The way we generate, distribute and consume energy is changing, and many observers anticipate accelerated changes ahead. These transformations are being driven by a combination of policy and regulatory pressures, rapid movements in the cost and performance of some energy technologies, and shifting patterns of consumption and behaviour.
This UKERC/CXC report presents results from a detailed survey exploring the differing views. It finds agreement that large scale renewables, buildings refurbishment and electric vehicles will play a major role in the UK energy system transition – but much less agreement in other areas, such as the role of behaviour change and modal shift in the transport sector, and the likely path for decarbonising buildings heat supply.
This report is an introduction to the issue of effective government policy with respect to energy efficient retrofit in the private rental sector, and to some of the evidence that relates to the topic. It is intended to be relevant to both the development of energy retrofit policy in the private rental sector in Scotland, and to anyone with a general interest in the topic.
It contains background information on the private rental sector and energy use in Scotland, and on the existing approach to government policy in this area, both in Scotland and across the UK. It follows this with a summary of some of the evidence on the issue from the academic and non-academic sources that were gathered for this scoping report.
Like the owner-occupier sector, policy interventions in the PRS are complicated by the level of actors that need to be addressed i.e. many thousands of individual landlords and tenants. Alongside this, the difficulty which is most commonly cited in the literature reviewed in this report is that of a split incentive between those who are most liable to pay the costs of energy retrofit – the property owners – and those who will most likely reap the benefits – the property occupants.
Retrofitting the housing stock to make it more energy efficient is a policy priority in Scotland, and alongside measures to target fuel poor households a major increase in private household investment in home energy retrofit is needed.
With the recent launch of the Energy Efficient Scotland Route Map, CXC’s Energy Policy Effectiveness project, based at the University of Edinburgh, has carried out an evidence review of how public policy can be used to leverage investment in retrofit by ‘able to pay’ households.
The review does not attempt to ‘pick a policy winner’. Effective policy involves a stable yet flexible retrofit policy package which informs, incentivises and regulates household demand, the businesses that supply it, and the support bodies that mediate between them.
The findings were presented at a recent seminar. Download all the presentations :
Alice Owen – Retrofit supply chain
Aaron Gillich – An ‘optimal’ retrofit programme
Faye Wade – Encouraging homeowners to retrofit
Lynn Forsyth – Energy Efficient Scotland
Read the blog Household investment in home energy retrofit
Read the blog
The energy retrofit of our domestic buildings (e.g. loft and cavity wall insulations, replacement of old inefficient boilers, draught proofing etc.) has seen many millions of UK and Scottish homes become more energy efficient in the last 15- 20 years. The demand for energy from our homes – electricity, gas and other heating fuels – has simultaneously fallen steadily in this period.
The large-scale uptake of retrofit has been driven by government policy, with many of the measures heavily subsidised and promoted via schemes such as home mandatory Energy Performance Certificates (for all homes for sale or rental). Many of the retrofit measures we have seen have been the most cost-effective, ‘lowest hanging fruit’, and whilst there are many more opportunities for home retrofit and energy savings still available, the ‘easiest/cheapest first’ approach means these are gradually becoming more difficult, and more expensive.
Home energy retrofit has largely been publically funded, as governments have set out to achieve carbon emission and fuel poverty reduction targets. There are, however, many reasons for private households to invest their own funds in retrofit: lower energy bills, more comfortable homes, environmental concerns are just some of the perceived ‘multiple benefits’ of home energy retrofit.
We have carried out an evidence review as part of ClimateXChange’s ‘Energy Policy Effectiveness’ project at the University of Edinburgh. To understand the rationale for the study it is useful to consider some figures. Firstly, the recently published Energy Efficient Scotland Route Map has set a target of ‘all homes in Scotland having an EPC rating of C (where technically feasible and cost effective) by 2032’. The ‘Existing Homes Alliance’ in Scotland (an influential campaign group) estimate that more than £10 billion would be needed to bring “the vast majority of homes in Scotland to an EPC rating of C”.
In Scotland, roughly, £0.5 billion of public funding has been earmarked to deliver energy efficiency and heat decarbonisation in the 4 years to 2021. At the UK level the latest supplier obligation could offer around a further £0.24 billion to Scottish households over the next 4 years. This difference between potential retrofit investment and available public funds was the inspiration for our evidence review question: “How can public policy more effectively encourage private, ‘able to pay’ households to invest in energy efficient retrofit?”
The review provided insight into the levels of private and public investment that have resulted from retrofit policy programmes based on loans, grants, tax subsidies and other measures. As might be expected, government subsidised loans tend to provide greater levels of private-to-public funding in retrofit than grants and tax incentives. The highest level of private to public funding in the review was 400% – i.e. private funding in retrofit that is four times the level of public funding. By contrast, some of the UK’s energy supplier obligations were found to have resulted in a private contribution that was less than that of the public funds i.e. less than 100%.
Public policy aimed at encouraging higher levels of private retrofit investment needs to consider the ‘additionality’ of retrofit support programmes, i.e. the extent to which the programme is supporting retrofit that would not have otherwise occurred. Our review shows that while in some schemes the majority of retrofit measures subsidised can be ‘free-riding’, there are also positive spill-over effects from policy that enhance the overall market. Different types of retrofit measures tend to achieve different levels of additionality; policy supporting measures which are new to a property e.g. new insulation, are likely to achieve higher additionality than policy programmes that support the replacement of existing building components i.e. boilers or windows.
