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Improving residential energy efficiency can be a cost-effective way to tackle the current energy crisis, increase energy security and mitigate climate change. Significant variations in the efficiency of homes across the country raise the question of how retrofitting should be implemented to maximise impact.<\/strong><\/p>\n Sharp increases in gas and electricity prices have raised major concerns in the UK. With millions of households facing the choice between heat or food, the winter is looking bleak. Experts predict that over half of UK households will be in\u00a0fuel poverty in January<\/a>\u00a0and that the energy crisis will extend until\u00a0at least 2024<\/a>.<\/p>\n In response, a\u00a0\u00a3400 fuel rebate<\/a>\u00a0was set out in April 2022. This was followed by the announcement, during Liz Truss\u2019s short tenure, of a\u00a0price guarantee<\/a>\u00a0until 2024 costing \u00a3150 billion. This was subsequently scaled back by the Sunak government in the\u00a0November Autumn Statement<\/a>. As it stands, until April 2023 the price guarantee caps energy bills of a typical household at \u00a32,500 yearly. This rate will then increase to \u00a33,000 per year until March 2024.<\/p>\n The quick succession of UK prime ministers has created conflicting signals for energy markets. For example, Liz Truss lifted a ban on fracking, which was then reimposed by the current government. She also refused to launch an information campaign about residential energy savings, which has since been\u00a0signed off by Rishi Sunak<\/a>. The campaign is estimated to cost \u00a318 million and aims to provide tips on how to cut energy use while keeping warm.<\/p>\n Finally, the government has announced additional financial support to the existing\u00a0energy company obligation scheme<\/a>. This \u00a31 billion retrofitting grant will predominantly target middle-income households and will be enacted in April 2023 and last until March 2026.<\/p>\n Faced with the pressing challenges of the cost-of-living crisis, longer-term plans to decarbonise the economy risk dropping down the government\u2019s priority list. But this does not have to be the case. Energy efficiency initiatives can be bolder and further net-zero efforts, while simultaneously addressing the energy crisis and improving the UK\u2019s energy security.<\/p>\n To meet the UK\u2019s target of reaching net zero by 2050, emissions must be reduced by\u00a0at least 100% compared with 1990 levels<\/a>. In 2021, the Climate Change Committee reported that UK greenhouse gas emissions were\u00a047% lower than 1990 levels<\/a>. Although this progress is significant, more than the same reduction must be made again in the next quarter of a century.<\/p>\n Given the level of change needed, it is no longer an option to rely solely on emissions reductions in the transport and energy sectors. Decarbonisation efforts must be intensified and diversified to other sectors to meet the looming deadline.<\/p>\n One area that has gained increasing attention is the residential sector. The\u00a0Climate Change Committee<\/a>\u00a0estimates that 25% of the UK\u2019s greenhouse gas emissions can be attributed to\u00a0residential energy use<\/a>, including lighting, heating and appliances.<\/p>\n Given the UK\u2019s high proportion of older buildings, many homes have\u00a0low energy efficiency<\/a>. Indeed, the UK is believed to have one of the lowest residential energy efficiencies in Europe (see, for example,\u00a0BEIS, 2019<\/a>).<\/p>\n At the same time, the rate of home energy improvements fostered by government policies has sharply reduced since 2013. Approximately 2.2 million homes received loft or cavity wall insulation in 2012, but this dropped to only 500,000 homes in 2013 and less than 200,000 in 2017 (Climate Change Committee, 2019<\/a>;\u00a0Institute for Government, 2022<\/a>).<\/p>\n Crucially, improvements in homes are a central part of the International Energy Agency\u2019s net-zero scenario \u2013 a well-respected analysis outlining pathways to reach net zero.<\/p>\n Retrofitting \u2013 upgrading to more energy efficient equipment \u2013 has repeatedly been associated with energy and\u00a0cost savings<\/a>. But the scale of impact is unclear, and realised energy savings frequently fall short of projected estimates (Fowlie et al, 2015<\/a>;\u00a0Allcott and Greenstone, 2017<\/a>).<\/p>\n Experts refer to this as the \u2018performance gap\u2019 between actual and theoretical savings. Studies highlight several explanations related to occupant behaviour that are not accurately accounted for by theoretical models (Loucaro et al, 2016<\/a>). For example, the rebound effect describes increased energy use following energy efficiency improvements.<\/p>\n Further, studies report important variation in energy use behaviours depending on income and energy prices (Cayre et al, 2011<\/a>). Together, this can lead to over-confident energy saving estimations, which may affect individuals’ willingness to participate in retrofitting projects (Gram-Hassen, 2013<\/a>).<\/p>\n But energy savings from retrofitting are very sensitive to energy prices. As energy prices go up, it makes more sense to invest in energy efficiency and save on monthly energy bills. Notwithstanding the performance gap, the current high energy prices will make retrofitting more appealing for the next few years.<\/p>\n Despite this, retrofitting offers several advantages in comparison to energy bill subsidies. While the latter can alleviate the financial pressure of energy bills in the short term, they must be renewed to have a continuous impact.<\/p>\n A massive advantage in the UK is the high quality, publicly available Energy Performance Certificate (EPC) data for England and Wales that have been accessible for several years. Scotland has also recently published similar data.<\/p>\n EPCs are a measure of home energy efficiency. They use a rating system ranging from A (lowest energy use) to G (highest energy). Simply put, the higher the EPC rating, the less energy used or carbon emitted, and the lower the energy costs.<\/p>\n New research based on England and Wales shows how using EPCs data combined with other information \u2013 including smart meter data \u2013 can attenuate the performance gap.<\/p>\n The study shows that, under current prices, retrofitting can lower energy consumption in England and Wales by 29%, with the highest energy savings concentrated in the wealthiest parts of the UK (Fetzer et al, 2022<\/a>). Energy savings are estimated to be between \u00a310 and 20 billion per year, implying that investments could break-even within six to seven years (Fetzer et al, 2022<\/a>).<\/p>\n Given the time pressure of meeting net-zero goals, the UK should focus on highly targeted retrofitting, by leveraging available EPC data to identify opportunities with most potential for improvement.<\/p>\n In 2017, following a campaign by the\u00a0World Wide Fund for Nature (WWF<\/a>), the UK government\u00a0committed<\/a>\u00a0to upgrade as many homes as possible to energy performance certificate (EPC) level C by 2035.<\/p>\n Source: Energy Performance Certificate, GOV.UK<\/strong><\/p><\/div>\n EPCs are conducted by independent assessors and need to be updated every ten years, for a cost between \u00a335-\u00a3120. They provide current and potential ratings (see Figure 1). The potential rating is the rating achievable by implementing energy-efficiency modifications (such as cavity wall insulation, a new boiler, etc). Such recommendations form part of the report.<\/p>\n Since 2008, EPCs are mandatorily included in home reports for every property out for rent or purchase. This means that not all homes will have an energy efficiency rating (for example if a home hasn\u2019t been sold or rented since 2008). Some buildings, such as places of worship, are also exempt from regulation. Therefore, the information collected does not reflect all buildings but only those with an energy efficiency rating (EER).<\/p>\n The availability of EPC data for England and Wales, and more recently Scotland, has enabled a significant amount of research on energy efficiency in the UK to take place.<\/p>\n The existing data provide information for over 15 million homes in England and Wales, which represent about 50% of the total residential dwellings, a substantial portion.<\/p>\n Source: Author\u2019s calculation, EPC dataset, Department for Levelling Up, Housing and Communities (DLUHC), 2022<\/strong><\/p><\/div>\n Of properties with an EPC, the average rating in England and Wales is band D, with 35% of homes rated as band C or higher. The average potential rating is band C, and 85% of homes have the potential to reach this or higher (see Figure 2). If this was achieved through retrofitting, there would be significant emission and energy cost reductions, especially under current energy prices.<\/p>\n <\/p>\n Source: Author\u2019s calculation, data from EPC dataset, DLUHC, 2022<\/strong><\/p><\/div>\n The majority of houses have the potential to reach band C or above (Figure 3). Around 25% of potential band C houses have a current rating of E, as do around 20% of potential band B houses.<\/p>\n Further, the existing EPC information could be used to direct grants to local authorities (LAs) with the largest potential. All LAs across England and Wales have an average rating of at least band C or higher, which shows that they have the potential to meet governmental targets (see Figure 4).<\/p>\n Source: Author\u2019s calculation, EPC dataset, DLUHC, 2022<\/strong><\/p><\/div>\n Despite these averages, there is a lot of variation in residential energy efficiency across England and Wales (see Figures 5 and 6). One study shows how the EPC data \u2013 combined with local-area level data and smart meter readings \u2013 can predict more representative energy consumption for the whole England and Wales (Fetzer et al, 2022<\/a>).