Reducing Demand for Energy in Residential Properties by 2035.
To prevent global climate temperatures from surpassing 1.5°C above pre-industrial levels, most countries signed the Paris Climate Agreement. For this agreement to be met there is a need for every nation to massively decarbonise. The UK government took ownership of their part in this in 2019 when they passed legislation to meet net zero greenhouse gas emissions by 2050. With the housing sector accounting for 17% of the UK’s emissions in 2019, it is evident if we are to achieve this domestic energy demand must be reduced.
Introduction
Is there a genuine potential to reduce the demand for energy consumption in residential properties in the UK by 2035 or is this just wishful thinking?
If we agree that this is not up for debate, then what are the technical, financial, behavioural, and political barriers to achieving this?
The findings from academic research indicate that there is a cost-effective potential of reducing energy demand by 25% and a technical potential of 55%, however, fundamental financial, political, and behavioural barriers are currently prohibiting this. For these barriers to be overcome there is a need for decisive national policy that will fund and inform.
Setting the scene
It has been estimated that approximately 80% of current properties will still be in use by 2050, meaning it will be impossible to reach net zero homes without significantly improving the energy efficiency of our existing stock.
To work toward this target, the government set an interim goal of improving every home to a minimum EPC rating of band C by 2035. However, the government are far off reaching this, with the Green Alliance estimating that currently, only 29% of homes are at a band C level. In addition, the UK’s housing stock is thought to be the least energy efficient in Europe, further displaying the potential and need to cut emissions via retrofitting.
Unfortunately, this is not new information. Retrofitting UK housing has long been seen as one of the most cost-effective and technologically ready sectors for greenhouse gas emissions reductions.
With space heating accounting for 63% of household energy usage, this is the key area to target for reducing emissions. When the current cost of living crisis is also taken into consideration – with millions more being pushed into fuel poverty following drastic increases to the energy price cap – it becomes evident the benefits are multifaceted and the need for change urgent. On top of this, the ongoing turbulence of the international energy market warrants further support for greater fuel security which can be achieved by reducing our domestic energy demand.
With the potential to fulfil a multitude of agendas by pursuing enhanced domestic energy efficiency, it poses the question – why has so little progress been made?
Policy background
The UK has had a series of stop-start national retrofit programmes. Past examples include: –
- The Green Deal, which offered loans to improve the energy efficiency of homes, paid back through bills savings
- The Warm Front, which offered grants to low-income energy inefficient homes
- The Carbon Emissions Reduction Target, which required energy suppliers to achieve reduction targets for carbon emitted by customers
Whilst these programmes saw some energy demand reduction, they were not particularly successful. With the government’s most recent scheme, the Green Homes Grant, also coming to an untimely end after receiving minimal uptake, there is a policy gap for national funding of retrofit.
Given this context, there are two key questions: –
- What is the greatest potential energy demand reduction offered by retrofit in the UK by 2035?
- What are the most significant barriers to achieving energy demand reduction via retrofit?
Which leads onto a third: is there a need for a national programme to fund retrofit, replacing the Green Homes Grant?
What is the greatest potential energy demand?
To answer these questions information has been gathered from a variety of different literature sources such as academic journals and reports from the government and not-for-profits. The full quantity of technically possible retrofit measures in the UK is depicted in Figure 1., with the left side highlighting the specific measure.
The chart is also divided into three portions, where each percentage represents a different scenario: –
- Limited ambition is what the UK is currently on track for by 2035 based on policy continuation
- Cost-effective scenario, which includes measures that could be deployed by 2035 and deemed cost-effective according to the UK governments appraisal criteria for public policy and projects
- Technical potential is the remaining portion and represents what is achievable if all possible retrofit measures were to be carried out.
An estimate of the mitigation potential of implementing the retrofit measures of each scenario is shown in Figure 2. Based on the literature’s findings, the cost-effective scenario, yielding a 25% energy reduction is the most plausible for the UK. This is because whilst the technical potential would offer greater reductions, it is widely agreed there are too many barriers for this scenario to be fulfilled.
Figure 1. Estimate of the remaining number of measures available for improving the energy efficiency of the housing stock. Each bar is split into the proportion of ease with which the measure can be carried out (Rosenow et al, 2018).
