Environmental activists recently blocked junctions of the M25 – London’s orbital motorway – to protest the glacial pace at which the UK government is tackling carbon emissions and fuel poverty in Britain’s housing stock.
Arguing that the country has “some of the oldest and most energy-inefficient” homes in Europe, the group known as Insulate Britain has vowed to continue campaigning until the government “makes a meaningful commitment to insulate Britain’s 29 million leaky homes”.
The transition to net zero emissions is often framed as a race to make new stuff – such as electric vehicles and wind turbines – as fast as possible. That’s actually the easy part. The hard part will be modifying what already exists – and that includes people’s homes.
Neutralising each home’s contribution to climate change will require a range of installations, including wall insulation, double- or triple-glazed windows, a heat pump or another low-carbon form of heating, and solar panels. Making these changes is known as retrofitting. The idea is to ensure that no home emits greenhouse gases by burning fossil fuels for energy and that, eventually, each home could produce as much energy as it uses.
Sound simple enough? Here are the five numbers that explain just how big a task it really is.
1. 68 million tonnes
About 15% of the UK’s total carbon emissions – 68 million tonnes – comes directly from homes, mostly from boilers burning gas for hot water and space heating. That’s more than the entire agricultural sector at 10%, and many times the 2% from industrial processes, such as cement, steel and chemical manufacturing in 2019.
2. 26 million
Some of the UK’s existing 29 million homes will be demolished by 205O, but it’s estimated that around 26 million will still be around. These will all have to be retrofitted to net zero standard.
To put that another way, about 80% of all the houses that will exist in 2050 are the houses that people are currently living in. Only 20% of the houses will have been built from scratch to net zero standard.
The cost to retrofit a typical family home to net zero standard is estimated at about £26,000. This is based on an analysis of work by the Climate Change Committee – a body of experts that advises the UK government.
Multiply those 26 million homes by £26,000 and the overall price tag is £676 billion. Averaged over the next 25 years, retrofitting Britain’s homes could amount to £27 billion a year. That is about the same as the entire annual spend on home repairs and maintenance, and more than half as big as the market for new-build homes.
A mass retrofit campaign wouldn’t just be a step-change in the construction industry, it would be an entire additional sector. But it would also be time-limited. Once all existing homes are retrofitted, it will come to an end.
4. 20 years
How quickly savings from an investment repay the initial expense is known as the payback period. In theory, a net zero house could have zero energy bills, as it would save and generate as much energy as it uses. The average annual energy bill is £1,289, so the payback period for a £26,000 retrofit would be just over 20 years.
But the payback period for each individual retrofitting measure tends to be longer. Improving window glazing tends to pay for itself after about 40 years. Roof and wall insulation is even longer at 46 years. Solid wall insulation, which will address the single biggest source of heat loss for older houses, has a payback period of 16 years.
Calculating the payback period for a heat pump is more complicated, as it typically replaces gas in a boiler with electricity. These energy sources have very different cost structures. Currently, the UK has one of the cheapest gas prices in Europe, but one of the most expensive electricity prices.
When considering the financial payback on an investment in energy efficiency, most households will struggle to look beyond five years, perhaps 15 years at most. But considering energy efficiency measures purely in terms of financial payback will never stack up. They must be considered in terms of carbon payback. Carbon payback is how quickly the reduced carbon emissions from daily life in a net zero home take to make up for the carbon emissions that went into making and building all the different parts.
For a home retrofitted to net zero standard, the carbon payback might be about six years. For individual parts it can be even shorter: solar panels have a carbon payback period of just 1.6 years.
Infrastructure, like roads and railways, is the only stuff people build which counts its payback periods in decades. The government needs to think of a mass retrofit programme for our houses in those terms: as critical national infrastructure.
The VAT rate applied to any work on existing homes – whether it’s maintenance, extensions, or retrofitting – is 20%. While there are some exceptions where the rate is reduced to 5%, these are only available to a small range of homeowners, such as those over 60, and only where the works are exclusively for the sake of energy efficiency, rather than as part of a broader home-improvement project. So the use of this rebate is minimal.
For private homeowners who are required to pay for retrofit measures like wall insulation or heat pumps from their own pocket, the so-called “able to pay” market, that 20% VAT might represent more than £4,000 of the estimated £26,000 cost.
By comparison, building a new home is zero-rated for VAT. This creates a financial incentive to demolish and rebuild rather than retrofit.
There have been many attempts to make the government change the VAT rules on this, including a recent one supported by the banking sector, but so far without success.
Decarbonising Britain’s housing stock is a huge challenge, but also a huge opportunity. Kickstarting the home insulation and retrofitting programme will only happen with government support, it is simply not something that normal market mechanisms can drive. Let’s hope public pressure can convince the government to change course fast.