be a £1 billion obligation on energy suppliers to improve the energy efficiency of EPC D-G properties across two eligibility groups, a ‘low-income group’ and a ‘general group’, between spring 2023 and March 2026.
However, there is strong evidence that GBIS is proving more difficult and costly to deliver than was originally estimated: Ofgem reported installation rates are lower than expected if the industry was on track to deliver their obligations by March 2026; and energy suppliers are reporting higher costs and supply chain constraints that limit their ability to fulfil their obligations.
The delivery figures as of end of July 2024 are as follows for GBIS:
| Metric | Count |
|---|---|
| Total number of homes | 19,789 |
| Low-income group | 6,661 |
| General group | 13,034 |
| Total number of measures | 24,721 |
| Loft insulation | 6,520 |
| Cavity wall insulation | 11,293 |
| Floor insulation | 69 |
| Solid wall insulation | 1,365 |
| Heating controls | 4,934 |
In the absence of regulatory changes, energy suppliers could continue to under-deliver on their obligations and/or experience a higher than estimated cost to meet their delivery targets.
The consultation that accompanies this Options Assessment proposes changes that should improve delivery and increase confidence that the overall cost of compliance meets the original estimate of £1bn. Other minor changes are proposed in the consultation to align GBIS and ECO4 to wider industry changes.
This Options Assessment provides analysis of the final policy design for the mid-scheme changes in GBIS and ECO4.
3. SMART objectives for intervention
GBIS has a wide eligible pool and supports installing insulation for a group of people who are not covered by other government schemes. As such, it is important to improve delivery under GBIS to reach these households. At the same time, there is a statutory duty to ensure that as many fuel-poor households as is reasonably practicable achieve a minimum energy efficiency rating of Band C by 2030. The policy objective of the consultation is to gather views on options to enable more progress towards meeting the full GBIS target as well as maintaining support for the supply chain that delivers ECO4. The intended effect of the consultation is that obligated energy suppliers and other stakeholders build confidence in ECO4 and GBIS, resulting in the outcome of increased delivery of both schemes, particularly GBIS. The preferred option should enable obligated suppliers to meet their GBIS obligation within the original total scheme cost of £1 billion. Indicators of success that will be considered include the number of households treated, the cost per household, annual bill savings achieved, and the impact on fuel poverty.
The proposals in the consultation aim to address some of the delivery issues that we have identified. These include the constrained supply chain due to the limited number of installers; the competition from other more attractive schemes such as ECO4; the fixed scheme costs which obligated suppliers can recover under the energy price cap, in light of inflation rising faster than expected at the time of scheme design; difficulties contracting for projects in the general group which require customer contributions; and the move to single measure projects with relatively higher fixed costs rather than whole house retrofits.
The outcome of the consultation will be a set of policy changes that are published in a subsequent government response and associated Final Impact Assessment. The desired outcome of these policy changes is primarily to increase delivery of GBIS measures. The increase in delivery will be measured exactly by Ofgem, the scheme administrators. We believe an increase in delivery is achievable and realistic and will be enabled by the proposals in the consultation. The desired outcomes rely on having the maximum amount of time possible to take effect, since GBIS and ECO4 are due to end on 31 March 2026.
4. Description of proposed intervention options and explanation of the logical change process whereby this achieves SMART objectives
The preferred approach is to introduce the options as consulted on, in support of the overall objective of increasing delivery of measures under GBIS. This meets the SMART criteria of being specific, achievable, measurable, realistic and time-bound. It is specific because it aims to make the achieved Annual Bill Savings (ABS) as close to the target as possible. The changes will be measured using installation figures reported to the department by Ofgem. It is an achievable objective given the efficiencies possible in GBIS which we have identified through our own analysis and in combination with stakeholder feedback. The options are realistic because we have the powers to make these changes to scheme rules, and stakeholder feedback was positive around them. The objective to increase delivery will have the greatest effect where the preferred option has the maximum amount of time possible to be implemented, which is why the consultation seeks views on the early introduction of changes before the updated legislation is agreed by Parliament. Therefore, it meets the objective of being time bound, as the scheme has only a year and a half left to run, and thus limited time for the change to have effect.
The proposal to allow loft and cavity wall insulation to be installed together should achieve the objective of increased delivery by spreading high fixed costs over more insulation measures. This would result in an increase in attractiveness of GBIS for installers and householders and would make the scheme more profitable, and therefore more attractive for the supply chain.
Fixed costs are important because GBIS currently only allows one insulation measure to be installed per household, with additional heating controls being permitted for installations in low-income households. This rule was introduced to ensure as many households as possible could benefit from the scheme. However, high fixed costs associated with home surveys, compliance with standards, and searching for viable properties mean offering only one insulation measure is not as attractive as offering multiple measures where the fixed costs make up a lower proportion of the total costs. In addition, better value for money is provided when multiple cost-effective insulation measures such as loft and cavity wall insulation can be installed at the same time.
