Westminster Sustainable Business Forum
Warmer & Greener: A Guide to the Future of Domestic Energy Efficiency Policy
The Case for Improving Domestic Energy Efficiency
Improving domestic energy efficiency is essential to tackle fuel poverty and meet the UK’s
legally binding target to reduce greenhouse gas emissions by at least 80 per cent from 1990
levels by 2050. In addition to helping to decarbonise the energy system, domestic energy
efficiency offers a highly cost-effective route to engage with the other elements of the UK’s
energy policy trilemma: ensuring security of energy supply and ensuring energy is affordable.
There are strong links between the efficiency of domestic buildings and their occupants’ health
and wellbeing. Increasing the efficiency of the UK’s housing stock would therefore lower social
care costs and reduce the burden on the National Health Service. Large scale energy efficiency
programmes would also unlock substantial economic benefits including boosting economic
growth, creating jobs and increasing the ability of individuals to contribute to society.
Defining the Problem
There are approximately 4.5 million fuel poor households in the UK. The UK Government’s
fuel poverty strategy for England sets a target to bring as many fuel poor homes in England as
is reasonably practicable up to a minimum Energy Performance Certificate (EPC) rating of C
by 2030. However, this report argues that current policies will be insufficient to engage with
this target and tackle fuel poverty. This report has also identified a clear shortfall between the
Government’s targets on greenhouse gas emissions and the current policy mix. It therefore
seeks to engage with the question of how domestic energy efficiency can be improved to
address these policy gaps.
Average efficiency ratings and the proportion of fuel poor households varies between different
housing types and each sector faces particular challenges to improve its energy efficiency.
Additionally, some types of energy efficiency measures have been installed in large numbers.
Other types of measures have only been rolled out on a very limited scale, for example there is
considerable remaining potential to deliver solid wall insulation. Moreover, current and past
supplier obligation schemes have primarily incentivised the delivery of measures at the lowest
possible cost. As a consequence the schemes have tended to under-deliver to households which
are more expensive to treat but are often most in need, such as deep rural properties.
This report finds that there is a strong case for the use of smart regulation to improve the
standard of homes currently being built and drive up the efficiency of existing homes. For
newly built properties, regulation is necessary to prevent homes being constructed which will
have to be retrofitted at a later date. The Government should therefore reinstate a long term
mandatory zero carbon standard for newly built homes.
The Government should reinstate a long term, mandatory zero carbon standard for newly
The report lauds the introduction of minimum energy efficiency standards for the private
rented sector. However, its findings reveal a number of problems with these minimum
standards which threaten to undermine their impact and need to be addressed. The current
standards are linked to the Green Deal which is no longer funded by government and could
therefore make them unenforceable. Houses in Multiple Occupation that are let on a room-by6
room basis are effectively exempt from the minimum energy efficiency standards. There is also
a very high level of noncompliance with requirements to issue EPCs at the point of letting and
the vast majority of landlords can be assumed to be unaware of the new minimum energy
Energy efficiency in the private rented sector could also be improved by local authorities using
the Housing Health and Safety Rating System more widely and by combining the existing
annual gas safety checks with evaluations of the efficiency of a heating system. The latter point
relates to the risk of a heating system becoming less efficient over time.
In the long term, the minimum efficiency standards for private rented sector properties need
to be increased beyond an EPC Band E. This could be done progressively over time but should
include a final, long term target. For example by demanding a higher EPC Band every 5 years,
with the date private rented properties are expected to be at Band A set out far in advance.
Additionally, this report makes the case for requiring the advertising of rent prices to include
an estimate of expected energy costs calculated from the costs displayed on EPCs. This
initiative would incentivise landlords to retrofit their properties.
The minimum energy efficiency standards need to be strengthened to ensure that they
have a meaningful impact. The problems associated with the Green Deal, Houses in
Multiple Occupation and landlords’ awareness of the regulations need to be addressed.
In the long term, the minimum energy efficiency standards for private rented sector
properties need to be increased beyond an EPC E rating.
The Government should mandate that advertising of private rented accommodation
includes a figure for monthly expected energy costs calculated from the EPC for that
The report argues for the extension of minimum energy efficiency standards to the owneroccupied
sector. These efficiency standards should increase over time and be mandated at the
point of sale of a property. This would tie in with existing regulations and could be
complemented by introducing consequential improvements. Consequential improvements
mean that when householders carry out larger refurbishment projects they also have to make
energy-saving improvements in other areas of the property. Furthermore, the report argues
that there is a need to introduce a new decent homes standard with a greater focus on energy
efficiency to drive consistent improvement across the social housing sector.
The Government should introduce minimum energy efficiency standards for the sale of
properties, which are increased progressively over time.
A new decent homes standard should be launched in the social housing sector with a
greater focus on energy efficiency.
The current supplier obligation, known as the Energy Company Obligation 2 (ECO2) will come
to an end in March 2017 and is set to be replaced by a new 5 year scheme which will focus on
tackling fuel poverty. This report finds that there are fundamental problems with the idea of
focusing a supplier obligation on fuel poverty. It assesses some of these problems and makes
suggestions to mitigate some of the potential issues with the next phase of the Energy
Company Obligation (ECO). It argues that the system of delivering ECO needs to be simplified
by re-introducing deemed scores and reducing the overall administration involved in the
scheme. To effectively tackle fuel poverty it will also be necessary to support ECO with a taxpayer
funded scheme administered by local actors. In the longer term there are significant
questions about how best to use a supplier obligation scheme. This may involve not focusing
future obligations solely or predominantly on fuel poverty, phasing obligations out or retaining
the same funding source of energy bills but placing responsibility for delivery in the hands of
The next phase of ECO should be based on a system of deemed scores and the Government
should aim to reduce the overall administrative burden imposed on those involved in its
The next phase of ECO should be supported by a tax-payer funded fuel poverty scheme
administered by local actors.
