Concept of UK home insulation

Energy efficiency boost could save households £500 a year

Image credit: Canva (with images from Pexels)

Think tank IPPR has highlighted a £5.8bn funding gap that prevents the UK from meeting climate goals and slashing household costs.

The average home could save £500 a year on bills from April with good insulation and heat pumps, according to a recent IPPR report. 

In the document, the think tank warned that public investment in energy efficiency and low-carbon heating is falling short of what is needed to meet climate goals to cut gas demand and emissions – and reduce consumers' bills. 

The report called for planned investment earmarked for after 2025 to be brought forward to the next two years to plug a £5.8bn funding gap.

In relation to home insulation, IPPR found that the UK's plan would require £12.7bn of public funding – but there is a shortfall in spending of at least £2.4bn.

The report also found that £5.1bn of public spending would be needed to replace gas boilers with electric heat pumps, but there the funding gap is £3.4bn. 

It also stressed that the government is falling short by £2.6bn against its own manifesto commitment to spend £9.2bn during this Parliament on energy efficiency.

“In the current cost-of-living crisis, the scale of investment now urgently needs to be commensurate with the scale of the benefits on offer as well as the crises we face," said Josh Emden, senior research fellow and lead author of the research paper. 

“A genuine commitment to a comprehensive retrofitting programme can help the government meet multiple objectives. Insulating and decarbonising our leaky homes can cut bills, create jobs, level up the country, reduce energy demand and improve energy security."

In order to bridge this energy efficiency gap, the researchers called for the government to bring forward the £6bn the Treasury recently pledged for energy efficiency from 2025 to 2028 to this Parliament. 

The funding could be used to ensure homes are well insulated, as good-quality ventilation and low-carbon heating can cut bills and create up to 2.7 million direct and indirect jobs, boosting growth and helping with levelling up, the report said. 

It added that, under the new £3,000 energy price guarantee that comes in from April, upgrading homes with high-quality insulation, ventilation measures and heat pumps could save the average household up to £500 on annual bills.

The coldest, draughty homes could save even more from the green measures, with savings of up to £2,000 for the least energy-efficient properties, the report said.

The think tank also called for the government to set out a comprehensive, nationwide 'GreenGo' retrofitting programme. It has been described as a “one-stop shop” to provide funding, loans and advice to households to green their homes. 

“If the government wants to take energy independence and net zero seriously, then it must start looking at common-sense solutions," said Luke Murphy, associate director of the energy, climate, housing, and infrastructure team at IPPR. 

“Creating a scheme like GreenGo, a one-stop shop for grants and loans, and for advice, is a no-brainer. It could help Rishi Sunak deliver on his key objectives of reducing inflation, tackling the cost of living, and growing the economy as well as reducing carbon emissions.”

The report has also urged to bring forward deadlines to ensure that homes are energy efficient. Gas boilers should be phased out by 2033 instead of 2035, and homes should have an energy performance certificate of C by 2028 for privately rented properties and 2030 for homeowners, it argued. 

It added that the government should work with unions, businesses and workers to develop high-quality job standards and provide £160m a year so people can learn the skills needed for green retrofits. 

Rising energy prices and a cost-of-living crisis have meant that  24 per cent of over-60s are living in homes which are colder than they would like them to be, rising to 27 per cent for older people with a disability, according to Age UK. 

Last month, the government said that 900,000 households in England, Scotland and Wales would be able to apply online from the start of the new year to obtain £400 in support – matching what is being paid out to millions of households with a more traditional energy set-up.

The support comes on top of the energy price guarantee, announced under Liz Truss’s government, which caps the price that a household pays for electricity at 34p per unit and 10.3p for a unit of gas. 

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