Figure 2. The estimated potential for energy savings in the existing housing stock as a percentage of 2015 energy consumption (Rosenow et al, 2018).
The estimated 25% energy reduction in the housing stock is achieved by carrying out all the cost-effective retrofit measures listed in Figure 1. compared to a baseline scenario where no efficiency improvements are made. The measures are carried out at a rate informed by their historical deployment, following a traditional S-curve trajectory for market diffusion. This figure has been adjusted to consider a rebound effect of 15% as commonly used as a rough estimation. The justification for the cost-effectiveness of these measures is based on a discount rate of 3.5%, and accounts for energy cost savings, greenhouse gas emissions reductions and places a monetary value on improvements in comfort and air quality.
What are the most significant barriers?
The reviewed literature identified four key categories which most of the barriers can be split into:-
- Technical
- Financial
- Behavioural
- Political
Figure 3. The individual barriers mentioned in each fully reviewed piece of literature grouped by category.
Figure 3. illustrates the number of times an individual barrier was mentioned for each of the four key categories from the reviewed sources. Financial barriers were the most frequently occurring, with an individual financial issue being mentioned a total of 66 times in all sources. Closely following this is the technical category with 60 and finally the behavioural and political on 49 and 26, respectively. Whilst Figure 3. shows which categories have the most individual barriers, it is limited in that frequency does not equate to significance.
Of all the identified barriers for each category, there were a few recurrent issues which are clearly the most prohibitive to domestic energy demand reduction. These are shown in Figure 4.
Is there a role for the government?
It is unanimous that government intervention is required to encourage retrofit uptake. Not only were barriers relating to the high cost of implementing measures mentioned 66 times, but the importance of public policy to influence the market by simultaneously addressing supply and demand stakeholders also came up frequently.
When policy recommendations were made in studies, they always mentioned the need for government funding to support private-sector investment, further emphasising the need to replace the Green Homes grant.
What is possible – physical barriers
In theory, there are a vast number of retrofit measures that could be carried out. Figure 2. Estimating a total of 608.4 million individual measures that could be taken to improve the efficiency of the UK housing stock. So, why is there still so much to do? Well, to better understand the gap between technical possibility and reality, we need to assess the significance of the key barriers from each category, starting with technical.
The decision on how to target retrofit measures is a complex one, with there being two fundamental approaches:
- shallow retrofit
- deep retrofit
Retrofit measures do not equally impact efficiency as they are highly dependent on building form, condition, and typology. This means not all properties are suitable for deep retrofitting. Additionally, as the UK has the oldest housing stock in Europe, this brings unique challenges when trying to improve domestic energy efficiency. With older homes being both less energy efficient, therefore require more action to reach a net zero level and less uniform, this makes it difficult to employ a nation-wide approach, such as Passivhaus in Germany or Energiesprong in the Netherlands.
A study by Gupta & Gregg (2016) where a full-house approach like Energiesprong was taken demonstrated emissions reductions of 75% for a Victorian house but only 53% for a modern house (as compared to the retrofit programme baseline). Additionally, a whole-house approach may not be appropriate for the whole of the UK as even the better performing of the two houses reduced emissions by 75%, 25% short of the net zero standard of Energiesprong.
To harness the greatest possible energy savings from the UK housing stock, a more tailored ‘low energy first, then low carbon’ approach would be more appropriate. This should be done by initially targeting fabric insulation, a strategy supported by Professor Sarshar, co-author of Scaling Up Retrofit 2050, who claimed it to be the simplest approach and the first step for the future of retrofit. As solid walls typically found in pre-1919 homes are the least efficient wall type, prioritising insulation on these kinds of homes would offer the best return on energy savings. Where installing multiple insulation measures is an option, this should be done as studies prove emissions reductions can reach around 40% when multiple measures are taken.
Once a high level of insulation is achieved, heat pumps should be deployed at a rapid rate surpassing the current yearly rate of 600,000. As the increased deployment of heat pumps will place greater stress on the energy grid, electricity generation will have to be scaled up accordingly. If this is done effectively by utilising UK-based green generation, there is potential to massively reduce domestic emissions. This is because not only are heat pumps much more efficient, therefore, require less energy than traditional boilers, but as 83% of homes rely on gas for heating and hot water the switch to electricity-powered heat pumps will drop emissions further. Especially if the grid continues to decarbonise at the same scale, it is now, averaging a 9% emissions reduction each year from 2009 to 2019.