Despite the problems with the Green Deal, this report argues that loan schemes could still have
an important role to play in supporting the improvement of the UK’s housing stock. Recent
research shows that there is considerable potential to use mortgage schemes to both finance
the installation of energy efficiency measures and help increase demand for more efficient
properties. The Government should work to persuade lenders to factor in an accurate
assessment of energy costs on a voluntary basis or make minor adjustments to the Mortgage
Market Review legislation to this effect.
Mortgage lenders should include more accurate calculations of energy costs in their
mortgage affordability assessments. This can be achieved either on a voluntary basis or
through changes to the Mortgage Market Review. In tandem with changes to mortgage
affordability assessments, lenders should provide mortgage extensions to finance energy
This report urges the Government to draw lessons from the failure of the Green Deal and
follow the model of ‘soft loans’ whereby public money is used to subsidise the cost of
borrowing to make it more attractive. The report also strongly advises against the use of short
term grant schemes like the Green Deal Home Improvement Fund, which tend to create a
cycle of boom and bust.
Future grant schemes need to be based on a sustainable funding model to provide certainty and long term sources of demand for the energy efficiency industry.Warmer & Greener makes a strong case for the use of tax incentive schemes to encourage energy efficiency improvements as they provide a long term, structural source of demand that the market can deliver against. In the light of the considerable challenges associated with
creating a council tax incentive scheme, this report favours a stamp duty incentive scheme to
support the uptake of energy efficiency measures in the domestic sector.
The 2015 Autumn Statement announced a 3 per cent surcharge on stamp duty rates for purchases of buy-to-let properties and second homes as of April 2016. A rebate on this could be used to encourage efficiency improvements, either as an interim measure before a variable rate is rolled out to all properties or as part of a wider stamp duty incentive project.
The Government should introduce a stamp duty incentive to encourage the uptake of
energy efficiency measures in the domestic sector. A rebate on the surcharge on buy-to-let
properties and second homes could be included within this, either as an interim measure
or as part of a wider strategy.
Advice and Information
This report finds that advice and information are an important part of increasing domestic
energy efficiency. Advice and information can be used to encourage people to take up
measures, ensure that these are the right measures and maximise their effectiveness once
installed. This report criticises the promotion of energy efficiency improvements in the UK to
date which has generally had a narrow focus on energy bills savings. In the future, the
promotion of efficiency measures should also refer to the potential for them to make homes
warmer, healthier and more comfortable places to live. The report also argues that advice and
information needs to feed into a subtle process of social norming to make people more
accustomed to energy efficiency measures. One way of achieving this is through greater use of
retrofitted show homes.
Government and commercial campaigns promoting energy efficiency measures should
emphasise their numerous benefits and not focus narrowly on bill savings.
Local authorities should work with relevant third and private sector groups to showcase
retrofitted homes in their area.
The report makes a strong case for a ‘whole house approach’ to energy efficiency
improvements, which sets out how people can get to a very high standard of efficiency in the
long term. The Government should therefore look to provide whole house roadmaps for energy
efficiency improvements in every domestic property. This would enable people to get an
overall view of the level of improvements needed in their property and the potential options
available. Energy efficiency installations also need to be supported with information on how
measures work as leaving households without any advice can significantly reduce their impact.
This should be enforced as part of the quality assurance of installers’ work.
Support for the end user to understand energy efficiency measures installed in their home
should be robustly enforced as part of the quality assurance of installers’ work.
Developing the Energy Efficiency Industry
To date, the overwhelming majority of demand for energy efficiency measures in the UK has
come from government schemes, particularly the series of supplier obligation schemes which
have been in effect since 1994. There is a need for much wider commercial delivery of energy
efficiency improvements. This report finds that the Government needs to work in a way which
is more supportive of the energy efficiency industry by providing a greater degree of
consistency in policy. Going forward, the exact details of the next phase of ECO will need to be
set out as soon as possible and the Government needs to manage the transition between
schemes to avoid the breaks in demand which have been a feature of changeovers between
past supplier obligation schemes.
The details of the next phase of ECO need to be set out as soon as possible to provide
clarity to suppliers and their supply chain. The scheme should also remain consistent once
it is implemented to avoid creating uncertainty.
The Government needs to manage the transition to the next phase of ECO to avoid the
breaks in demand which have been a feature of changeovers between past supplier
Future domestic energy efficiency policy should aim to provide a much greater degree of
certainty to industry than has been achieved in recent years.
The report also showcases a particularly good model for the development of the deep retrofit
industry in the UK: the Dutch Energiesprong scheme. This offers the chance for a step change
in the market, with the potential for whole house retrofits to be delivered commercially on a
mass scale. There are financial, regulatory and practical barriers to its implementation in the
UK but these are not insurmountable. The Government should therefore look to support the
development of the Energiesprong UK group, including some initial, small-scale funding for
the project, in recognition of the long term potential of the scheme.
The Government should engage with Energiesprong UK to reduce barriers to its
development and provide some initial, small-scale funding to the project.