We are pleased to announce the launch of a new report with the Coalition for the Energy Efficiency of Buildings entitled Financing energy efficient buildings: the path to retrofit at scale.
Under COVID-19 lockdown, most of us are spending many more hours – in fact, whole days and weeks – inside the confines of our homes. Lockdown is leading to an increase in domestic energy use, and in turn, bills – a trend only set to spiral if social distancing measures continue into colder months. With UK homes among the coldest and least energy efficient in Europe, this is bad news for the climate, as well as those already experiencing a household spending crunch and conditions of fuel poverty.
As governments around the world consider steps for a green recovery, large-scale programmes to retrofit homes and buildings to high energy efficiency standards are increasingly being identified. These programmes are a win-win, helping to reboot the economy and create green employment opportunities, while lowering energy bills and greenhouse gas emissions. Already, Denmark has earmarked over £3.5 billion for green renovations to social housing between 2020 and 2026.
To achieve the 2050 net zero target, the UK needs coordinated and collaborative action to stimulate the market and reduce carbon emissions from homes – which represent around 20% of the country’s total emissions. An estimated investment of £65 billion is required to achieve the UK government’s ambition to bring homes up to Energy Performance Certificate (EPC) rating C by 2035. Even more finance on top of this will be needed to meet the net zero commitment.
Conservative government commitments have demonstrated some ambition but fall far short of what’s required. Private finance and innovation, combined with public sector investment, will be key to meeting the shortfall.
The CEEB, established by the Green Finance Institute (GFI) in 2019 with E3G providing secretariat support, brings together a powerful multi-stakeholder group to scale-up finance to retrofit UK homes to high standards of energy efficiency. The Coalition has launched a new report reviewing the UK financial market for green home renovations. The report outlines 20 concept projects overcoming barriers to mobilising capital and provides policy recommendations to drive broader systems change.
In early 2020, Coalition members undertook a market review to better understand energy efficiency financing within the social-rented, private-rented and owner-occupied sectors. The Coalition identified key decision-makers and behavioural drivers for each of these groups, as well as barriers to scaling up retrofits. Certain barriers were identified across all three groups, including:
- uncertainty on the benefits of energy saving measures;
- lack of access to information about the retrofit journey and finance options;
- high supply chain costs and uncertainty around green credentials;
- and a lack of incentive to take on the upfront costs and ‘hassle’ associated with retrofits.
Following the review, the Coalition devised a portfolio of over 20 ‘demonstrator’ projects, financial products and services co-designed to overcome key barriers. These solutions seek to address issues across a diversity of housing, socio-economic and geographic profiles. Importantly, they also include homeowners not supported by existing government policy or manifesto commitments on energy efficiency.
The demonstrators include projects that will help ‘enable’ others to overcome universal barriers across households. In turn this should increase the commerciality and scalability of other financial products and services, like building passports with retrofit histories and the future needs of buildings in them. Other ideas include establishing retrofit principles to guide lenders seeking to offer financial products to individuals making energy efficiency improvements to their homes.
The report then identifies further government policy measures that could help underpin the market for decarbonising our homes. A key recommendation is the inclusion of both energy efficiency and climate resilience investment in the government’s economic recovery plans. Another is for government to make good on and boost its energy efficiency investment commitments. It also recommends establishing a common goal for all homes to achieve EPC C by 2030, in line with England’s fuel poverty targets. The target is something the finance industry, supply chain, homeowners and tenants can coalesce around.
Homes have always been at the centre of our lives. Never has this been more apparent than during lockdown. Energy efficiency improvements are key to meeting climate targets. As part of a green economic reboot, they will also play an important role in boosting green employment opportunities and taking pressure off household budgets.
We are excited to be working with the GFI and members of the CEEB in the run up to COP26 and beyond. Together we will be developing the market for financing net zero carbon and climate-resilient buildings, and in the process supporting a green recovery for the UK.
Watch E3G Chair Tom Burke discuss the potential of energy efficiency to help recover from the COVID-19 crisis on Sky News here: