UK homes need ‘deep efficiency retrofit’ to meet climate goals

§ Home demand

Four out of every five homes that British people will be living in in 2050 have already been built, the report says. Retrofits of current houses will, therefore, play a pivotal role in meeting the UK’s climate targets.

Home energy demand currently accounts for around 20% of the UK’s greenhouse gas (GHG) emissions and more than three-quarters of this demand comes from space and water heating.

As the chart below shows, demand peaks in winter at around six times its summer levels. This means it might be hard to switch solely to electric heating, the report argues.

The “only viable strategy” for cutting housing emissions is, therefore, to decarbonise or reduce heating demand, it says. The best way of doing this is by “dramatically increasing” the thermal efficiency of houses, the report says. This would mean implementing an array of improvements, such as external insulation and electric heat pumps.

Speaking at a briefing for journalists ahead of the release of the report, Richard Miller, director of consultancy Miller-Klein Associates and lead author of the report, said the UK “cannot new-build our way out” of the problem, but needs “deep retrofit” for existing housing. He added:

“What do we mean by deep retrofit? We mean going to that zero carbon heating, the 2050 target, in one jump, a whole house approach that tackles the whole problem in one go, because that’s the most efficient way to get there.”

This proposal of an “all in one go” is in contrast to the government’s current incremental policy approach. For example, the government has pledged to upgrade the energy efficiency of one million homes, while Labour has proposed to upgrade 4m homes to Energy Performance Certificate (EPC) band C over five years. Both of these fall well short of the proposals in today’s report.

Reducing housing emissions is also important since much of the UK’s remaining carbon budget needs to be reserved for other sectors expected to be more difficult to decarbonise, the report adds. These include aviation or agriculture, for example. Emissions from housing will also have to fall even faster if the UK sets a net-zero emissions target to align with the Paris Agreement’s goals.

§ National programme

All this means that heating and cooling UK homes must have zero emissions by 2050, the report says, including heat, hot water and air conditioning. They will also need to be close to net-zero overall energy, it adds.

This will not be delivered by the market on its own, the report says:

“The costs are currently too high and the risks perceived as too great. Investment cannot be justified by energy savings alone. Although this transition is of great value to society, there is little market pull.”

Therefore, national and local governments, as well as city authorities, will need to take the lead to encourage and support changes, the report argues. It outlines four “overlapping strands of activity” that are needed:

• A long-term strategic plan, including a focus on a 2050 goal for housing, a clear 30-year plan and supportive policies.
• A drive to reduce costs and support the business case for retrofits, achieved by a programme of demonstrators and pilots to increase the number of retrofits achieved.
• Engagement with householders to outline benefits and overcome scepticism.A good way of doing this is using a “street by street” approach, the report says, to increase awareness in the community and reduce possible stigma of accepting help.
• Encourage investment in deep retrofits, including through innovative financing and public sector support until costs are reduced.

Social housing – which accounts for 17% of the UK’s housing stock – should be the initial focus, the report adds. This is because social landlords often have a stronger interest in housing performance in the long term and own a large number of properties, which could be retrofitted at once, bringing down costs.

The report points out that energy efficiency upgrades could be integrated with other policy areas. For example, the UK will already need to upgrade many of its homes to cater to an ageing population and increase fire resilience.

§ Energy leap

The report highlights several programmes and pilots exploring mechanisms for quickly ramping up energy efficiency. Expanding these is the key next step in moving towards lower carbon homes, it says.

One of these programmes is the “Energiesprong” model – Dutch for “energy leap”. This approach to deep retrofitting involves a major, whole-house retrofit to achieve a near net-zero energy home, typically including the fitting of an external “wall envelope” for insulation, as well as rooftop solar panels.

Energiesprong has been pioneered in the Netherlands, where it is now self-financing, the report says. Overall, 1,300 retrofits have been done in the country, with 15,000 more in the pipeline. In the UK, Nottingham has recently finished a pilot with 10 retrofits – the first Energiesprong project outside the Netherlands – and is considering doing another 200.

A key part of the scheme is that the developer guarantees the energy performance of the house for 30 years, while the householder gradually pays off the initial investment instead of their usual household energy bills.

This means that avoided costs in some cases exceed the total investment lifetime of the plan, the report says. However, a big challenge with the Energiesprong model is that money which would previously have been budgeted over 30 years needs to be made available upfront as a long-term investment.

According to the report, Energiesprong considers that its model could be “market ready” for private landlords and commercial developers in the UK within the next five years, if the scheme is rolled out to 25,000 homes. A phased approach will be needed for this, it says, with government subsidies on a sliding scale. Energiesprong estimates around 9m UK homes – a third of the total – would be suitable for its deep retrofit with today’s technology. (Older housing stock, such as Victorian-era homes, would come at a later stage and have internal rather than external cladding added to them).

§ Policy potential

The untapped potential for energy efficiency in homes to cut emissions has been often highlighted. In its most recent report on UK progress towards its climate targets, the Committee on Climate Change (CCC) said the government still needs to publish “concrete policies” to deliver on its plans to retrofit as many homes as possible to EPC band C by 2035. Currently, 70% of the housing stock does not reach EPC grade C, today’s report notes.

The government’s proposal for the third round of its Energy Company Obligation (ECO) scheme, set to run from 2018 to 2022, is currently going through parliament. This has “quite a lot of scope around the innovation elements” that could help bridge the gap to where we need to be, Jon Warren from Energiesprong UK, said at the briefing.

“As that policy gets clarified, we’re hoping something will drop out of there,” he said, which could help build up support for deep retrofits over the next few years.

Prof Marjan Sarshar, professor of sustainability at Nottingham Trent University and co-author of the report, said the next step is for the government and cities to commit to pilot retrofits for 25,000-30,000 homes.

Low-cost and “patient” long-term financing is also essential to delivering a national retrofit programme, the report adds. It concludes:

“There is evidence that the payback to society from deep retrofit of the housing stock is at least as good as for other major infrastructure programmes. Yet funding for retrofit is treated differently to national infrastructure.”