NAO: Weak controls and oversight blamed for faulty home installations under energy efficiency scheme

• 98% of homes with external wall insulation installed under the government's ECO scheme require work to correct major issues that will cause problems such as damp and mould. 
• DESNZ's consumer protection system, which was set up in 2021, did not alert it to significant issues with the quality of installations until late 2024.
• The NAO recommends that DESNZ sets out how and when affected households can have faulty installations repaired, and reforms the consumer protection system.

A new National Audit Office (NAO) report sets out the reasons for failures in the government's energy efficiency scheme for homes, including poor-quality installations, weak government oversight and inadequate audit and monitoring, which the Department for Energy Security and Net Zero (DESNZ) believes have led to tens of thousands of households needing repair work to correct major issues that will cause problems such as damp and mould.¹

The government's Energy Company Obligation (ECO) scheme aims to tackle fuel poverty and reduce carbon emissions in Great Britain by requiring energy companies to fund the installation of energy efficiency measures, such as insulation, in homes.²

But poor installation work has resulted in an estimated 22,000 to 23,000 homes with external wall insulation fitted under the scheme (98% of the total) and 9,000 to 13,000 homes with internal insulation (29% of the total) having major issues that need fixing. A small percentage of these installations also pose immediate health and safety risks.³  

Possible explanations why so many installations have been carried out to such a poor standard include an under-skilled workforce, with work being subcontracted to individuals and firms who are not competent or certified; uncertainty over which standards apply to which jobs; and businesses ‘cutting corners' when undertaking design and installation work.

DESNZ implemented a new consumer protection system for the scheme in 2021, which included appointing TrustMark as its government-endorsed quality scheme.⁴ But this system failed to alert DESNZ to significant issues with the quality of installations until October 2024, by which time the media had already reported on individual cases of bad mould in homes.

Reasons for the ECO scheme's shortcomings include:

• weak government oversight resulting in widespread issues with the ECO scheme not being identified sooner;
• an overly complex consumer protection system that ultimately failed due to unclear and fragmented roles, responsibilities and accountabilities among DESNZ, Ofgem and private sector certification bodies and scheme providers;⁵
• TrustMark's funding arrangements limiting its ability to have analytical systems fully up and running until the latter half of 2024; and
• insufficient audit and monitoring, in part due to weaknesses that allowed installers to ‘game' the system.⁶

In addition to these issues, in November 2024 Ofgem estimated that businesses had falsified claims for ECO installations in between 5,600 and 16,500 homes, potentially claiming between £56 million and £165 million from the energy suppliers operating under the scheme.⁷

DESNZ and Ofgem took action once TrustMark made them aware of the extent of the problems. This included asking certification bodies and scheme providers to suspend the worst performing installers; communicating the issues to potentially affected households and to the wider public; and implementing immediate changes to the consumer protection system.

DESNZ also plans to apply the lessons learned from this experience to the design of its future schemes and its forthcoming Warm Homes Plan.

To improve the consumer protection system, and to boost householders' confidence in government-backed schemes,⁸ the NAO recommends that DESNZ:

• takes clear responsibility for schemes such as ECO, even when they are funded through consumers' electricity bills;
• clarifies its approach to repairing faulty ECO scheme installations alongside its Warm Homes Plan;
• reforms the consumer protection system for retrofit schemes; and
• reports annually on a statistically robust estimate of the level of fraud and non-compliance in each of its retrofit schemes.
  
  

Gareth Davies, head of the NAO, said:

“ECO and other such schemes are important to help reduce fuel poverty and meet the government's ambitions for energy efficiency.

“But clear failures in the design and set-up of ECO and in the consumer protection system have led to poor-quality installations, as well as suspected fraud.

“DESNZ must now ensure that businesses meet their obligations to repair all affected homes as quickly as possible. It must also reform the system so that this cannot happen again.”

ENDS

Notes to editors

1. The report will be available on the NAO website via the following link from 00:01 Tuesday 14 October: https://www.nao.org.uk/reports/energy-efficiency-installations-under-the-energy-company-obligation/ 
2. The findings in the NAO report relate to the two current ECO schemes: ECO4 runs from April 2022 to March 2026 (although DESNZ is consulting on extending ECO4 by six to nine months), and the Great British Insulation Scheme (GBIS), with broader eligibility, runs from March 2023 to March 2026. The government expects these schemes to deliver £280 million in annual energy bill savings for households.
3. Of the homes affected by major issues, 900 to 2,000 homes with external wall insulation (6% of the total) and 300 to 1,400 homes with internal wall insulation (2% of the total)  pose an immediate health and safety risk from issues such as exposed live electrical cabling or blocked boiler ventilation.
4. TrustMark is a private not-for-profit company that acts as the government-endorsed quality scheme for energy efficiency retrofits. TrustMark took over technical monitoring of ECO from Ofgem in July 2021. It collates information on all ECO projects and the audits that have been undertaken on those projects.
5. DESNZ is responsible for the design of the ECO scheme, and Ofgem (the energy regulator) is responsible for the administration of the scheme in line with government policy. The private sector plays a key role in delivering the scheme and assuring the quality of the work. A list of private sector stakeholders can be found in paragraph 5 of the report.
6. Installers were able to ‘game' the audit process by either being certified by multiple certification bodies or transferring their certification between bodies. This meant they would have less history with each, and more likely to have a level of audit at the lower end of the range stipulated in the standard (3% to 4% rather than 7% to 10%).
7. DESNZ and Ofgem do not have sufficient quality data to accurately estimate the overall level of fraud in the ECO scheme.
8. The original installer is liable for the whole cost of repairing faulty installations in affected homes. To arrange an audit of their home so that repairs can be arranged, affected households should contact Ofgem. The Ofgem ECO helpline can be contacted at 0808 169 4447 or ECOhelp@ofgem.gov.uk.