The case for energy efficiency has never been stronger

Improving energy efficiency is one of the most immediate solutions to rising energy bills and to concerns around security of supply. Improving the efficiency of our homes could reduce our heating bills by around 20% and reduce our dependency on foreign gas. The business case for energy efficiency is better now than ever before.

Energy efficiency will also play a key role in the decarbonisation of heat. Research suggests that energy efficiency measures could reduce carbon emissions by 34% across all buildings by 2030 - a significant proportion of which will be from lower heat demand.

While there is awareness of the importance of energy efficiency, in recent times, Government has not always been consistent in the way it sought to encourage greater energy efficiency. We think Government might need to increase its focus on energy efficiency.

 1.   There is an urgent need to improve energy efficiency

The UK has one of the most poorly insulated housing stocks in Europe, with around 17 million out of 28 million households falling below EPC

The figure below shows the proportion of homes below EPC Band C in England alone, highlighting the scale of change needed. 

Figure 1 - Percentage of homes in England rated EPC Band A-G between 2015-2019

The majority of UK households pay much higher energy bills – and produce much more carbon emissions – than is necessary. Considering the current context and the potential for energy efficiency to reduce energy bills, there are compelling arguments for doing more to improve energy efficiency.

 2.   The focus on retrofitting homes has changed over time

In the past, Government has made a number of pledges to retrofit homes. Government promised in its 2019 election manifesto to spend more than £9 billion on insulation and energy efficiency for British homes. The 2021 Heat and Building Strategy also sets the ambition to retrofit as many homes as possible to achieve at least the Energy Performance Certificate (EPC) Band C by 2035 and included an accompanying £3.9 billion of support.

However, Government has not always followed-through on its ambition. Arguably, this has dampened the momentum to retrofit homes, confusing consumers and the industry. At least 14 million households have missed out on insulation because of the abandonment of the green deal scheme, which was set up in 2013 and stopped in 2015, with only about 15,000 homes upgraded. A further 47,500 homes were improved in the most recent successor scheme, the green homes grant, instead of the 600,000 promised, and the scheme was scrapped after only six months.

The graph below shows how UK home insulation rates plummeted after 2013, corresponding to significant cuts in green schemes (including energy efficiency). The level of home insulation never recovered to the levels seen prior to 2013, and the Government’s current target to insulate 600,000 homes with the green homes grant shows no ambition to reach this level again.

Figure 2 - UK home insulation rates

3.   Cheaper and less invasive measures can also make a large difference

That said, energy efficiency is not just about home retrofitting. There are less invasive and cheaper measures which can also help reduce energy consumption. Smart home technologies can be a cost-effective way to support behavioural change. The table below illustrates some widely available technologies.

Table 1 - Available smart home technologies and their applications

Furthermore, simple behavioural changes can deliver significant energy savings. This can be done by:

• Implementing standards that prevent unnecessary waste of energy. A recent example is France’s requirement that doors of shops must be closed whilst using air-conditioning.

• Nudges, which can also provide an influential and less commanding approach. One example is the EU funded THE4BEES project. Through this project, an app was developed such that users could easily view information regarding their heat and electricity consumption. Over 32 weeks and across 6 European countries, users reduced their energy consumption by 15 to 20% on average. This is offered by some UK energy suppliers and could be rolled out nationally.