Low-hanging fruit on energy efficiency largely gone

Much of the energy efficiency “low-hanging fruit” has already been picked, with homes requiring wall insulation outnumbering those needing loft and window improvements, according to a new report from an influential thinktank.

Analysis of government data in the Resolution Foundation’s new report Hitting a Brick Wall shows the walls of around 9.3 million homes in England are classified as having ‘poor’ or ‘very poor’ efficiency. This equates to 40% of the total housing stock.

The same data shows that 21% of homes now have roofs classified as ‘poor or very poor’ efficiency and 9% have poorly-graded windows.

The report says: “Much of the low-hanging fruit has already been picked: during the 2010-12 period, when insulation rates were highest, seven-in-ten of all recorded installations were loft insulation, and just two per cent treatment for solid walls.’

Treating these leaky walls is particularly difficult because home-owners lack financial incentives to carrying out such works, says the report.

Taking into account borrowing costs, the average £8,000 per property upfront expense of insulating walls would take 18 years to recoup through bill savings even at currently elevated energy prices, according to the report.

In addition, it says that nearly half (47%) of owner occupier households with inefficient walls think that upgrades are unsuitable for their properties.

“Left to their own devices, then, private UK households are unlikely to step up when it comes to insulating walls (as the past decade when there has been little meaningful policy in this space demonstrates),” the report says.

The paper goes on to say households will require subsidies to insulate walls but that doing so across the board would be far too expensive, working out at £72 billion over ten years.

Instead it suggests a sliding scale approach based on that proposed by the government for reforming social care costs.

Richer households should self-fund all of their insulation costs up to a cap; poorer households would be fully funded; and those in the middle offered support on a sliding scale.

The report says that if richer households with total assets in property equity and savings of £250,000 plus were expected to fully fund their energy efficiency upgrade costs, 52% of owner-occupied households would need to insulate their homes entirely out of their own pockets.

The costs could be capped for such richer households whose homes require very expensive energy efficiency upgrades.

Fully funding wall insulation works for the 10% of owner occupiers whose incomes are under £30,000 and have assets worth less than £100,000 would cost £600 million per annum over 10 years.

The remaining 38% of middle-income households, who would receive a sliding scale of support based on their income and assets, would require a further £1.2 billion each year of public funds over a decade.

The report also suggests that concerns about energy efficiency workforce shortages appear “somewhat overblown”.

Insulating one million homes per year would add around 2% to total construction industry working hours, which is “within the bounds” of historical year-on-year changes within the sector.

However the report acknowledges there are are a number of “worrying bottlenecks” including a short supply nationwide of insulation-specific skills, such as workers with experience in solid wall insulation and coordinators who can link households and tradespeople with public finance.

Jonny Marshall, senior economist at the Resolution Foundation, said: “Previous approaches such as cheap loans have failed to deliver improvements at scale, and the biggest barrier to energy efficient homes has been largely ignored: our leaky walls. The sheer cost of insulating Britain’s walls means that the state cannot be expected to foot the bill entirely.

“Instead, a new carrot and stick approach is needed to ensure that England’s nine million leaky homes are upgraded. Mandating that all homes must be energy efficient by 2035 can spur home-owners and landlords into action, while a new means test could help around half of households with at least some of the costs of the upgrades, and all of the costs for those with the lowest means.”