Loft and cavity wall insulation are the most popular and cost-effective measures on GBIS and installing both, where possible, results in better outcomes for installers and householders. While this proposal theoretically reduces the number of homes able to be treated through GBIS compared to the original assumption, it should enable more delivery overall than would take place without changes. The noted delivery challenges and compliance costs, which make up a large proportion of scheme costs, would be significantly reduced, making GBIS more attractive to the supply chain.
The proposal to allow smart thermostats as an eligible secondary measure in the low-income group will achieve the objective of increased delivery by broadening the variety of measures on offer. The addition of these high-scoring, low-cost secondary measures would help make GBIS more appealing to the supply chain and assist with increasing levels of delivery.
Heating controls, of which smart thermostats form a part, can deliver significant savings to households at a small cost compared to insulation measures. Heating controls improve energy efficiency by reducing heating hours when heat is not required. GBIS currently allows heating controls in the low-income group only, as a secondary measure in addition to a primary insulation measure. Certain types are eligible measures, but smart thermostats have not previously been allowed. Smart thermostats offer several advantages to the household, such as remotely controlling their home temperature via a tablet, smartphone or desktop.
The proposal to allow ECO4 delivery to count towards GBIS will achieve the objective of increased delivery because obligated suppliers are reporting high volumes of ECO4 capacity in the market and that scheme has been delivering well. Many obligated suppliers are now ahead of where they would need to be at this stage of ECO4. Maximising use of available ECO4 capacity would expand support for fuel poor homes. This proposal would allow ABS an obligated supplier achieves under ECO4 rules to be able to count towards their GBIS obligations.
The proposal to allow an alternative installation standard will achieve the objective of increased delivery because it will make delivery of loft insulation more attractive in GBIS. The proposal is to allow loft insulation when installed as a standalone measure, or when paired with heating controls, to comply with TrustMark Licence Plus (TMLP) instead of the full PAS 2035/2030 standard. This lower-cost alternative to PAS 2035/2030 could reduce delivery costs for loft insulation when delivered in isolation (or with heating controls) and may therefore result in a greater number of households receiving support, than is the case currently.
These options are technical changes to rules of existing schemes and will be introduced as an update to existing regulations, the Electricity and Gas (Energy Company Obligation) Order 2022, and the Electricity and Gas (Energy Company Obligation) Order 2023. The impacts of the options have been quantified using well-understood modelling techniques employed across several schemes in DESNZ.
5. Description of shortlisted policy options carried forward
The short list for the consultation is as follows:
Option 1: Do nothing
This option is the counterfactual in our scenario. It is continuing GBIS as normal where no changes are made. This option would mean that the targets set for obligated suppliers are almost certain to be missed. Obligated suppliers would incur higher costs through their delivery than they are able to recover through the price cap, which is set by Ofgem. This would not be an acceptable option because there would in effect be a target that suppliers are obligated to meet at a cost that is higher than they can recover from consumers.
Option 2: Do minimum
This option is to tweak the scheme to allow multiple measures; allowing installation of both loft and cavity insulation in the same retrofit. Suppliers and installers have called for this change. It is considered efficient to install loft and cavity insulation alongside each other and so is sensible to open up the option to do this within the scheme. This change would also bring down the proportion of fixed costs per retrofit and increase the relative profitability of the scheme, thus making it more attractive. Whilst a positive change, it is unlikely that this change alone would be enough to increase scheme delivery sufficiently to meet most suppliers’ obligated targets.
Option 3: Preferred way forward
This option is considering making changes to the scheme that will likely improve delivery and help obligated suppliers meet their targets at the original £1 billion cost.
The changes include:
- allowing loft and cavity wall insulation in the same project in GBIS
- allowing smart thermostats to be included in the low-income group in GBIS
- allowing ECO4 delivery to count towards GBIS
- allowing for the introduction of Trust Mark Licence Plus, an alternative option to PAS
The three options in this shortlist were narrowed down to one by considering the implications of each. The impacts on the installation supply chain, obligated suppliers, and consumers were considered and it was clear that changes beyond the minimum possible were required to achieve the suppliers’ GBIS targets.
The preferred option should have a positive impact on small and micro businesses, and medium-sized businesses, if they participate in the ECO4 or GBIS schemes. The impact of the preferred option would be to increase delivery and the availability of contracts from obligated suppliers to deliver GBIS and ECO4. GBIS would be made more attractive due to the options included in the preferred way forward because the cost of delivering some measures would fall and suppliers would have a greater range of measures and households with which to meet their targets.
There is no view over the most likely combination of GBIS and ECO4 delivery that will maximise the likelihood of GBIS targets being met, as both schemes are modelled to fully deliver the amounts determined in the respective scenarios. A central case where GBIS and ECO4 contribute equally to meeting suppliers’ GBIS targets is used only as an illustrative example.