Despite the results displaying a high number of individual technical barriers, this overstates the actual significance of technical obstacles, as financial and behavioural problems are often generators to many technical barriers. For example, the technical barriers of hard-to-treat homes would be reduced if more funding was available to cover the added excess of retrofitting hard-to-treat homes. Similarly, the barrier of disruption to home life is dependent on the resident’s tolerance to the retrofit, which stems from their perceived value of it, a core behavioural barrier.
What is possible – other barriers
So, what about the financial, behavioural, and political barriers?
One key behavioural barrier for the ‘able to pay’ is a lack of environmental concern. This is a serious issue as it means even when there are none of the other typical barriers like high upfront costs, efficiency improvements are still not made. With recent hikes in energy prices this barrier may become less of an issue as there is now greater financial incentive for the ‘able to pay’ to reduce their energy demand. Equally, with reports such as the recently published ‘Buying into the Green Homes Revolution, Santander October 2022’ highlighting the growing market demand for green homes, it will be interesting to see if and how quickly this barrier is removed.
Many people would like to make green improvements to their home, both to protect the environment, but also because they see it as a way of bringing down their own energy bills in the future. What’s often less known is that retrofitting now puts a price premium on our homes, with better EPC (Energy Performance Certificate) ratings, insulation, solar panels and heat pumps fast becoming levers in the housing market.
Source: Buying into the Green Homes Revolution, Santander October 2022 https://www.santander.co.uk/assets/s3fs-public/documents/buying_into_the_green_homes_revolution_report.pdf
Perhaps the most significant and certainly the most frequently mentioned barrier to retrofitting homes is the cost, with all measures from basic insulation improvements to high-tech PV panels having a considerable upfront cost. This means even when a homeowner might wish to improve their energy efficiency or where measures reduce bills enough to pay for themselves in the long run, many still can’t afford to part with the money in the first place. This is where national funding policy must come in.
The literature coincides with this, suggesting energy demand reduction via retrofit can’t reach its full potential without supportive government policy. One solution, though lacking extensive evaluation, would be to give greater policy control to local authorities. This could be done in a system like the ‘Better Buildings Neighbourhood Program’ (BBNP) from the US, that awarded funding to the best local-level retrofit programmes, so long as they met government standards. This works well as it ensures there is national funding for retrofit measures whilst simultaneously allowing local authorities to devise a programme tailored to their specific housing stock. Equally, with all programmes complying to the same set of national quality criteria the BBNP maintained an adequate country-wide level.
Whilst there are some local level programmes already established in the UK like the Greater Manchester Retrofit Accelerator, an initiative run by the Greater Manchester Combined Authority but funded by the government through their Green Homes Grant Local Authority Delivery Scheme (LAD). Programmes like this are few and far between. Undoubtedly caused by the uncertainty of future LAD funding, with the government yet to announce another round of support since their second Phase, Phase 1B which closed December 4th 2020.
Considering one scholar, Gillich, explicitly stated the possibility of transferring the successful programme steps of the BBNP to the UK market and the previous flurry of failed nationally run programmes – the argument for more local retrofit programmes supported by government funding is compelling.
Conclusion
Overall, it is undisputed there is great untapped potential for reducing household energy demand via retrofit. Whilst the initial findings suggested that financial and technical barriers are the most prohibitive to retrofit, after a deeper analysis of the four categories, it is clear the impact of the technical barriers is limited. Instead, the financial, behavioural, and political barriers seem to bare the most significant problems to achieving real household energy demand reduction.
In addition to this, there is a need to further evaluate the applicability of increased local-level retrofit programmes like the Greater Manchester retrofit Accelerator across the country. As the current research into retrofit policy of this kind upholds the suitability of a series of local authority lead UK programmes, it is worthy expanding on this to gauge the full policy potential.
Finally, as the focus of this piece was the potential for domestic energy demand reduction by 2035, the findings serve as an indicator that the government will struggle to reach net zero by 2050 without much more ambitious action and policy.
