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Incentivising home energy improvements should be an urgent priority for government. They give individual households more control over their energy bills, improve public health, and increase the value of the property. They also reduce carbon emissions, help to improve energy security, and boost economic productivity.

As part of our Green conservatism project, Bright Blue has today published a new report, “Better homes: incentivising home energy improvements”, which recommends some new policies to cost-effectively stimulate the home energy improvement market. Since the end of the Green Deal in July 2015, there has been a policy vacuum for incentivising the ‘able to pay’ sector to invest in home energy improvements.

Home energy improvements both reduce the overall energy consumption of a property by retrofitting energy efficiency measures (such as solid wall insulation) and decarbonise the remaining energy supply through the installation of decentralised renewables (such as heat pumps).

This blog will examine the recent market trends in the main energy efficiency measures and decentralised renewables.

Energy efficiency measures

Solid wall insulation adds insulation material to either the inside or outside of solid walls to trap heat. It has the greatest energy saving potential of £331 per year on the fuel bills of an average household, but also the highest installation cost of between £4,000 and £14,000. It has had the least progress of any measure with just 340,000 solid wall properties insulated in Great Britain, as 7.5 million solid wall properties are still without insulation.

Cavity wall insulation injects insulation material into the gap between a property’s two walls to trap heat. It saves an average household £165 per year on their fuel bills, which is less than the potential saving for solid wall insulation. But it has a lower cost than solid wall insulation of between £500 and £1,500 to install. The uptake has been strong to date with 14.3 million cavity walls insulated in Great Britain, and 4.7 million without insulation.

Loft insulation places a layer of insulation material on the floor of a property’s loft to stop heat escaping through the roof. It saves an average household £121 per year on their fuel bills, and it has the lowest cost of any the energy efficiency measures we examine of between £100 and £350. Progress has been good with nearly 17 million lofts now insulated in Great Britain. But there is still great potential for further installations with seven million lofts still requiring additional insulation.

Decentralised renewables

Renewable heating

Heat pumps remove heat from outside sources using electricity. They have lower fuel costs than conventional gas boilers, and utilise existing electricity infrastructure. But they have a high upfront cost: ground-source heat pumps cost between £9,000 and £17,000 and air-source heat pumps cost between £3,000 and £10,000. Heat pumps also do not have high flow temperatures, meaning that to provide a home with sufficient heat, the property must be very energy efficient. This can require the retrofitting of more energy efficiency measures, together with more radiators. There have been 22,000 air-source heat pumps and 7,000 ground-source heat pumps installed to date under the Renewable Heat Incentive (RHI), the government’s subsidy scheme to support domestic renewable heating.

Biomass boilers burn renewable organic material, such as wood pellets or purpose-grown crops, to produce heat. Unlike heat pumps, they are able to provide similar flow temperatures to condensing gas boilers. There are two main barriers to uptake. First, they have a high upfront cost of between £7,000 and £13,000. Second, there is limited availability of sustainable biomass that doesn’t compete with food crops and increase overall carbon emissions. Twelve thousand biomass boilers have been installed under the RHI.

Solar thermal panels fixed on a home’s rooftop produce heat using energy from the sun. They are the lowest cost renewable heat technology, ranging from £4,000 to £6,000. The main barrier to uptake is that they only produce heat intermittently, and cannot be relied upon during winter. Eight thousand installations of solar thermal panels have been accredited under the RHI.

Renewable electricity

Solar photovoltaics (PV) fixed on a home’s rooftop produce electricity using energy from the sun. The upfront cost of solar PV has fallen dramatically in the last four years by over 40%. The average cost of an installation is now £6,750. There have been over 800,000 installations of solar PV in homes under the Feed-in Tariff (FIT) scheme, the government’s subsidy scheme to incentivise decentralised renewable electricity. Domestic solar PV represents around 3% of the UK’s total electricity generating capacity.

Conclusion

Overall, there is significant potential to further upgrade the energy consumption of the housing stock in the UK. It is estimated that 10% of the UK’s carbon emissions could be cut by retrofitting all the remaining potential energy efficiency measures. Similarly, it is vital to increase the share of decentralised renewables from 2.5% in heating and 3% in electricity. New policies are required to unleash this potential.

Sam Hall is a senior research fellow at Bright Blue