Analytical Approach and Assumptions
The analytical approach to estimating the impact of these policy changes is the same as that laid out in the 2023 GBIS (formerly known as ECO+) Final Impact Assessment (IA)[footnote 2] and 2022 ECO4 Final Impact Assessment.[footnote 3] The National Buildings Model (NBM) has been used to simulate the cost of delivering both schemes, whereas the above IAs were modelled in the National Household Model – the NBM’s predecessor. Some changes in results will arise because of this change in model environment, but most differences will come from changes to cost assumptions.
The cost assumptions underpinning the modelling of the above policies have been updated since these IAs were undertaken, reflecting the sharp rise in the cost of some measures since they were published. These costs are presented in Annex A.
Other changes include updated evidence on the proportion of cavity wall insulation (CWI) that is easy to treat and hard to treat. This reduces the amount of low-cost, easy to treat CWI that can be found and treated. The effect of this has been to drive up the cost of the marginal CWI installation, which produces more economic rent in the market as a result.
The full range of policy changes are also reflected in the analytical approach and costs, such as the introduction of TrustMark Licence Plus, which lowers the compliance cost of installing loft insulation, and the ability to install loft and cavity wall insulation alongside each other.
The counterfactual (keeping with the existing scheme) has been modelled assuming it is fully deliverable. However, as the justification for these policy changes is to increase the certainty of delivery, the net present value of the counterfactual is highly uncertain.
6. Regulatory scorecard for preferred option
Part A: Overall and stakeholder impacts
(1) Overall impacts on total welfare
Description of overall expected impact:
Directional rating: Positive - Based on all impacts (incl. non-monetised)
The overall expected impact of the regulation on social welfare is expected to be positive. As we are making changes to make the scheme easier to deliver, we expect increased delivery of measures from these changes compared to the counterfactual. Further, incorporating ECO4 delivery increases the proportion of low-income households receiving measures, which helps the equity-weighted perspective of the cost-benefit analysis.
The figures, below, show the model results that enable a cost per Annual Bill Saving (£/ABS) to be calculated. They show the costs and benefits of each scheme, assuming GBIS and ECO4 schemes each deliver half the obligated amount of GBIS ABS points.
The total cost of delivering these ABS points to energy suppliers is the same as in the original regulations’ final stage Impact Assessment, as a currency conversion has adjusted the value of ECO-compliant delivered points accordingly. In addition, the overall impact is positive because it gives a much higher level of confidence that the ABS points will be delivered.
Monetised impacts:
Directional rating: Positive - Based on likely £ NPSV
Total £ NPSV of GBIS-compliant delivery: £339.1m
Total £ NPSV of GBIS-compliant delivery (Equity weighted): - £66m
Total £ NPSV of ECO4-compliant delivery: £154.3m
Total £ NPSV of ECO4-compliant delivery (Equity weighted): £159.9m
| Metric | GBIS Compliant Delivery | ECO4 Compliant Delivery |
|---|---|---|
| Total Discounted Benefits | £895.5m | £536.3m |
| - Energy Savings | £284.5m | £249.6m |
| - Air quality | £54.1m | £47.9m |
| - Carbon Traded | £7.8m | £16.2m |
| - Carbon Non-Traded | £458.9m | £198.3m |
| - Comfort taking | £90m | £24.3m |
| Total Discounted Costs | £556.3m | £382m |
| - Total Capex | £253.2m | £268.9m |
| - Hidden landlord and tenant costs | £23.9m | £15.9m |
| - Search Costs | £55.2m | £14.3m |
| - PAS Costs | £142.9m | £42.8m |
| - Economic Rent (For the EW NPV) | £104.3m | £89.6m |
Equity weighted (EW) NPV includes all of the above costs and benefits, with the addition of economic rent. However, the headline main NPV does not include economic rent.
Combining the individualised costs and benefits of both these schemes together, we get the following:
| Metric | Figure |
|---|---|
| Total discounted costs | £938.4m |
| Total discounted benefits | £1,431.8m |
| Main NPV | £493.4m |
| Total discounted costs (EW) | £1,132.2m |
| Total discounted benefits (EW) | £1,226.2m |
| Equity weighted NPV | £94m |
Non-monetised impacts:
Directional rating: Positive
There is a greater probability of delivering measures into more homes as a result of these changes. All other key costs and benefits noted from the original GBIS FIA have been monetised.
Any significant or adverse distributional impacts?:
Directional rating: Neutral
No.
(2) Expected impacts on businesses
Description of overall business impact:
Directional rating: Positive
The overall expected impact to businesses is expected to be positive as we are making delivery easier. However, there is no change to the EANDCB as costs are passed through from Ofgem to consumers. As we have kept the budget the same, there is no change to what was stated in the FIA.
Monetised impacts:
Directional rating: Neutral - Based on likely business £NPV
The estimated cost to energy suppliers of delivering annual bill savings (ABS) for GBIS is £24.84/ABS and for ECO4 is £17.87/ABS. The consultation suggests different ways of setting an ECO4 delivery cap that enables ECO4 measures to count towards energy suppliers’ GBIS obligations. This introduces a ‘currency conversion’ that, depending on the cap level, will adjust the cost of delivering GBIS back to its original £1bn. This means there is no additional cost to energy suppliers compared to the level estimated in the original final stage IA, so the regulations count as De Minimis, as the impact is below the £10m threshold.
In both the ECO and GBIS schemes, energy suppliers pass their compliance costs onto their domestic energy consumers. An allowance for this cost is made in the Ofgem price cap for default energy tariffs to allow this. Given there is no additional cost to energy suppliers following the changes suggested in this consultation, there will be no change in the EANDCB or EANDCH, as no change in pass-through costs to consumers are expected.
Non-monetised impacts:
Directional rating: Neutral
All key costs and benefits noted from the original GBIS FIA have been monetised.
Any significant or adverse distributional impacts?:
Directional rating: Neutral
No.
There may be regional impacts and impacts on specific business sectors.
Please note SaMBA impacts and mitigations were covered in the process of arriving at the short list as this is red-rateable.
(3) Expected impacts on households
Description of overall household impact:
Directional rating: Positive
The expected impact to households is expected to be positive. By including ECO4 delivery, the equity-weighted NPV improves as a higher proportion of low-income households are expected to receive measures. This is also reflected in the number of low-income households treated in our approach compared to the counterfactual.
Monetised impacts:
Directional rating: Neutral - Based on likely household £NPV
There is no individual household NPV and, as stated above, there is no change to the EANDCH.
Non-monetised impacts:
Directional rating: Positive
There is a greater probability of delivering measures into more homes as a result of these changes. All other key costs and benefits noted from the original GBIS FIA have been monetised.
Any significant or adverse distributional impacts?:
Directional rating: Neutral
No.
The inclusion of ECO4 delivery will help more low-income households. The PSED details other expected impacts, which shows the impact of ECO4 delivery increasing the representation of elderly, ethnic minority and disabled households. It also increases the regional spread to be more representative of the country as a whole.
Part B: Impacts on wider government priorities
Business environment:
Directional rating: Supports
This will impact the ease of doing business for obligated suppliers, as there will be increased delivery of measures across Great Britain.
International Considerations:
Directional rating: Neutral
There is no likely impact on international trade nor investment.
Natural capital and Decarbonisation:
Directional rating: Supports
The schemes were designed to decrease consumer bills and improve household insulation which would thus decrease energy consumption and reduce carbon emissions. As it is unclear by how much the scheme is likely to under-deliver without these policy changes, it is difficult to assess the impact on carbon savings. However, it is likely to deliver more carbon savings.
7. Monitoring and evaluation of preferred option
The strategic aims of the ECO4 and GBIS mid scheme changes align with the intended outcomes and impacts of GBIS scheme, as shown in the Theory of Change in the below Figure. These are to: better insulate homes, reduce energy bills, and contribute towards the UK’s fuel poverty and net zero targets.
The Theory of Change shows how we expect the GB Insulation Scheme to achieve its high-level aims after considering the proposed mid-scheme changes. It sets out the pathways to impact which result from the scheme activities, outputs and outcomes. This Theory of Change has been developed in consultation with those involved in policy design and steered by an M&E adviser in the Department for Energy Security and Net Zero (DESNZ). Updates have been made to the Theory of Change as the policy design has evolved.
The monitoring and evaluation (M&E) approach will assess the extent to which the proposed changes have been successful in achieving the aims of the GBIS policy.
Evaluating proposed changes to GBIS
The overall approach to M&E accounts for the strong existing evidence around ECO-GBIS scheme implementation, current and future evaluation activity on ECO4, and the quality of scheme data available. To assess performance of the scheme against its stated objectives, we will continue to track the outcomes of the scheme using the Ofgem data and publish this as GBIS Official Statistics.
Alongside this, we will evaluate the implementation of the proposed changes through the existing GBIS evaluation that focuses on fieldwork with households and non-household stakeholders. This would provide further, more detailed evidence on impacts of the suggested changes and will also involve deep dives into priority areas of policy interest. The design of the evaluation is such that we will be able to explore questions of specific relevance to the delivery of the GB Insulation Scheme and the proposed changes in Wave 2 and Wave 3 of the existing GBIS evaluation. Whilst ensuring resource is focused on areas where there is not already extensive evidence from previous and ongoing evaluations of the ECO and GBIS scheme. This is therefore deemed to be the most cost effective and proportionate approach.
The existing evaluation of GBIS is in progress, having commenced in March 2024 and scheduled to conclude in March 2027. The GBIS evaluation is a process and outcome evaluation, focusing on understanding how the scheme is delivered, whether it is being delivered as intended, the quality of its delivery, and any issues or challenges encountered during implementation. This type of evaluation is crucial in ensuring that schemes achieve their intended outcomes.
The diagram below shows the current GBIS Theory of Change, including the proposed changes in activities.
Text version of diagram:
Inputs / Activities & Policy mid-changes (PMC):
- DESNZ staff resource to draft/amend legislation and develop robust policy rationale
- HMT agrees price cap of £1bn
- Website development, guidance and comms
-
Ofgem scheme set up and delivery
- Ofgem administration of the scheme
- Suppliers contract installations
- Trustmark monitoring standards and compliance of installations (PMC)
- Installers find homes and install measures (inc. CWI + LI allowed and smart thermostats for LI income)
- Local authority staff administer flexible eligibility
Outputs:
- Legislation is enacted to enforce new policy, within desired ministerial timeframes
- Website is live, allowing people to sign up for measures
- Measures are installed in people’s homes to Trustmark-assured standards, by competent, skilled installers
- Consumers fuel bills savings start to acrue
- Consumers become aware of the benefits of energy efficiency and GBIS
- Consumers build trust in the EE market
- Payments are made to installers
- Consumers fuel bills savings start to acrue
- Measures are installed in people’s homes to Trustmark-assured standards, by competent, skilled installers
- Non-compliant measures are reftified (Trustmark monitoring)
Outcomes:
- Improved health and wellbeing due to increased thermal comfort
- Better insulated homes
- Reduced energy demand
- Reduced energy bills, increased houshold resilience to higher costs of living
- Supports jobs growth in energy efficiency sector. Installations concentrated in north of England, contributing to levelling up agenda
Impacts:
- Progress towards Net Zero and GHG emissions reductions
- Increase UK energy security
- Progress towards statutory Fuel Poverty targets
The GBIS evaluation includes primary data collection with:
- participating households (surveys and pre/post installation interviews);
- installers and the supply chain (surveys and interviews)
- energy suppliers (case studies)
These will allow us to collect evidence on the proposed changes both to understand the implementation of the scheme and to assess the impact of the proposed policy changes.
The key aim of the proposed changes is to increase delivery on GBIS. The evaluation of the mid-scheme changes will focus on analysing how the proposed changes affected the delivery of GBIS. The table below maps the impact of proposed changes to the evaluation questions and the sub-questions that would be asked.
| Proposed changes | Aim of proposed changes | Impact | Evaluation Question | Existing data collection that will be used |
|---|---|---|---|---|
| Allowing loft and cavity wall insulation in the same project in GBIS. Allowing smart thermostats to be included in the low-income group in GBIS. |
Increased delivery increase in attractiveness of GBIS for installers and householders smart thermostats deliver significant savings to households at a small cost | Multiple Measures installed in households | What is the experience of households who receive GBIS? What are the reported outcomes for households? |
Household surveys and interviews Installer surveys and interviews |
| Allowing ECO4 delivery to count towards GBIS | Increase delivery maximises high volumes of ECO4 capacity in the market | Higher delivery. Stable and continuous business for supply chain. |
How is GBIS delivered by the supply chain? What is the experience of the supply chain involved in the delivery of GBIS? What is the experience of the supply chain involved in the delivery of GBIS? How does the GBIS ABS market work? |
Installer surveys and interviews. Supplier case studies. |
| Allowing for the introduction of Trust Mark Licence Plus, an alternative option to PAS | Lower scheme costs while mitigating risks and prioritising consumer protection delivery of loft insulation more attractive in GBIS reduce delivery costs for loft insulation when delivered in isolation (or with heating controls) | Measures installed with TMLP standards | What is the customer journey for households who receive GBIS? What are the reported outcomes for households? |
Household surveys and interviews Installer surveys and interviews |
Timelines
Our evaluation plan allows for flexibility as it is split into three waves of research. This means that at the beginning of each wave there is an opportunity to review the evaluation questions according to policy needs and policy changes, and that the results of each wave will provide an opportunity to answer policy questions and to inform any policy amendments.
The sequencing of the fieldwork activities is set out in diagram below. We will explore the opportunity to shift some supply chain research to 2026, or supplement it with further research in order to be able to look at the impact of the changes on supply chain stakeholders.
Text version of diagram:
(GBIS Scheme Delivery & installation, Q3 2023/24 to Q3 2026/27).
A: Household Research:
| Wave 1 (2024/25) |
Wave 1 (2025/26) |
Wave 1 (2026/27) |
|
|---|---|---|---|
| A1: Enhanced Interviews | Household interviews: pre-installation (n=20) & post installation (n=20) | - | Household interviews: pre-installation (n=20) & post installation (n=20) |
| A2: Surveys | - | Household surveys (n=2,000) | Household surveys (n=2,000) |
| A3: Telephone Interviews | - | Household follow-up interviews x50 | Household follow-up interviews x50 |
B: Supplier Research:
| Wave 1 (2024/25) |
Wave 1 (2025/26) |
Wave 1 (2026/27) |
|
|---|---|---|---|
| B1: Surveys | - | Supply chain survey | - |
| B2: Telephone Interviews | Suppliers and supply chain interviews | Suppliers and supply chain interviews | - |
| B3: Case studies | Supplier case studies x2 | Supplier case studies x2 | - |
Our research will use the following data sources:
- Ofgem database, containing addresses of GBIS beneficiary households. We will use this database to draw a representative sample of households for the household survey
- TrustMark database, containing business names of installer companies who have registered installations of GBIS measures. We will use this database to define a sample of installers, retrofit assessors and retrofit coordinators for the supply chain interviews
Evaluation of GBIS
The existing GBIS evaluation will provide information relating to the following priority areas:
- Socio-demographics: motivations, satisfaction and characteristics of ‘able to pay’ or ‘general’ group households.
- Customer journey: There are multiple possible routes to enter the scheme, and multiple variations in the delivery approach of GBIS. The data collected through the evaluation will be used to develop a journey map which visually demonstrates the experience of customers receiving GBIS measures.
- Customer satisfaction: customer satisfaction with the scheme and with the installed measures,
- Customer outcomes: We will measure perceived outcomes such as perceived changes in energy consumption, perceived energy bill savings, changes in thermal comfort, health and wellbeing.
- Customer contributions: The evaluation will investigate how contributions are agreed, how much and which households contributed, and the views on making/requesting contributions – from both supply chain and customer perspectives.
- Annual Bill Savings (ABS) market: The evaluation will explore how the price per ABS is calculated, how it has changed throughout the course of delivery and the considerations made when supplier procure partners to deliver ABS. To address this evidence gap, data collected will be used to develop an ABS map which visually represents the ABS market and its components.
- Delivery journey: The research will focus on identifying the typical delivery journey configurations that exist, as well as the different roles involved in delivery. Data collected will be used to develop a journey map which visually demonstrates the delivery journey of the scheme.
- Supply chain perceptions: The research will investigate the attitudes of those involved in the delivery of the scheme ‘on the ground’ (i.e., energy suppliers, installers, managing agents, retrofit coordinators, retrofit assessors and lead generators).
- Commercial attractiveness: Following from research exploring supply chain perceptions and the market for ABS; overall indications of the profitability, risk, and attractiveness of different installation strategies will be examined, to understand the overall commercial attractiveness for suppliers.
8. Minimising administrative and compliance costs for preferred option
Admin costs have not increased, nor changed because the costs of administering ECO4 and GBIS remain the same. The preferred option ensures that there is no change to consumer bills, so the analytical model has used the same administrative and compliance cost as stated in the GBIS Final Impact Assessment.
The cost of complying with PAS 2035/2030 was modelled for ECO4 and GBIS. The introduction of TMLP for GBIS will reduce these high compliance costs that obligated suppliers and installers are facing when delivering loft insulation as a standalone measure or when paired with a heating control. TMLP for GBIS will allow more households to be treated at a lower cost compared to the higher costs of complying with PAS 2035/2030.
Declaration
Department: Department for Energy Security and Net Zero
Contact details for enquiries: Chris Nicholls, chris.nicholls@energysecurity.gov.uk
Director responsible: Jessica Skilbeck
I have read the Impact Assessment and I am satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impact of the leading options.
Signed: Jessica Skilbeck
Date: 19 November 2024
Summary: Analysis and evidence
We have not produced alternative option analysis for the options assessment, as these proposals are mid-scheme changes so there were limitations to what modelling could be done for the final year of the scheme to produce an impact. The counterfactual in this scenario is the business as usual, which would entail the schemes continuing to deliver as usual. But as delivery has been more difficult, and costs have increased since the regulations were made, there is a necessity to make changes to ensure that impacts to consumers and delivery remain minimal.
Although the changes for this consultation apply to both ECO4 and GBIS, the changes that need modelling apply mostly to GBIS. The analysis undertaken has involved GBIS modelling and ECO4 modelling. The analysis for the Final Impact Assessment (FIA) for GBIS was produced under the previous National Housing Model (NHM). The new National Buildings Model (NBM) has been used to produce the latest analysis. This includes an update on the NPV for the baseline policy without any changes.
For the GBIS changes, the £1bn budget spend envelope has been kept ensuring there is no negative impact on energy consumers (see below for further details of this calculation), as the Ofgem price cap already allows energy suppliers to collect this amount on their standard energy tariffs. No negative impacts are envisaged due to the changes making the scheme easier and cheaper to deliver, compared to a counterfactual of under-delivery.
There are assumed to be no direct benefits to business from the GBIS scheme. Whilst companies are assumed to benefit from economic rent achieved through installing measures at varying costs in GBIS, these benefits are the result of ‘resource used to comply with regulation’ and are therefore not classified as direct benefits for the purpose of the EANDCB, in line with RPC guidance.
The Green Book Supplementary guidance has been used to quantify some of the costs and benefits presented in this analysis, along with the costs detailed in Annex A. The equity weighted calculations were derived through assigning each household an individual weight and taking an average of all the total households. The Discount rate used was 3.5% (≤30 years) and 3% (>30 years).
Some differences in the baseline results compared to the FIA have occurred due to moving from the NHM to the new NBM. For example, the comfort taking assumption previously installed all measures in a household, then took comfort taking off this. Now, comfort taking is taken off after every measure is installed in the household, so it is more accurate as it is after every installation.
An additionality factor has also been applied to all the costs and benefits within GBIS, which accounts for all installations that would have been installed by the general group in the counterfactual without the policy. The assumption is that there will be 20% deadweight for the general group. This factor was calculated using the number of low-income group and general group treated, the percentage will alter depending on how many general group homes are treated.
For the final change, which is ECO4 delivery counting towards GBIS, the cost of delivering ABS points through GBIS and ECO4 was modelled. The cost of GBIS delivering half the regulated ABS points was calculated to be £696m, leaving £384m for delivering the remaining ABS points through ECO4. ECO4 compliance was modelled without the EFG and solid wall insulation minima, as it was deemed unlikely that either of these would be used to comply with GBIS if other, cheaper delivery approaches could be used instead. The cost of delivering those ABS points was calculated at £500m. This cost is used to produce a conversion factor (£500m/£384m) that, when combined with the cost of delivering ABS points through GBIS, gives a total cost of £1bn. This results in the cost of achieving an ABS under GBIS to be £24.84/ABS and ECO4 to be £17.87/ABS.
For a scenario where the amount of the GBIS Home Heating Cost Reduction Obligation (HHCRO) target that could be delivered via ECO4 projects is 50% i.e. £27,999,000 ABS, the conversion factor is 1.3 (£500m/£384m). Meaning £1 ABS delivered to ECO4 rules will achieve £1.30 ABS that count towards an obligated supplier’s GBIS obligation.
Depending on responses to the consultation regarding the most appropriate cap on ECO4 delivery that can count towards GBIS, the conversion factor would scale relative to this cap, to ensure the overall budget stays at £1bn. For example, were the cap set at a level such that 25% of the GBIS target could be delivered via ECO4 projects, the conversion factor would be 6.83. At a 75% cap the conversion factor would be 1.03.
Price base year: 2022
PV base year: 2023
Summary results
Net present social value
1. Business as usual (baseline)
Main NPSV = £738.2m
Equity weighted NPSV = -£40.5m
Total number of homes = 304,000
- Low-income group: 60,000
- General group: 243,000
Total number of measures = 348,000
- Loft insulation: 93,000
- Cavity wall insulation: 208,000
- Floor insulation: 2,000
- Solid wall insulation: 1,000
- Heating controls: 44,000
Total discounted costs = £1,170.6m
Total discounted benefits = £1,908.8m
Costs:
- Total capex: £537.8m
- Hidden landlord and tenant costs: £51.4m*
- Search Costs: £82.8m
- PAS costs: £346.4
- Admin costs: £61m
Benefits:
- Energy Savings: £608.6m
- Air quality: £115.3m
- Carbon Traded: £17m
- Carbon non-traded: £974.8m
- Comfort taking: £193.1m
Equity weighted NPV is all of the above with the addition of economic rent as an additional cost.
Economic Rent cost: £155.3m
*Hidden costs were calculated under the assumption that all homes treated were owner-occupier. There is a small percentage in the results which are housing association and PRS.
2. Preferred way forward (if not do-minimum)
Total £ NPSV of GBIS-compliant delivery: £339.1m
Total £ NPSV of ECO4-compliant delivery: £154.2m
Combined total £ NPSV of the GBIS and ECO4 compliant delivery: £493.5m
Total £ NPSV of GBIS-compliant delivery (Equity weighted): - £65.9m
Total £ NPSV of ECO4-compliant delivery (Equity weighted): £159.9m
Combined total £ NPSV of the GBIS and ECO4 compliant delivery (Equity weighted): £94m
| Metric | GBIS compliance | ECO4 compliance | Total both for schemes |
|---|---|---|---|
| Total Homes | 177,000 | 45,000 | 222,000 |
| Low Income Group | 36,000 | N/A | 36,000 |
| General Group | 141,000 | N/A | 141,000 |
| Total Measures | 230,000 | 93,000 | 323,000 |
| Loft Insulation | 52,000 | 16,000 | 68,000 |
| Cavity wall insulation | 139,000 | 11,000 | 149,000 |
| Floor insulation | 8,000 | 2,000 | 10,000 |
| Solid wall insulation | N/A | 1,000 | 1,000 |
| Heating controls | 30,000 | 11,000 | 42,000 |
Remaining measures that are included in the final total for both schemes above but are not mentioned in the table are measures that are allowed in ECO4 but not GBIS.[footnote 4]
| Metric | GBIS Compliant Delivery | ECO4 Compliant Delivery |
|---|---|---|
| Total Discounted Benefits | £895.5m | £536.3m |
| - Energy Savings | £284.5m | £249.6m |
| - Air quality | £54.1m | £47.9m |
| - Carbon Traded | £7.8m | £16.2m |
| - Carbon Non-Traded | £458.9m | £198.3m |
| - Comfort taking | £90.1m | £24.3m |
| Total Discounted Costs | £556.3m | £382m |
| - Total Capex | £253.2m | £268.9m |
| - Hidden landlord and tenant costs*: | £23.9m | £15.9m |
| - Search Costs | £55.2m | £14.3m |
| - PAS Costs | £142.9m | £42.8m |
| - Admin Costs | £39.4m | £40.1m |
| - Customer contributions | £41.8m | - |
| - Economic Rent (For the EW NPV) | £104.3m | £89.6m |
Equity weighted (EW) NPV includes all of the above costs and benefits, with the addition of economic rent. However, the headline main NPV does not include economic rent.
