Scenario Modelling: Impact of the Reduction of the Renewables Obligation on fuel bills and ending the Energy Company Obligation (ECO) scheme on fuel poverty in Scotland
Findings
We estimate that from January to March 2026 there will be around 800,000 fuel poor households in Scotland – 31% of all households.
Furthermore, from January to March 2026 we estimate that 50% of all fuel poor households will be in extreme fuel poverty. This means that around 400,000 households will be in extreme fuel poverty – 16% of all households[1].
After the removal of the RO and ECO levies we would estimate around 730,000 (29%) fuel poor households in Scotland and 350,000 (14%) extreme fuel poor households in Scotland.
This is a reduction of around 60,000 households (2.5 percentage points) in the number of fuel poor households, and 50,000 (1.9 percentage points) extreme fuel poor households.
Table 1: change in fuel poverty rates
|
|
Households 000's |
Rate |
|
Fuel poverty Jan to Mar 2026 |
800,000 |
31% |
|
Fuel poverty Jan to Mar 2026 after RO reduction and ECO removal |
730,000 |
29% |
|
Change |
-60,000 |
-2.50% |
Table 2: change in extreme fuel poverty rates
|
|
Households 000's |
Rate |
|
Extreme Fuel poverty Jan to Mar 2026 |
400,000 |
16% |
|
Extreme Fuel poverty Jan to Mar 2026 after RO reduction and ECO removal |
350,000 |
14% |
|
Change |
-50,000 |
-1.9% |
In addition to the national estimates presented in Table 1 and Table 2, there will be interest in how fuel poverty rates and levels vary by household heating fuel. These are set out in tables 3 to 6 below.
|
Primary Heating Fuel |
Fuel poverty Jan to Mar 2026 |
Fuel poverty Jan to Mar 2026 after RO reduction and ECO removal |
Change households |
|
Gas |
590,000 |
530,000 |
50,000 |
|
Oil |
40,000 |
30,000 |
[low] |
|
Electric |
140,000 |
130,000 |
10,000 |
|
Other fuel type |
30,000 |
30,000 |
0 |
|
Total |
800,000 |
730,000 |
60,000 |
Table 4: Fuel poverty rate January to March 2026 before and after RO reduction and ECO removal
|
Primary Heating Fuel |
Fuel poverty Jan to Mar 2026 |
Fuel poverty Jan to Mar 2026 after RO reduction and ECO removal |
Change percentage points |
|
Gas |
29% |
26% |
3% |
|
Oil |
26% |
25% |
1% |
|
Electric |
52% |
48% |
4% |
|
Other fuel type |
46% |
46% |
0% |
|
Total |
31% |
29% |
3% |
Table 5: Number of extreme fuel poor households January to March 2026 before and after RO reduction and ECO removal
|
Primary Heating Fuel |
Extreme Fuel poverty Jan to Mar 2026 |
Extreme Fuel poverty Jan to Mar 2026 after RO reduction and ECO removal |
Change households |
|
Gas |
260,000 |
230,000 |
30,000 |
|
Oil |
20,000 |
20,000 |
[low] |
|
Electric |
100,000 |
80,000 |
20,000 |
|
Other fuel type |
20,000 |
20,000 |
0 |
|
Total |
400,000 |
350,000 |
50,000 |
Table 6: Extreme fuel poverty rate January to March 2026 before and after RO reduction and ECO removal
|
Primary Heating Fuel |
Extreme Fuel poverty Jan to Mar 2026 |
Extreme Fuel poverty Jan to Mar 2026 after RO reduction and ECO removal |
Change percentage points |
|
Gas |
13% |
11% |
1% |
|
Oil |
14% |
13% |
1% |
|
Electric |
37% |
30% |
6% |
|
Other fuel type |
25% |
25% |
0% |
|
Total |
16% |
14% |
2% |
As shown in table 3 the largest reduction in fuel poverty is for households with mains gas as the primary heating fuel, which saw a reduction of around 50,000 fuel poor households.
Similarly, the vast majority of households moved out of extreme fuel poverty also used mains gas (30,000) although 20,000 households who heat their property with electricity also moved out of extreme fuel poverty.
The reason for the large difference in the movement out of fuel and extreme fuel poverty by primary heating fuel is likely due to the fact that although electricity saw a larger per unit decrease than gas, and as shown in table 7 a larger modelled bill reduction, based on this modelling prior to the decrease in fuel prices, fuel poor households using electricity as their primary heating fuel have a significantly higher median fuel poverty gap[2] (around £2,000) compared to households using mains gas (around £800). This means they would need larger fuel bill reductions to come out of fuel poverty, compared to households with gas as the primary heating source. Nevertheless, after reductions the median fuel poverty gap reduced by around £100 for households using mains gas as their primary heating fuel (£700) and £300 for households using electricity (£1,700).
This indicates that although many households did not move out of fuel poverty, their depth of fuel poverty has been reduced.
It is important to note as well that as shown in table 7 below households heating with mains gas also use electricity, and therefore will also have benefited from the reduction in electricity bills.
Table 7: Annual modelled gas and electricity use by primary heating fuel
|
Primary Heating fuel |
Mean annual gas consumption Kwh |
Mean annual Electricity consumption Kwh |
Mean fuel bill reduction after RO levy and ECO scheme removed |
|
Mains Gas |
20,000 |
3,200 |
£170 |
|
Electricity |
0 |
15,700 |
£530 |
[1] These figures represent a decrease of around 30,000 households in fuel poverty and 20,000 households in extreme fuel poverty from previously published scenario modelling figures. The primary reason for this is due to the more precise application of unit rates for gas and electricity rather than the previously used broad % increase.
[2] Where a household is in fuel poverty, the fuel poverty gap is the annual amount that would be required to move the household out of fuel poverty. This is either:
- the amount required so that the fuel costs necessary for the home are no longer more than 10% of the household’s adjusted net income (after housing costs), or
- the amount required which, after deducting fuel costs, benefits received for a care need or disability and childcare costs, means the household’s remaining adjusted net income is sufficient to maintain an acceptable standard of living.