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Barriers to Low and Zero carbon homes

The following section highlights some of the key barriers to the diffusion of LZC new build and retrofit in the UK. Although many of the issues are fairly consistent between both new build and retrofit, where  innovation and adoption faces similar barriers, there are a number of areas where the challenges diverge. These barriers are associated with concerns over the economic benefits, technical challenges and shortfalls and the cultural and behaviour attitudes that may inhibit the transition to a predominantly low energy building regime.

  1. Retrofit

The following section includes a discussion of the range of barriers identified in the academic literature, as presenting key obstacles to the further diffusion of low carbon retrofit in the UK housing stock. This includes reference to policy interventions as identified, and to what extent these initiatives have addressed these barriers.

  1. Economic Barriers

A recent study by the EST identified a model of the relative costs of a range of retrofit measures. Figure 1 illustrates the typical Marginal Abatement Cost Curve (MACC) profile for a range of retrofit interventions, excluding those relating to domestic appliances and behavioural change.


Figure 1 MACC of retrofit measures, adapted from EST (2013)

The Green Deal had been devised to address the causes for why measures that were cost effective, after discounting, were not adopted by homeowners. The initiative was designed to address two key economic barriers that were identified as the major cause of this sub-optimality.

  1. Capital cost of measures; therefore the green deal would provide finance to undertake energy efficiency measures

  2. Risk of loss of investment; to mitigate the risks that the occupants would lose the benefits of their efficiency investment, the loan would be levied on the property rather than the home owner

However as shown, the Green Deal has failed to deliver its originally conceived potential. A number of studies have provided inference as to why the Green Deal as designed may have failed to deliver. An ex-ante assessment of the scheme by Dowson et al. (2012) highlighted how previous schemes had offered subsidies to those installing retrofit measures, and the relatively meagre savings offered by Green Deal packages may be insufficient to incentivise uptake. The report also highlights that the inherent risk associated with the payback on measures may require an internal rate of return of 11-12% for loan providers.

Indeed these concerns have proven prescient as an ex-post survey of Green Deal deployment revealed significant reluctance to adopt a green deal, with respondents citing the high interest rates on Green Deal finance and the requirement to pay for an assessment up front as key obstacles (Marchand et al., 2015).

Further Balcombe et al. (2014) identify how perceived concerns as to the additional costs associated with purchasing a home with a Green Deal attached, may be introduce an aversion to the scheme, for fears of their home’s future saleability. Pettifor et al. (2015) also identify consumer concerns with the realisation of stated economic savings, playing a part in their reluctance to adopt.

This uncertainty about perceived financial benefits is central to explanations of the lack of diffusion of retrofit measures, further many of the barriers identified in the following sections often feed back into this insecurity.

However it is clear than many of the most significant measures identified in the examples of ‘deep retrofit’ in section 5.2 represent a net cost, with many having very high MAC figures. It would seem that on this basis, without the form of a grant or subsidy scheme, many cost positive measures may be only likely to be economically installed during replacement of old or faulty hardware, such as windows or doors; this would seem a crucial touch point for policy.

Solid wall insulation measures are seen of critical importance to maximising CO2 savings from the sector (CCC, 2013); however the high cost of these measures remains a significant barrier to adoption. There may be opportunities to reduce these costs through economies of scale (Dowson et al., 2012) and subsidised deployment may facilitate dynamic efficiencies and technological learning  (Jaffe et al., 2005).

By contrast to the Green Deal, grant (ECO) and subsidy schemes such as FIT and to a lesser extent the RHI have facilitated deployment of solid wall insulation and microgeneration technologies. Although the FIT has been particularly successful in driving rooftop solar, Balcombe et al. (2014) identify how the scheme has largely benefited those with access to capital, and thus discouraged younger people and also those concern with losing their investment when moving home.

Many scholars also identify how the energy efficient distributed energy ‘homes of the future’, are likely to undermine existing utility company business models (Platt et al., 2014, Dixon et al., 2014). In consequence it can be seen how the emphasis in the provision of efficiency interventions through supplier obligations (Rosenow, 2012) may be creating perverse incentives, and choke off innovation in this area. It may be interesting to investigate the R&D investments in retrofitting measures among privatised energy suppliers relative to other areas as a matter of future study.

References

BALCOMBE, P., RIGBY, D. & AZAPAGIC, A. 2014. Investigating the importance of motivations and barriers related to microgeneration uptake in the UK. Applied Energy, 130, 403-418.

CCC 2013. Fourth Carbon Budget Review – part 2 -The cost-effective path to the 2050 target. London: Committee on Climate Change.

DIXON, T., EAMES, M., BRITNELL, J., WATSON, G. B. & HUNT, M. 2014. Urban retrofitting: Identifying disruptive and sustaining technologies using performative and foresight techniques. Technological Forecasting and Social Change, 89, 131-144.

DOWSON, M., POOLE, A., HARRISON, D. & SUSMAN, G. 2012. Domestic UK retrofit challenge: Barriers, incentives and current performance leading into the Green Deal. Energy Policy, 50, 294-305.

EST 2013. Review of potential for carbon savings from residential energy efficiency -Final report. Cambridge: Energy Saving Trust.

JAFFE, A. B., NEWELL, R. G. & STAVINS, R. N. 2005. A tale of two market failures: Technology and environmental policy. Ecological Economics, 54, 164-174.

MARCHAND, R. D., KOH, S. C. L. & MORRIS, J. C. 2015. Delivering energy efficiency and carbon reduction schemes in England: Lessons from Green Deal Pioneer Places. Energy Policy, 84, 96-106.

PETTIFOR, H., WILSON, C. & CHRYSSOCHOIDIS, G. 2015. The appeal of the green deal: Empirical evidence for the influence of energy efficiency policy on renovating homeowners. Energy Policy, 79, 161-176.

PLATT, R., STRAW, W., ALDRIDGE, J. & WILLIAMS, J. 2014. City Energy: A new powerhouse for Britain. London: Institute for Public Policy Research.

ROSENOW, J. 2012. Energy savings obligations in the UK—A history of change. Energy Policy, 49, 373-382.