Combining the individualised costs and benefits of both these schemes together, we get the following:
| Metric | Figure |
|---|---|
| Total discounted costs | £938.3m |
| Total discounted benefits | £1,431.8m |
| Main NPV | £493.5m |
| Total discounted costs (Equity Weighted) | £1,132.2m |
| Total discounted benefits (Equity Weighted) | £1,226.2m |
| Equity weighted NPV | £94m |
*Hidden costs were calculated under the assumption that all homes treated were owner-occupier. There is a small percentage in the results which are housing association and PRS.
Public sector financial costs
1. Business as usual (baseline)
As a supplier obligation financed by energy bill customers, there is no impact on public sector finances.
2. Preferred way forward (if not do-minimum)
As a supplier obligation financed by energy bill customers, there is no impact on public sector finances.
Significant un-quantified benefits and costs
1. Business as usual (baseline)
As the final impact assessment says Until March 2024, the Government will be compensating energy suppliers for supplying electricity and gas to households in Great Britain at reduced rates under the EPG. By lowering energy use, ECO+ will marginally reduce the cost of the EPG in 2023/24. This benefit has not been monetised. Other non-monetised benefits include improved security of energy supply, lower energy imports and the health benefits gained by households receiving measures who will live in warmer homes.
2. Preferred way forward (if not do-minimum)
All key costs and benefits noted from the original GBIS FIA have been monetised.
Key risks
1. Business as usual (baseline)
Please note that the baseline analysis shows the policy as modelled from the FIA. But with updated analysis using the new NBM. The published actual delivery figures earlier in the OA paper explain how we are unlikely to reach this by the end of the scheme.
2. Preferred way forward (if not do-minimum)
-
Results of sensitivity analysis
1. Business as usual (baseline)
No sensitivity analysis was undertaken due to the fact that the schemes are already in delivery, and minor changes are being made.
2. Preferred way forward (if not do-minimum)
No sensitivity analysis was undertaken due to the fact that the schemes are already in delivery, and minor changes are being made.
Annex A. Input assumptions for costs and benefits
This annex sets out the input assumptions used for quantified costs and benefits in the GBIS modelling.
A.1 Installation capital costs of energy efficiency measures
The Department for Energy Security and Net Zero (DESNZ) has updated the assumed costs of installing insulation from those used in the GBIS Final IA[footnote 5] and ECO4 Final IA.[footnote 6] The department’s new cost models for these insulation measures are the same as the GBIS Final IA (in 2022 prices) but makes use of updated GDP inflation figures. The following inflation factors were applied: 2023 = 1.117 (11.7% cost increase), 2024 = 1.023 (2.3% cost increase), 2025 = 1.023 (2.3% real increase).
The assumed costs of installing heating controls remained the same as the GBIS Final IA, with the additional cost of smart thermostats. Smart thermostats had an assumed cost of £200 per unit (in 2022 prices).
We have assumed that the cost of installing a measure through TMLP is 50% of the cost of installing a measure through PAS. PAS costs were assumed to be approximately £1,000 (2022 prices). Installing loft insulation under TMLP was assumed to be around £500 (2022 prices).
-
Design of the Energy Company Obligation (ECO): 2023-2026 - GBIS (ECO+) final impact assessment ↩
-
Design of the Energy Company Obligation (ECO): 2023-2026 - ECO4 final impact assessment ↩
-
The measures table was updated on the 20/11/2024 to provide clarification on the number of measures. The outstanding amount in the GBIS total number of measures is due to rounding the figures. ↩
-
Design of the Energy Company Obligation (ECO): 2023-2026 - GBIS (ECO+) final impact assessment ↩
-
Design of the Energy Company Obligation (ECO): 2023-2026 - ECO4 final impact assessment ↩