While grants and tax incentives are more attractive to households than loans, loans typically achieve higher private-to-public funding ratios, suggesting a trade-off between policy effectiveness in terms of overall energy savings, and policy efficiency, in terms of the relative impact of limited public funds.
Due to the long-term nature of retrofit targets and the gap between the investment required to achieve targets and available public funds, an effective retrofit policy package might do well to use limited public funds to support low interest loans and work on innovative policy options that seek to increase the uptake of this relatively efficient mechanism.
There are many options for improving the attractiveness of retrofit to households. Aligning policy incentives with retrofit ‘trigger points’ – such as moving house, or coinciding with other home renovations – offers a way to increase household interest and investment. Whilst a ‘whole house’ approach to retrofit where multiple improvements are made is desirable from the point of view of reducing cost and hassle, it is often impractical in reality. There remains, however, the possibility of retrofit adhering to a ‘whole house plan’ over time, with any single change made with an awareness of how it relates to possible future changes.
Providing households with more information on energy use and retrofit options will help support overall policy, but it is unlikely to instigate much demand on its own. With respect to regulation, there are options that can see new standards gradually introduced over time. Many countries already see energy efficiency improvements required when an extension is added to a property, whilst in others improvements are required when an existing area is renovated.
There is also a need for policy to focus on the actors involved with the supply of energy retrofit and general home renovation. There is more general home renovation than energy retrofit, and households do not ordinarily distinguish between energy and non-energy home improvement, so the multiple occasions of general refurbishment can act as important opportunities to encourage energy retrofit improvements. This can be achieved if policy engages with the actors involved in installation and supply chains, so that it is in their interests to include retrofit in their plans.
Finally, an effective policy package needs to be considered in terms of the overall guidance that it gives to both households and supply-side actors. Support needs to be seen as stable enough so that businesses can be built on a sure footing and households can consider home improvements safe in the knowledge that long term government support will be available. This stability needs to be married with a flexibility in terms of adjusting policy where it is not working or where regional differences may necessitate variety. A simple, straightforward policy support package that avoids any unnecessary administrative burden or complexities is also critical.
There is an increasing incentive for governments to encourage households to invest in retrofitting their homes. Encouraging the ‘able to pay’ to retrofit is likely to prove a difficult task. A long term effective and efficient policy strategy is needed to unlock the many public and private benefits involved.
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This post was first published by UKERC
Interdisciplinary whole systems research has attracted increasing interest both in the UK and internationally as a response to complex societal challenges such as the sustainable energy transition.
In a new journal article published in Energy Research and Social Science, I argue that whole systems research is often poorly understood by funders, commissioners, assessors and the researchers involved, in terms of its particular aims and needs.
While there is no ‘one best way’ to carry out such research, all interdisciplinary whole systems research initiatives are likely to face similar challenges: integration versus diversity, stability versus flexibility and independence versus engagement.
Drawing on the interdisciplinary studies literature, the paper considers whole systems research strategy and practice in the UK Energy Research Centre (UKERC) over its first two phases (2004-14) and compares UKERC to other similar UK-based initiatives.
The broad emphasis in UKERC was on integration in the first phase and diversity and flexibility in the second phase – a pattern largely imposed by funders, assessors and stakeholders rather than by internal strategy. Though granted ambitious remits, whole systems research is often funded, practiced and assessed in the margins of disciplinary based research systems, rather than as a distinctive research form.
There is a need to better attend to the choices and trade-offs involved in whole systems research strategy and practice, drawing on the experiences of UKERC and other initiatives. Learning from the experience of UKERC and other similar initiatives can promote a better understanding of interdisciplinary whole systems research as a distinct research form.
Further Reading and Information
- The full journal article is available here.
- UKERC’s full Research Report on interdisciplinarity is available here.
- For further information, please email: mark.winskel@ed.ac.uk
Dr Mark Winskel is Chancellor’s Fellow and Senior Lecturer in the Science, Technology and Innovation Studies Group, in the School of Social and Political Science at the University of Edinburgh. He was UKERC’s national Research Co-ordinator in ‘Phase 2’ (2009-14), and continues to contribute to UKERC’s research on future energy system pathways. His also contributes to ClimateXChange, Scotland’s national centre for expertise on climate change with over 20 years’ experience as an interdisciplinary energy researcher.
The ASCEND workshop brought together policy, business, research and other communities to discuss the challenges of whole energy systems analysis and decision-making across scales, and identify opportunities for improved analysis and strategy.
Participants first looked at the energy system as a whole, including:
- model-linking across scales,
- system integration across vectors,
- good practice in scenario design; and
- dealing with uncertainty in decision-making.
The afternoon focused on cross-scale analysis and strategy in the heat sector, looking at issues such as
- linking national strategy with local master-planning,
- iterating between long-term whole system pathways and emerging demonstration and pilot studies; and
- how to represent new policy drivers (industrial strategy, local economic impacts, equity and affordability) in whole systems analysis.
The event, held at ECCI in November 2017, formed part of the ‘Ascend’ scoping project, supported by the EPSRC (Engineering and Physical Science Research Council) and Energy Systems Catapult. The project involves the universities of Birmingham, Leeds and Edinburgh, and University College London. The workshop showcased emerging findings from project researchers and others.
For more information, please contact Dr Mark Winskel at the University of Edinburgh.