Energy-saving measures could boost UK economy by £7bn a year, study says | Energy
Insulating homes in Britain and installing heat pumps could benefit the economy by £7bn a year and create 140,000 new jobs by 2030, research has found.
But the uptake of these energy-saving measures depends heavily on government policy, according to analysis by Cambridge Econometrics, commissioned by Greenpeace.
Currently, ministers have little planned to encourage households to take up home insulation, though the chancellor, Kwasi Kwarteng, is expected to make a major announcement on the economy and energy crisis on Friday.
Through the boiler upgrade scheme, the government offers households up to £5,000 towards a heat pump, which is roughly half the cost. But take-up has so far been slow. To gain the government incentive, households must meet a high standard of home insulation, which can cost from £7,000 to £15,000, and for which there is currently no government support for the average homeowner.
Doug Parr, the chief scientist at Greenpeace UK, said: “The UK is in an economic, energy and climate meltdown. Yet the government continues to shun the green home upgrades that offer a viable way out of this mess. It’s truly baffling.”
The economic boost forecast in the Cambridge Econometrics analysis, entitled Economic Impacts of Decarbonising Heating in Residential Buildings, and published by Greenpeace on Tuesday, comes mainly from savings on soaring energy bills and the creation of green jobs, and the positive impact on the rest of the economy from freeing up people’s spending.
There are also health and social benefits, as people living in under-heated homes are more prone to illness, while lifting people out of fuel poverty improves their wellbeing and the education prospects of children.
Parr said: “Greening the UK’s homes at speed and scale will reduce energy consumption, bills and carbon emissions. It will provide tens of millions of households with warmer homes that are cheaper to run and help limit the catastrophic impacts of the climate crisis. As the UK is hurtling towards a recession, it could give a boost of almost £7bn for the economy by the end of the decade.”
According to the modelling used in the report, in 2030 the government would need to spend £4.2bn on supporting heat pumps and insulation, with households spending £9.3bn. In that year, households would also save £11bn through lower heating costs.
According to the study, the investment required from the government for a scheme to subsidise insulation and install heat pumps would amount to about £27.7bn in total from 2022 to 2030.
Greenpeace urged Kwarteng to devote £7bn to insulation and heat pump installations over the next two years, and provide more support to those in fuel poverty through a windfall tax on oil and gas companies of 70% of their profits.
Liz Truss, prime minister, has set a cap on energy bills of £2,500 annually for the average household, substantially lower than the £3,500 that was expected under the previous system of calculating energy price caps.
However, the freeze will mean the government handing an estimated £150bn to energy companies, which critics have said does little to solve the underlying causes of the crisis, including the UK’s reliance on fossil fuels, leaky houses and barriers to renewable energy.
Insulation is the cheapest way to cut energy bills, experts have repeatedly said since Russia’s invasion of Ukraine sent gas prices soaring this February. But the government has made no move since then to improve home insulation rates, to the consternation of experts and green campaigners.
Insulation rates fell by 50% last year and there has been no government support for average households in England to install insulation since the scrapping of the green homes grant in March 2021, after its “botched” administration. Insulation rates have been low for the last decade, and the UK has continued to build new homes that use gas boilers, lack solar panels and are not built to low-carbon standards, so will require expensive retrofits to meet the target of net zero greenhouse gas emissions by 2050.
The financial markets expect gas prices to remain high for at least two years, and some are forecasting it could be much longer.
Jon Stenning, the head of environment at Cambridge Econometrics, said: “Improving the quality of the UK’s housing stock and switching to low-carbon heating technologies can bring down household bills immediately, and remove struggling household from having to choose between heating and eating this winter, while also delivering greater economic growth and substantial carbon emissions savings in the long term.”
Michael Lewis, the chief executive of E.ON UK, the energy company, said: “We’ve seen the personal impacts of people living in warmer, more comfortable homes – not just lower bills but families leading healthier lives in streets and estates that are simply nicer places to live.”