terrace houses

Energy bills are at the top of the political agenda in the UK. In the short term, increasing energy efficiency and reducing energy consumption will reduce energy bills – but how effectively do current energy efficiency policies incentivise cuts in energy use?

Heating is a major contributor to greenhouse gas emissions. In the UK, heating 28 million homes accounts for around 12% of total emissions. Of that energy use, 65% is used to heat living spaces.

Cutting greenhouse gas emissions from heating will be one of the key areas  in the government’s Clean Growth Plan due to be published this autumn. However, decarbonising heating will be a complex challenge.

In the long term, we need to reduce our reliance on fossil fuels and move towards lower-carbon technologies; in the short term, efficient heating systems and better insulation can help to reduce the use of energy generated by fossil fuels. But creating the incentives for households to cut energy use is complex, as our study in Ireland has shown.

Energy efficiency, fuel poverty and government intervention

In the UK social housing comprises 19% of the housing stock. The people living in these homes tend, on average, to have lower incomes than those living in privately-rented accommodation or owner-occupied homes – and so they are more likely to suffer from high rates of poverty and deprivation and, if they cannot afford to keep their homes adequately heated, could also suffer from fuel poverty.

These factors make them less likely to invest in energy-saving measures―for example, insulation, more efficient boilers and double glazing―so government intervention such as subsidies may be needed to improve the thermal efficiency of, and reduce the greenhouse gas emissions from, social housing.

What other benefits and motivations are there relating to subsidies for improvements in the energy efficiency of social housing?

They could also lead to lower energy bills as less energy is needed to heat a better insulated house – therefore advancing anti-poverty objectives. While much focus is on the cost of electricity (a review on UK electricity pricing will report to the government in October), energy efficiency and reducing energy waste is the most effective way to cut energy bills in the short term.

There could also be health benefits through warmer homes for groups that are particularly vulnerable to temperature-related health problems, including the elderly, the very young and people with disabilities. These groups tend to be over represented among social housing tenants.

Do energy efficiency measures reduce energy use?

It is unclear how effective energy efficiency programmes are at reducing energy use. Put simply, a household that receives an energy efficiency upgrade might decrease its energy use (and benefit from reduced energy bills) because the home is now more thermally efficient. Alternatively, the household may use more energy, as lower marginal costs make energy services cheaper, allowing residents to keep their homes warmer by having the heating on more or higher – this is one element of the so-called ‘rebound effect’.

Bottom-up engineering models, such as SAP in the UK and DEAP in Ireland, estimate the expected energy consumption of dwellings per unit floor area, based on standardised assumptions for occupancy and behaviour, and have been widely used to guide policy. However, they can result in energy savings being overstated as it is difficult to calibrate such models to real life. For example, engineering estimates of potential improvements can be wrong, and the quality of installation can vary widely. Sometimes equipment does not perform as it should due to the equipment itself, or how it is used. And occupancy patterns can vary widely depending on the age or economic circumstances of the inhabitants.

The shortfall between predicted and observed savings can be as much as 50%, and potentially more for low-income households as they are more likely to suffer from fuel poverty and to use the predicted savings by heating their homes more.

Studying energy efficiency upgrades to social housing in Ireland

In research with colleagues at the Economic and Social Research Institute in Dublin, we studied the impact of energy efficiency upgrades on social housing tenants in Ireland over a three-year period. One of our aims was to find out how demand for natural gas changed after improvements were made to homes.

We carried out the research in collaboration with Respond! Housing Association, a charity providing housing services and support to vulnerable households across Ireland.  Respond! was allocated public funding for residential energy efficiency upgrades to 164 homes which we followed in the study. We also collected information from a control sample of 100 similar households whose homes were not upgraded during the research period.

Most of the upgraded homes received cavity wall insulation (92%), heating controls (80%), attic insulation (80%) and compact fluorescent lights (CFL) (72%). Some homes were also upgraded with new windows and doors (41%), a replacement boiler (42%), some households who previously used solid fuel had a new oil or gas boiler installed (20% and 24% respectively) and external wall insulation (2%). All of the homes received a range of upgrades, with over half receiving five separate measures. This is a much more extensive retrofit than is typical for households in Ireland.

Regular gas billing information was collected for 100 of the homes studied (50 of the upgraded homes and 50 of the control group) and Respond! provided information on the physical state of the upgraded homes to create a profile of the thermal efficiency of each home before and after upgrades. The study did not record temperatures inside homes.

Results from the Irish study: households benefited from efficiency upgrades but not all used less energy

Following the efficiency upgrades, fewer of these vulnerable households than before reported difficulty in affording adequate heating or paying their bills.

Analysis of data from gas meters showed that consumption fell, but by less than would be predicted based on changes to the thermal efficiency of the home. On average, energy usage only dropped by half of the amount that engineering models predict. This is in line with much of the previous research on the impact of energy efficiency upgrades, but the results lie to the lower end of what previous research estimates the shortfall to be for fuel-poor households.

We also found that some households appeared reluctant to switch from solid fuel consumption (such as burning coal and peat in a fire or stove) to gas central heating even after they had gas boilers installed at no personal cost. Many reported that they continued to spend significant proportions of their total annual fuel bill on coal and peat one year after the home energy improvements were carried out.

Lessons learned: policy on energy efficiency should consider observed behaviour

Our results have clear implications for emissions reductions in the domestic sector. While the impacts on people’s pockets were positive, we found that energy use in the improved homes did not decrease in the way that models predict – possibly because the householders used some of the cost savings by warming their homes more.

When considering how to cut emissions from home heating, policy-makers will need to take into account the effectiveness of a range of energy efficiency measures. Our study highlights the importance of making empirical evaluations based on observed consumption data  rather than depending on modelled predictions of energy savings in evaluating the impact of subsidies and other energy efficiency policies targeted at households.

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