Upgrade: how should the government deliver its Warm Homes Plan?

There’s been no shortage of reports published on how to decarbonise heat in recent months, but today’s from Public First, “Upgrade”, sets itself apart in specifically asking ‘how the government should deliver its Warm Homes Plan’, as opposed to ‘how should we decarbonise heating?’. These may appear to be the same question, but there are important differences that have implications for the conclusions reached and for expectations of what may be achievable in the coming years. In this respect, Upgrade takes a brutally realistic and pragmatic approach.

Most importantly, the government is financially constrained, having allocated a relatively modest ￡13.2 billion of public spending to this issue over five years. In contrast, the report estimates that meeting statutory fuel poverty and climate targets would require ￡31 and ￡46 billion, respectively. This reduced budget limits what can be done and requires some super creative thinking about how we do it. In the very likely absence of more public money, this means the government will need to quickly need to make some tough choices on who receives funding for home upgrades (the most fuel-poor or carbon-intensive homes or smaller amounts of money for all?) and find ways of bringing in more private finance to make up the spending shortfall.

Upgrade has also developed recommendations that reflect public opinion, drawing on polling and focus groups commissioned for the report. The research finds that the public is as yet unconvinced of the benefits of home upgrades, wanting to see much bigger energy cost savings than those that will realistically be available. This means the government must act quickly to lower the cost of running a heat pump by rebalancing electricity and gas prices and points to the need for a government communication campaign to inform people about the benefits of home upgrades, as well as reliable and trusted information about installations.? It is also clear that the public is less receptive to terms like ‘retrofitting’ and ‘decarbonisation’. Both industry and government need to focus more on the concept of ‘upgrading your home’ and link installations more clearly with supporting the UK’s drive towards energy security and independence.

The report also restricts its focus to the next five years. Recommendations are limited to what the government needs to do this parliament, not on distant 2050 targets or, as yet, theoretical boiler bans in the 2030s. In practice, this means working with and adapting existing funding schemes rather than scrapping them and starting again. It means modifying schemes to enable quick and easy wins, like better supporting the replacement of the most expensive heating (electric and night storage heaters) with heat pumps. ?And it means making up for lost time and putting measures in place to build the market and scale to deliver mass market retrofit of homes into the 2030s.

Of particular importance here are the measures necessary to deliver the ‘street-by-street’ approach Labour has already committed to. This is something Kensa has long advocated for, allowing for a coordinated upgrade of the power grid to meet the new demand and the retirement of the gas network, the development of local supply chains, and supporting technologies like heat networks and shared ground loops to be deployed where most beneficial. Upgrade concludes that the foundations for this must be laid now. This includes creating a common methodology for Local Area Energy Plans, providing support to local authorities to allow them to develop their own plans, and ensuring a coordinating role for Regional System Planners. (For some excellent policy thinking on this subject, check out Nesta’s recent report)

In setting itself these constraints, some may argue that Upgrade’s recommendations are not ambitious enough. But I think those of us in the clean heat space have a responsibility to be honest with ourselves about what the public will support. In doing so, Upgrade grapples with the political and economic realities the government faces in delivering its Warm Homes Plan and deals with the trade-offs of heat decarbonisation head-on. As such, Upgrade provides the government with a sensible and realistic five-year plan for starting to deliver this most tricky of climate challenges. The government would do well to absorb the findings of this timely report and embark on its ‘to do list.’

Upgrade’s ‘to-do list’:

·??????? Build public knowledge and trust by strengthening consumer protections and launching a ‘National Home Upgrade Programme’, bringing together information campaigns, online tools and funding schemes under one mission.

·??????? Set a clear roadmap for decarbonisation to build market confidence. This must include rebalancing energy prices, ruling out hydrogen, introducing the clean heat market mechanism and Future Homes Standard, and laying the groundwork for a street-by-street approach. ?

·??????? Improve the performance of existing schemes, reducing underspend and complexity. This should include removing EPC band requirements from schemes, ?a ten-year funding commitment to a Local Authority Retrofit Scheme, and extending ECO at least until the end of the decade. The government should also look at ensuring schemes can deliver ‘easy wins’, where heat pump installations can deliver major bill reductions even with current energy prices.

·??????? Pump-prime the market to unlock private finance, with publicly funded grant schemes and attractive loan terms to encourage uptake among ‘able to pay’ households

·??????? Build a home upgrade workforce to reskill existing workers or attract new recruits.

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