<\/p>\n Figure 5 shows \u2018room for improvement\u2019 by LA \u2013 in other words, the percent point difference between potential and current EPC rating for the unique set of properties in the EPC dataset. Most improvements (dark green) are in those LAs in the West and North of England and Wales. This seems to correlate with\u00a0fuel poverty distribution<\/a>.<\/p>\n Overall, Tower Hamlets in London has the highest EPC rating, and the Isle of Anglesey in North of Wales has the lowest. Gwynedd county in North Wales had the lowest percentage of houses per local authority rated as band C or higher, while the highest can be found in Buckinghamshire.<\/p>\n Source: Author\u2019s calculation, EPC dataset, DLUHC, 2022 and the Ordnance Survey, 2022<\/p><\/div>\n EPC includes information on the carbon emission impact of a property. These figures may overestimate carbon emission savings, they can still be used to identify top priority LA areas and for illustrative purposes.<\/p>\n Accounting for population variation, it is possible to calculate the carbon emissions saved each year if: a) all; b) the top 50; c) the top 100; and d) the top 200 local authorities retrofit all EPC homes to their potential rating (see Table 1).<\/p>\n <\/p>\n <\/p>\n Source: Author\u2019s calculation,EPC dataset, DLUHC, 2022 If all homes in the EPC dataset are retrofitted to their potential rating, approximately 31 million tonnes of carbon emissions, equivalent to 8.5% of total UK carbon emissions, will be saved each year. By 2050, this is equivalent to 837.4 million tonnes saved.<\/p>\n For context, the UK average carbon footprint is approximately 10 tonnes of carbon dioxide per person per year. This means that by 2050, retrofitting all EERs to their potential would save over 1.2 times the UK population\u2019s carbon footprint for 2022.<\/p>\n Source: Author\u2019s calculation,EPC dataset, DLUHC, 2022<\/p><\/div>\n The UK government\u00a0committed<\/a>\u00a0to upgrade as many homes as possible to energy performance certificate (EPC) level C by 2035. Retrofitting the stock of homes in the EPC dataset has been estimated to cost about \u00a360 billion (Fetzer et al, 2022<\/a>).<\/p>\n The\u00a0English Housing Survey<\/a>\u00a0(2019) estimates that improving energy efficiency of homes in England and Wales currently with a band D or lower EER to reach an EER band C would cost around twice as much about \u00a3114.1 billion (see Table 2). This is equivalent to about 5.2% of UK GPD in 2021.<\/p>\n Source: Author\u2019s calculation based on English Housing Survey, 2021<\/p><\/div>\n Significantly, the government previously estimated the costs to retrofit homes at between\u00a0\u00a335 billion and \u00a365 billion<\/a>. This is much lower than figures suggested by the English Housing Survey.<\/p>\n But, government estimates do not account for factors such as conservation laws for historic buildings, which makes retrofitting more\u00a0complex and expensive<\/a>. The disparity between these estimates stresses the need for additional funding, which will still be less costly than energy bill subsidies.<\/p>\n Retrofitting homes offers an opportunity to address both the energy crisis, the ensuring public health crisis \u2013 as cold homes are linked with excess mortality (see, for example, the\u00a0Marmot Review<\/a>\u00a0\u2013 and climate change. In addition to being more cost effective than energy price schemes or energy bill subsidies, improving energy efficiency is a vital pillar in achieving net zero and improving energy security.<\/p>\n While several energy efficiency schemes have been initiated, the take-up rate has been sluggish. Many have not granted all, or even the majority, of available funds, further limiting their impact.<\/p>\n Uncertainty and lack of trust are serious\u00a0barriers<\/a>\u00a0to retrofitting homes, so this potential impact should be taken seriously before implementing other retrofitting schemes. This is especially relevant to the recently announced\u00a0ECO+ scheme<\/a>.<\/p>\nNet zero and energy efficiency<\/strong><\/h3>\n
Can retrofitting help with energy savings?<\/strong><\/h3>\n
What is the current situation?<\/strong><\/h3>\n
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What does this mean for carbon emissions?<\/strong><\/h3>\n
![\"\"](\"https:\/\/www.carilec.org\/wp-content\/uploads\/2023\/01\/Table-1-300x240.png\")
Notes: *363.4 million in 2019; **holding yearly emissions constant.<\/p><\/div>\n![\"\"](\"https:\/\/www.carilec.org\/wp-content\/uploads\/2023\/01\/Figure-7-300x204.png\")
How much would retrofitting cost?<\/h3>\n
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Conclusions<\/h3>\n
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